Woolworths said the key focus of the year had been to return the retail arm to profitability and attributed the turnaround to better gross margins, rigorous control of costs and a move away from loss-making categories.
However like-for-like retail sales fell 3.2%, with more than half of the decline down to Woolworths' decision "not to chase unprofitable sales", including electrical and computing products.
Total adjusted profits at Woolworths for the year to February 2 jumped 30% to £28.3m with total group sales up 8.5% to £2.97 billion.
Chief executive Trevor Bish-Jones said: "We are particularly pleased that Woolworths Retail has returned to profit in a year in which our markets remained volatile and fiercely competitive."
He added: "Given the advances made across the business last year and our plans to make further improvements this year to the customer offer and the store portfolio, while continuing to cut costs, we are well placed to make continued progress in this financial year. Whilst like-for-like sales are up against last year, the much earlier Easter makes the like-for-like comparisons meaningless. It is early days and the retail environment is likely to remain challenging in the current year. We will, therefore, continue to manage the business tightly."