Tesco supermarket group has announced an 11.8% rise in annual profits for 2007, despite “challenging” market conditions.

Profits reached £2.85bn in the year to February, with sales at £51.8bn, up from £46.6bn in the same period the previous year.

Like-for-like sales in the UK, excluding petrol, increased by 3.5% as the retailer faced a consumer slowdown and “recovering competitors”.

Tesco sign

Sales for the first five weeks of 2008 were up 4%, the supermarket said.

Sir Terry Leahy, Tesco chief executive, said the group had started the new financial year “confidently”, despite challenging marketing conditions as consumers tightened their belts.

International sales were up by more than 25% Tesco said, with strong growth in Asia and Europe. The group made half of its trading profits from overseas stores in 2007.

Tesco said it planned to continue its expansion this year, with plans to open 11.5 million square feet of new store space, 20% of which will be in the UK.