Woolworths expects sales to pare back further in coming months as trading returns to normal after a surge in coronavirus spending last year, as the supermarket giant posted a dip in food sales during the March quarter.
Overall group sales were up 0.4 per cent to $16.56 billion for the 13 weeks to April 4, helped by improved activity in the Big W and Endeavour Drinks businesses.
However, food sales in Australia were down 2.1 per cent on a comparable basis to $11.09 billion. New Zealand food sales were down 7.5 per cent on a comparable basis.
"In general, customer shopping behaviours continue to normalise," CEO Brad Banducci said on Thursday.
"While food customers are still shopping less frequently, the growth in the number of items customers put in their baskets is slowing.
"Customers are also shopping more on weekends, state-based performance is becoming more balanced and there is less divergence in trading across the fleet."
Supermarkets had reported double-digit sales growth during the same period last year, as an impending lockdown due to COVID-19 triggered panic-buying by shoppers for items ranging from pasta to toilet paper.
Woolworths' same-store sales rose 10.3 per cent in the March quarter last year.
The company's numbers were in line with expectations after rival Coles on Wednesday reported a 5.4 per cent drop in third-quarter sales. Like its closest competitor, Woolworths also expects an extended period of normalised trading.
"We continue to expect sales to decline over the March to June period for all businesses other than hotels," Mr Banducci said.
Trading remains volatile and Australian food sales were nearly flat in the first three weeks of April, he said.
By 1200 AEST, Woolworths shares were down 3.2 per cent at $40.08 in a firm Australian market.
Meanwhile, sales at Big W stores were strong in the March quarter, increasing 6.3 per cent to $1.02 billion, while sales at its liquor retailing arm Endeavour Drinks rose 6.3 per cent to $2.39 billion.
The Hotels business, which had been hit because of venue closures last year, has seen sales jump 11.5 per cent to $390 million.
It also benefited from a surge in online shopping. Online sales soared 90.5 per cent to $878 million, and now account for 7.9 per cent of overall sales, nearly double from 4.1 per cent a year ago.
Additional costs associated with COVID safety measures have continued to trend down over the quarter, the retailer added.
Separately, Woolworths has scrapped plans to set up a massive bottle shop in Darwin after Indigenous communities protested against the development.
The company announced on Thursday it would no longer go ahead after receiving the findings of an independent panel led by lawyer Danny Gilbert to review the project.