Giant Food Inc. yesterday reported a 26 percent increase in net income on a 5 percent gain in sales for the fiscal year that ended Feb. 22.

The Landover, Md., supermarket chain, which is celebrating 50 years in the grocery business, said that net income was $57 million ($1.90 a share), up from $45.2 million ($1.53) during the previous year.

The sharp jump in profits was more than five times the increase in sales for the year. Sales were $2.2 billion, compared with $2.1 billion collected a year ago, bringing the company's profit margin to a record high of 2.54 percent. That means that for every dollar in sales the company earned about 2.5 cents in net income -- up from the 2.11 cents earned a year earlier.

Giant's chairman, Israel Cohen, attributed the improved profit margin to the company's enlarged food-processing business. Last year, after making its own bakery and dairy goods and ice cream for years, Giant decided to go into the soft-drink business as well, producing its own brand-name sodas in a newly constructed plant in Jessup, Md. Next month, the company will open an ice-cube manufacturing plant in Landover.

"The manufacturing processing end was a substantial contributor" to the bottom line, Cohen said. "In addition to the normal profits we make as a retailer, we make additional profits by being a wholesaler as well. We've managed to be a 2 percent profit-margin company because of our wholesale division," he added.

The 137-store chain opened five stores last year and currently has 11 under construction, with opening dates scheduled for this year.

For the 16 weeks that ended Feb. 22, the company earned $20 million (66 cents), up 13 percent from the previous year's earnings of $17.7 million (60 cents). Sales for the same time period were $725.9 million, up nearly 5 percent from the previous year's tally of $691.8 million.Best Products Co. Inc., a catalogue-store discount retailer with headquarters in Richmond, reported that profits dipped sharply in its 1985 fiscal year, which ended Feb. 1, to $2.2 million (8 cents a share) from $13.6 million (50 cents) for the same period the year before.

Sales for the year were $2.23 billion, down slightly from $2.25 billion in fiscal 1984.

Robert E. R. Huntley, Best's president, said " . . . our 1985 initiatives adversely affected both sales and earnings for the year." The initiatives included a store remodeling program and a new store warehouse system.

Sales for the 13-week fourth quarter were $865.3 million, compared with $915.9 million for the 14-week fourth quarter a year ago. Net earnings were $22.5 million (83 cents), compared with pro forma earnings of $26.8 million (99 cents)