Underlying pre-tax profits at Britain's biggest supermarket were down 6.9% to £3.05 billion for the year to February 22 while like-for-like sales dipped by 3% in the fourth quarter, the group said.
Tesco admitted that it had done worse than expected amid increasingly tough competition, saying: "Our performance in the year was not where we had planned it to be." Like-for-like sales for the year in the UK were down 1.4%.
The supermarket warned that the challenging environment would continue in the current financial year.
It also revealed a one-off charge of £801 million mainly relating to a write-down of assets in Europe, as well as a £540 million impairment relating to its Chinese business.
Group trading profit was down 6% to £3.3 billion while statutory profit before tax was up 9.8% to £2.3 billion, reflecting the impact of one-off charges in this year and last year's results.
Mr Clarke said: "Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change."