The chief executive of Sainsbury’s has said he has the full support of the board to remain in his post despite a failed attempt to merge with Asda, which cost £46m last year.

Annual pre-tax profits dived 41.6% to £239m in the year to 9 March after £396m of one-off costs, including the cost of preparing a deal with Asda, which was crushed by the competition regulator last week.

Total sales at the supermarket group, which owns Argos, rose 2.1% to £32.4bn. However, sales at established stores slid 0.2% for the year, including a 0.9% drop in the last quarter when food and clothing sales dropped back.

“I’m sticking to the company. I’m very proud of the organisation I run,” Mike Coupe, who took the helm at Sainsbury’s in July 2014, told BBC Radio 4’s Today programme.

He added later that he expected to remain in the post for “months and years”. He said: “The board is fully supportive of the leadership team and there isn’t a single major investor that wasn’t supportive of the [Asda] deal but also recognised there were risks involved.”

Sainsbury’s new chairman Martin Scicluna, who took on the role in March, said he and the board firmly backed Coupe and believed that the merger attempt was “absolutely the right decision”.

Coupe said the Asda deal now seemed like “ancient history” as it had been clear from February, when the Competition and Markets Authority revealed its preliminary findings, that a merger was unlikely. “We’re getting on with the rest of our lives, looking forward and adapting to customers changing shopping habits,” he said.

Sainsbury’s is now aiming to lower prices on about 100 core commodities, such as fruit and vegetables, tinned basics and meat, Coupe said, where he admitted the chain had lost sales in the past year. He suggested the company was experimenting with new low-price own label items in some areas, similar to Tesco’s farm brands, as well as stepping up investment in stores and digital technology.

About £100m more than last year will be invested in improving the look of 500 convenience stores and 400 supermarkets, including better beauty areas, and will extend digital services, including payment via mobile phone in Sainsbury’s and digital Argos stores. He said store standards, which have been criticised by industry watchers, “remained a focus”.

Coupe said the group could afford £550m of total investment in the year ahead as it was improving efficiency and had completed the costly integration of Argos into Sainsbury’s stores as well as the transfer of banking operations from Lloyds.

Sainsbury’s also plans to save more money by combining further back office functions with Asda including its payroll system. He admitted this could lead to job cuts but said the group expected to increase employment overall as it continued to expand.

“I am confident in our strategy and also clear on what we need to do to continue to evolve the business in a highly competitive market where shopping habits continue to change,” he said.

Analysts said Sainsbury’s had performed better than expected on sales and profits but continued to lag behind its rivals in terms of growth. There was particular concern that food sales fell 0.6% in the final three months of the year ending 9 March.

Some experts questioned how Sainsbury’s would fund price cuts, with James Grzinic, a retail analyst at investment bank Jefferies, questioning whether the supermarket would be able to persuade suppliers to help out while it was losing market share.

Coupe himself admitted that cutting prices would be harder and take longer without the merger with Asda under which he promised 10% price drops on core products.

Sainsbury’s is to give further details of its plans for the future, including development of financial and digital services, in September at a presentation to analysts and investors.

Shares in the company rose just over 4% to nearly 232p on Wednesday on the better than expected performance, after hitting the lowest price in more than 20 years last week.

But Sainsbury’s will have to work hard to fashion a new growth story now that its Asda dream is over.

Thomas Brereton, a retail analyst at GlobalData, said: “Even though it is often difficult to choose a winner from the big four supermarkets, Sainsbury’s has incontestably claimed the bottom spot for the past 12 months, continuing to exhibit inexcusable weaknesses on a day-to-day operational level that its competitors – particularly a reinvigorated Tesco – have taken full advantage of.”

Clive Black, a retail analyst at Shore Capital, said: “We remain concerned about Sainsbury’s as a business, where it has reached, especially following the optimism surrounding the potential of the group when it completed the acquisition of Argos in September 2016.”

Sainsbury’s said on Wednesday that retail markets remained “highly competitive and very promotional, and the consumer outlook continues to be uncertain.”

With Aldi and Lidl continuing to open stores at a rapid rate, bigger rival Tesco kicking back and Ocado continuing to expand, Coupe has his work cut out.