Analysts hailed Tesco’s turnaround under the leadership of Dave Lewis on Thursday, but investors proved far harder to please.

On the surface Tesco’s annual results for the year to 25 February were a further vindication for Lewis’ strategy as the UK’s largest grocer posted its first full-year like-for-like UK sales growth since 2009/2010. Sales were up 4.3% to £49.9bn over the year, up 1.1% at constant exchange rates, while UK-like-for-like sales were up 0.9%. Underlying profitability was up too, with group operating profit before exceptional items up 24.9% to £1.28bn at constant exchange rates.

Retail Vision’s John Ibbotson hailed the continuation of “Tesco’s fairy tale recovery story”, while Bernstein welcomed the “solid beat on all key parts of business”. The market took a rather more glass half empty approach - sending the shares down 5.2% to 185.5p by lunchtime, meaning they are down some 10.5% so far in 2017.

Tesco’s shares had risen in the days leading up to the earnings announcement, but it seems investors were also spooked by Tesco’s level of reported pre-tax profit fall after the fine and payments relating to its accounting scandal were incorporated into the year’s accounts. That £235m one-off hit meant pre-tax profit fell 28.2% from £202m to £145m, which represented an even steeper 39.1% fall on a constant currency basis.

Concerns also persist over the wisdom and viability of its Booker takeover - with some in the City hoping for a more rounded and fulsome rationale from Lewis than repeating the message of “substantial synergies” and “faster growth”.

Sector shares sector suffered - Sainsbury’s was down 2.3% to 259p and Morrisons down 1.4% to 232.8 - as the City continues get to grips with the impact of inflation. Philip Benton, senior analyst, Euromonitor International, said: “The cooling of the UK supermarket price wars has enabled Tesco to increase their value sales, as well as volume sales, but this will likely be a result of inflation costs having been passed on to the consumer.”