Sainsbury’s says shoppers are returning to its stores as the surge in online shopping seen during the Covid pandemic continues to unwind.

The UK’s second largest supermarket said online sales had been above 20% at the height of the pandemic, but are now back to about 13%.

Its comments came as it reported strong food sales after spending heavily on keeping prices low to attract shoppers.

However, other areas were weaker, with sales of clothing and fuel falling.

Sainsbury’s said pre-tax profits for the past year had fallen 15% to £277m, reflecting costs related to its decision to wind down its banking division.

However, underlying profits rose 1.6% to £701m, which was slightly higher than expected, and Sainsbury’s said it was “confident of delivering strong profit growth in the year ahead”.

The UK’s second largest supermarket said its food business was “firing on all cylinders”, with grocery sales growing by 9.4% over the past year.

Chief executive Simon Roberts said that more than 87% of all food sold was done so “in a physical store”.

Supermarkets have been fighting hard for customers, with shoppers still feeling the effects of steep price rises over the past two years, which have ratcheted up the cost of living.

Sainsbury’s response has been to focus heavily on its food, which accounts for about three-quarters of its business, and it said it has spent £780m over the past three years on keeping prices low, including promotions such as Nectar prices and price-matching budget chain Aldi.

Mr Roberts said he expected inflation – which measures the pace of price rises – to “continue to stabilise”.

Official figures released last week showed that overall inflation fell to 3.2% in March, partly due to declines in some food prices.

Mr Roberts said he expected inflation to remain in “low single digits” in the year ahead.

He also said there were signs that shoppers were beginning to “trade up” by buying more premium products when it came to food.

However, he said it would probably take a cut in interest rates later this year to lift sales of more expensive non-food items for cautious shoppers.

“It is going to take a change in interest rates later in the year – let’s hope – for the environment on discretionary spend begin to change,” said Mr Roberts.

While Sainsbury’s food business performed well, its general merchandise sales – which include its Argos business – slipped 0.5% and clothing sales fell 6.4%. The company also owns the Habitat brand.

The retailer said trading at Argos had been hit by last summer’s wet weather, which affected sales of seasonal goods such as barbecues and paddling pools.

The weather also impacted clothes sales, as competitors launched sales to clear stock, and Sainsbury’s said there had been some disruption to clothing supplies in recent months because of Houthi rebels attacks on shipping in the Red Sea.

As Sainsbury’s announced its results, a “technical issue” hit some of its online deliveries on Thursday.

However, the retailer said the problem had been fixed, and had only affected a “small number” of customers.