The expectations in first quarter

Same-store sales, excluding new stores, grew 0.7 per cent in the 14 weeks to October 2. This was higher than analyst expectations and Woolworths’ first rise in same-store sales since 2015.

Chief executive Brad Banducci said:  “We’ve been seeing gradual, consistent improvement in our business since May. There’s no one thing we can look at, we’re just a little bit better every week.”

Woolworths has cut prices by about $1 billion in recent quarters, driving increased store traffic and transaction numbers. But Mr Banducci said Woolworths was shifting its focus from price to fresh products and product range, as recommended by former Aldi executive Paul Foley.

Mr Banducci said it was “hard to get clean read” on Australia’s $90 billion grocery market, which is becoming more competitive as Woolies and No. 2 chain Coles cut prices, and foreign chains Aldi and Costco expand.

“There is some indication of the two-speed economy, it’s very hard for us to be precise given our price investment,” he said.

“In terms of Aldi’s entry into South Australia and Western Australia … they’re having an impact in those economies. We’ve been impacted but we’ve not been impacted to the extent we had expected or budgeted.”

Rival Wesfarmers was dumped by investors this week after lower-than-expected growth for its Coles supermarkets.

Deutsche Bank analyst Michael Simotas told clients Woolworths’ sales update was “positive … particularly in the context of the Wesfarmers’ release earlier in the week” and contained “no major surprises except for [discount department store] Big W, which was worse than expected”.

“Interestingly, items per basket are still falling with improvement driven by transaction growth,” he said. “Items per basket is probably an easier problem to fix than lack of customers, but a drag nonetheless.”

The last time Woolworths reported, in August, it posted its first loss as a listed company, driven by its disastrous foray into home improvement, Masters, plus troubles in supermarkets and Big W.

Friday’s results also highlighted continued bleeding from Big W, and Woolworths has forecast operating earnings will not rise from last year’s. Same-store sales were down 5.7 per cent year-on-year, due to lower-than-expected clothing sales.

Former fund manager Peter Morgan, who owns some Woolworths stock, cautioned the company’s turnaround would take time. Woolworths has said it will take three to five years.

“You can’t turn big ships around quickly,” Mr Morgan said. “Woolworths has only been down and out for six to 12 months, really.

“It’s still got a competitive environment. I don’t think [rival] Coles is going to lay down. And the bigger issue, longer term, is what happens online in the marketplace.”