Wilkinson pre-tax profits fell from £65m to £61m in the year to January 28 as the value retailer was hit by rising commodity prices, the increase in VAT and fluctuating exchange rates.

The fall comes after a stellar performance in the previous year, when pre-tax profits more than doubled.

Operating profit declined from £63m to £58m while like-for-likes dropped 1.3% in the year to January 28.

Turnover was flat at £1.6bn. The value retailer said it had its best ever Christmas despite suffering in the “exceptionally severe weather” in the lead up to the Christmas period.

Wilkinson chief executive Stuart Mitchell described the results as “a strong performance given the trading conditions during the year.”

In a joint statement, family directors Karin Swann and Lisa Wilkinson said: “Despite having a second consecutive year of difficult trading conditions we have seen our business continue to grow and develop, which has only been made possible through the hard work, pride and passion shown by our team members.”

In its Annual Review, Wilkinson said that its fourth quarter performance showed “a good recovery in late December and January after the difficult period in early and mid December”.

A continued focus on investment in stores, supply chain, people, and infrastructure, as well as cost reduction, benefited the retailer.

Wilkinson said it has noticed that “customers facing a decline in their disposable income shopped less frequently and more carefully, seeking out value, trading down where possible and concentrating on essential rather than discretionary spending”.

The retailer rolled out its new branding to 80 stores last year, and said it will rebrand a further 90 this year. Sales were up 4% in the rebranded stores.

Wilkinson opened 14 new shops in the period, and said it expects to open a similar number in the current financial year.

After a renewed focus on own brand products, Wilkinson reported that private label sales were up 10% to £700m. It plans to launch a premium brand, ‘Wilkinson’ in October 2011.

The retailer said it saw “huge growth” in visitors to the website, which were up 20%, after it was relaunched in the period.

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