The group, which also offers insurance and legal services, said on Wednesday it expected the 'volatile external environment and turbulent economic headwinds' to continue.
Shirine Khoury-Haq, chief executive said a focus on paying down debt, which had ballooned in 2021 due to a much-needed systems upgrade, had strengthened the group to weather the inflationary storm.
Net debt fell from £920 million to £333 million.
"We saw that inflation was going to be incredibly high, especially in the areas of salary and energy, so we made sure we were able to mitigate that in the year," she said in an interview. "We took £101 million out of our operating costs."
Inflation Expected To Ease
Inflation is expected to ease to the low single digits by year end, she said. "We wouldn't expect deflation to happen for several years yet."
The group, which has 4.4 million members, said it expected inflation to 'dampen profitability in the short term.'
The Co-op is Britain's seventh biggest supermarket chain, serving 16.4 million customers a week, up 5% on the prior year.
It has a 5.7% share of the grocery market, focused on the convenience sector, according to industry research from Kantar.
Khoury-Haq said that the group's close relationship with suppliers, such as sourcing all of its meat from British farms, had helped it avoid shortages in products like eggs and salad that had hit some its rivals.
She said the Co-op's grocery business had "built really solid relationships with a fewer number of producers, who then prioritise us when these things happen".
The group reported revenue of £11.5 billion, up 3%, and pretax profit of £247 million, up from £57 million.