Sainsbury's crowned a three-year turnaround plan today by ringing up bumper annual profits of £488 million.

The figure for underlying pre-tax profits, which was slightly ahead of City estimates, represents a rise of more than 28% compared with the previous year. Sales for the year to March 22 were 5.8% ahead at £19.3 billion.

The retailer said it had exceeded a series of targets set down under the "Making Sainsbury's Great Again" scheme, which was launched in 2005 by chief executive Justin King.

Around 117,000 staff will also share a £47 million payout this year - an average of £401 each - as part of the success.

Chairman Philip Hampton said: "This year has been particularly significant for Sainsbury's since it marked the completion of the Making Sainsbury's Great Again recovery plan announced in October 2004 and we moved from a period of recovery to growth."

Sainsbury's has put on an extra £2.7 billion of sales during its turnaround plan, compared with a target of £2.5 billion. Customer numbers per week have also grown from 14 million to 16.5 million, it said.

The retailer has also enjoyed 13 consecutive quarters of like-for-like sales growth, including the most recent quarterly hike of 4.1%.

Comparative growth for the full year to March 22 was 3.9%, seeing Sainsbury's outperform industry leader Tesco.

Mr King, who joined from rival Marks & Spencer in March 2004, said turning around the business meant fixing many "fundamental" parts of the business.

He said: "The plan was based on delivering great quality food at fair prices. To achieve this on an ongoing basis we needed to fix many fundamental parts of our operation.

"Only by satisfying customers and improving sales could we return to sustainable growth in both sales and profitability and this has driven everything we have done over the past three and a half years."

He is now in line for a multimillion-pound payout, potentially worth as much as £9 million as a result of his success.

Sainsbury's results suggest that food shops seemed to be bucking the spending slowdown despite record food inflation affecting staple goods such as bread, rice and milk.

Mr King pledged continued progress for the business this year despite acknowledging pressure on consumer spending.

He said: "Consumer budgets are clearly under pressure and we expect the market to remain intensely competitive. Sainsbury's is now a much better business, able to compete and grow in this challenging environment."

Mr King said food price inflation in his stores was running at 2%, much weaker than had been reported. Pressure has been felt in areas such as rice and wheat, Mr King said, which were small segments of the average UK shopper's basket.

He said the proportion of items on promotion had risen by 10% over the past year as major players fought for business. He added that a consumer spending slowdown should benefit the business, as more people swap from eating out to eating in.

Mr King also announced that Sainsbury's would be launching an online non-food sales operation next year. The move will bring it into line with rivals Tesco and Asda. Around £15 million is being spent this year to develop the operation.

There will also be a greater emphasis on in-store non-food offerings in new stores, with more electrical goods and the TU clothing brand.

The group currently has 788 stores across the UK, with plans for another 75 by March 2010.

Mr King has targeted £3.5 billion of sales growth between March 2007 and March 2010, split two-thirds from food and one-third from non-food. Half the new space during that period will be given over to non-food.

The results announcement led Pali International retail analyst Nick Bubb to downgrade his profits forecast for the current year from £600 million to £575 million.

He said: "It is not clear how well the business's premium positioning will stand up to the tougher consumer climate that is fast developing."

In November last year, Qatari-backed investment fund Delta Two abandoned a £10.6 billion takeover bid for Sainsbury's. Under Stock Exchange takeover rules, the group is now able to make a new bid.

Analyst Freddie George, from Seymour Pierce, said the Qataris, who own 25% of Sainsbury's shares, were likely to come back with a higher offer.

Sainsbury's shares were down more than 2% today.