Profits at retail giant Sainsbury slumped 23 per cent in the last year due to poor performance at its supermarkets, the group reported.

But the company also announced it was to create around 5,000 jobs over the coming year with new investment in its home shopping service and store expansions.

The jobs will be created as the Homebase DIY to supermarkets business attempts to reverse the slide.

The group reported profits before tax, exceptional costs and goodwill were down to £580m, from £755m last year. Sales and profits jumped at Homebase and its US business, Shaw's, but the UK supermarkets business saw profits fall, hit by price competition and higher staff and property costs.

Sir Peter Davis, the group's newly installed chief executive commented: 'These results demonstrate that while we have two very strong businesses in Homebase and Shaw's ... we need to focus our efforts on our core supermarket business.'

To further help regain ground against key competitors such as Tesco, Sainsbury plans to speed up the roll-out of its home shopping service, Sainsbury's To You.

The service is currently run through nine stores, but will be rapidly expanded to be available to 60 per cent of Sainsbury's customers by the end of this year, Sir Peter said.

Warehouse-sized centres are being planned to provide products for the home delivery business, including a 300,000 sq ft centre in west London due to be opened in July.

Sir Peter said around 5,000 jobs would be created over the 12 months across the group, partly through the expansion of the home shopping business and partly through the opening of new stores.

Over the last year the group opened 20 new stores. This year it plans to open a further 13 and extend 35 others.

To help fund its investment Sir Peter said he hoped to rationalise the group's offices, including selling its current headquarters in central London. Including the headquarters, the group has 14 office sites in London and Sir Peter said he hoped to move quickly into new headquarters.

But he dismissed rumours the group was considering selling its successful US business to fund investment in the UK.

While he declined to give any cost-cutting or growth targets for the supermarkets business, Sir Peter struck a confident note pointing out the group was maintaining its underlying dividend to shareholders at 14.32p.

Sir Peter said the group would continue to offer 'fair pricing and value for money', but would not make cheap prices the core of its promotions. 'You won't see us launching a big price campaign, but we will always be price competitive,' he said.