Wesfarmers lifted its first half sales across all retail divisions as customers flocked to its stores in record numbers over the Christmas period.
Managing director Richard Goyder said Australians left their festive shopping until the last minute in 2012 but a record number of customers and $1 billion of sales were achieved in the week leading up to Christmas, indicating consumer confidence was slowly improving.
"Australia is still in pretty good shape," he said.
"Consumers came to our stores in record numbers over Christmas.
"The Australian consumer is relatively in a good place and I think the Australian economy is relatively in a good place as well."
Wesfarmers' supermarket giant Coles and home improvement business Bunnings recorded the strongest growth for the six months to December 31.
Coles' sales for the 2012/13 first half were $18.3 billion, up 4.9 per cent on the previous corresponding period.
Sales at Bunnings were $4.0 billion, an increase of 5.7 per cent on the 2011/12 first half.
He said the reduction of bad economic news from overseas, recent gains on equity markets, the stabilisation of house prices and falling interest rates were all slowly assisting consumer sentiment.
"I don't think people are feeling worse," Mr Goyder said.
"They're probably feeling a little bit better, if not cautious."
Kmart sales were for the first half were $2.4 billion, up 1.2 per cent, on the previous corresponding period with continued growth in transactions and units sold.
"The focus on driving volume and improving our operational execution resulted in good performance in stores across Australia and New Zealand," Kmart managing director Guy Russo said.
Target sales for the six months to December 31 were $2.1 billion, an increase of 1.2 per cent on first half 2011/12.
Target managing director Dene Rogers said he was satisfied with the progress made on the strategy to improve customer service and strengthen Target's mid-tier position.
Wesfarmers operates the Curragh coal mine in Queensland's Bowen Basin and announced on Wednesday that its production in the three months to December 31 was down 6.4 per cent on the same period in 2011/12.
The company said that the fall was caused mainly by a scheduled shutdown of the mine but that rainfall in January, as well as a lack of rail and port availability, had also affected production.
It said it expected coal sales for the 2012/13 financial year to be in the range of 7.5 million to eight million tonnes.
Wesfarmers shares were down 1.78 per cent, or 69 cents, to $38.13 on Wednesday.
IG Markets broker Chris Weston said the fall in the share price was due to food and liquor sales being mildly below expectations and that Wesfarmers had downgraded its coal division.
"This result is not going to change the fundamental story of the business," he said.
"It's still a quality business with a good story still intact, it's just getting expensive."