The troubled high street titan's retail arm posted an adjusted profit of £3.4m for the year to February 2, reversing a £12.9m loss for the year before.
Total profits for the group, which includes its better performing wholesale entertainment arm, came in at £28.3m for the year, up from £21.8m.
The group said it had pursued "rigorous cost control" and not chased unprofitable sales in its 800-store high street operation as like-for-like sales dipped 3.2 per cent.
Chief executive Trevor Bish-Jones said he was "particularly pleased" about the return to profitability.
But he added: "It is early days and the retail environment is likely to remain challenging in the current year. We will, therefore, continue to manage the business tightly."
As part of the cautionary outlook, Woolworths said it was slashing its annual dividend by nearly two-thirds to help it "preserve financial flexibility".
There has been persistent speculation that Woolworths could sell its share of DVD business 2Entertain or its EUK distribution business, but Mr Bish-Jones said there were no such plans.
"I don't think you can consider splitting the group up until you have a sustained level of profitability from the business ... 2Entertain has just finished what has been a very, very successful year ... we've got flexibility at some point when and if appropriate to crystallise the value of the business," he said.
The company said it planned to reduce excess space in 80 of its stores by sharing parts of larger stores to other retailers such as Wigan-based JJB and it will expand its range of own-brand goods.
Woolworths will also open a few concessions in branches of food retailer Somerfield starting at the end of the week.
Total group sales were up 8.5 per cent to £2.97bn.
The contribution from the retail arm was £1.72bn, down from £1.81bn. But the wholesale arm was up to £1.25bn, from £920m.
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