Wilkinson, the value retailer, said full-year earnings have come in below expectations despite pre-tax profit surging 21% to £27.5m.

In the 53 weeks to February 2, the retailer recorded a 2.3% sales drop to £1.53bn.

In documents filed at Companies House, Wilkinson family directors Karin Swann and Lisa Wilkinson said in a joint statement that the sales performance was “respectable” in a difficult retail market. But its chief finance officer Ian Ellis added that its pre-tax profit was “below our planned expectations at the start of the year”.

Ellis said that as sales dropped, profit growth was driven by its initiatives to reduce costs, make efficiencies across the business and by slowing down its store refurbishment programme. It also cut working hours and closed its final salary pension scheme to future accrual.

Ellis said that the slow start to the year was in part offset by the Olympics last summer as “optimism returned to customers”. However, sales still fell despite the addition of seven new stores, which took the store estate total to 372, and Ellis admitted like-for-likes declined as customers visited the retailer less often. However, customer spend increased, Ellis added.

Wilkinson opened its first trial Wilko shops, which feature its latest store design, in the year in Crawley, Edmonton Green and Pwllheli. It plans to open two further Wilko stores in the first half of this year.

Online sales are also “behind expectations” but Ellis said the channel is “performing well”. In the year Wilkinson launched a mobile site and rolled out click-and-collect across its estate and since year-end it relaunched its desktop website under the Wilko.com URL.

Ellis added that Wilkinson will reduce its cost base further in the current fiscal year, while it expects online sales will be boosted by improving deliveries through a dedicated distribution centre.

Ellis said Wilkinson’s financial position “remains strong”  with net cash inflow from operating activity of £63.9m against £44.3m last year.

Swann and Wilkinson said the retailer is “still investing heavily” in the business as it continued its category reviews, launching new ranges across garden, stationery, kitchen, halloween and Christmas in the period.

The retailer is relaunching its home and cleaning categories, while it has already made its first steps to review its decorating, DIY and health and beauty ranges, which will land in store next year.

Swann and Wilkinson added: “Our vision for 2012/13 was a strong one to deliver extraordinary shopping in the heart of the community. This year has seen us take decent steps forward in our pursuit of this.”

Wilkinson lost its chief executive Stuart Mitchell in June last year. He has not been replaced.