Asda, owned by brothers Zuber and Mohsin Issa and private equity firm TDR Capital, said core earnings, or adjusted EBITDA, were £886 million ($1.1 billion) in 2022, down from £1.17 billion in 2021, on flat sales of £20.45 billion.
"We took a conscious decision to support customers by investing heavily to mitigate the impact of inflation and keep prices as low as possible," said Mohsin Issa.
"Although this contributed to a decline in profitability, it was the right thing to do for our customers and will ultimately help to deliver long-term growth," he said.
British households have been battling double-digit inflation since September and the government's official budget forecaster said earlier this month that the country remained on track for a record fall in living standards over the two years to March 2024.
Grocery inflation in March hit a record high of 17.5%, according to market researcher Kantar.
The Bank of England raised interest rates last week by another quarter of a percentage point, adding to the strain on budgets for many households.
Third Largest Grocer
It said this positive momentum has continued into 2023, with like-for-like sales growth of 6.8% in February.
The group said it was making progress towards achieving its long-term goal of becoming the number two supermarket in UK grocery.
The Issa brothers and TDR also own petrol forecourt business EG Group.
In January, the Times reported that the Issas and TDR were exploring a merger of EG and Asda. All parties declined to comment on the report.