Woolworths beat market expectations by posting profit excluding significant items of $1.384 billion, up 4.7%, for the first half.
Adding in $103 million of costs to turn around the BIG W business, profit was $1.28 billion, down 3.1%.
Sales were up 1.8% to $32.4 billion.
Earnings in its Australian Food, Liquor and Petrol division increased 7.3%.
Sales momentum in October and November improved but trading in December was subdued and this continued into January.
“Cost savings have enabled us to continue to invest in lower prices,” CEO Grant O’Brien says. In Australian Supermarkets, customers benefited from lower average prices as reflected by deflation of 1.8% for the half year.”
However, Woolworths expects full year profit growth to be at the lower end of analyst expectations of between 1.8% and 6.6%.
The board has announced a half year dividend of 67 cents, up from 65 cents.
Woolworths shares were down more than 9% to $30.88 in early trade.