The supermarket giant Tesco has reported the biggest fall in annual profits in two decades after writing off its disastrous entry into the American grocery market.

Pre-tax profits in the year to February 23 plunged 51% to £1.9 billion (€2.2bn), the company said today.

Overall sales rose 1.3% to just over £72bn. But in Ireland like-for-like sales, which excludes the sale from newly-opened shops, were down 0.3%. And they fell 1% in its core British business.

The company said it getting out of the US, where its supermarkets trade under the Fresh and Easy brand. Tesco entered the US market a few years ago and it has been a nightmare for the retailer since. The shops were mainly concentrated on the West Coast, which has been hit hard by the economic downturn. And Tesco's idea of fresh food dominated shops has bombed in a country where frozen and processed food is popular.

The exit from America will cost it just over £1bn, and it will also take a huge hit writing down the value of its supermarkets in Britain.

“Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns,” Tesco boss Philip Clarke said in a statement

He said the focus will be now to rebuild its British business and expand its non-food sales. Tesco said online sales were up 13% during the year and that its clothing brand, F+F, recorded sales of more than £1bn for the first time.

In Ireland, Tesco continues to suffer. While sales were 0.3% down for the full year, in the final three months of its financial year, sales dropped 1.4%.

“In Ireland, after a period of relative calm following its early exposure to the crisis, customers are facing a further round of austerity measures which has further impacted spending,” Tesco said in a statement.

Louise Cooper, financial analyst at the investment company Cooper City in London, told Newstalk Breakfast that the annual results were a disaster for the company.