Morrisons, one of the UK's leading supermarkets, has reported losses of £176 million for the year ending in February 2014.
This has come as a surprise, as between 2012 and 2013, the retailer made profits of £879 million.
Morrisons also has debts of £2,817 million, even after investments of more than £1,080 million.
Sir Ian Gibson, chairman of the chain, acknowledged that it had been "a disappointing year" for Morrisons.
The grocery retailer is now planning a major restructure in an attempt to recover its finances and restore its reputation.
Dalton Philips, chief executive of Morrisons, said in a statement: "The strategy we are announcing today is a bold and comprehensive response to the fundamental structural changes that are taking place in grocery retail."
He added the company would try to reduce its outgoing costs and plans to invest £1 billion in improving its business strategy over the coming three years, with customers hopefully noticing improvements across all Morrisons stores.
The retailer is also planning to sell Kiddicare, its baby products brand, as well as its stake in New York food retailer Fresh Direct in a bid to further improve its finances.
Mr Philips said he believes Morrisons will emerge from its restructure as "a more focused, more distinctive value leader" that will be better equipped to cope with the changing face of grocery retail.
Despite Morrisons' current financial problems, its recent £200 million 25-year deal to begin selling groceries through online retailer Ocado has benefited the latter significantly and it is expected to report its first ever profit later this year, having made £9 million in the past three months alone.
Ocado saw its sales increase by 18 per cent during this period, totalling £218.8 million, suggesting it may be set to enjoy its highest turnover since its establishment 14 years ago.
Morrisons has enjoyed several successes throughout the past 12 months though, with 100 convenience stores now in operation and a brand new distribution centre has also been opened.