Australia's largest food retailer Woolworths has reported a 16% increase in sales during the first half of the year, news that has prompted speculation that the company will lift its full year earnings guidance.

Sales for the retail group increased by A$3bn (US$2.23bn) to $22.1bn during the six months to the end of December, as the chain increased its share of the national market.

Delivering the results, Woolworths' chief executive and managing director Michael Luscombe said: "The positive momentum in the business has continued into the second quarter, with strengthened sales results in all divisions delivering both accelerated growth and increased market share. The December trading period was solid and in line with expectations."

The company's Australian supermarket business saw a 16.7% rise in sales during the half, rising to $18.839bn. Luscombe attributed the gain to an improved product range in stores and lower prices.

Woolworths' food and liquor division, which includes Australian and New Zealand supermarkets, Dan Murphy stores and hotel bottle shops, recorded sales of $14.3bn, up 9%. Comparable store sales in food and liquor gained 5.7% over the first half while acquisitions in New Zealand supermarkets helped to boost results.

"Supermarkets have performed strongly and we are very pleased with the improved trend in BIG W. The Woolworths management team can be proud that the consistent delivery continues to pay off in increased customer acceptance," Luscombe commented.

The company will deliver details of its half-year earnings next month, when it is expected to revise its full year earnings forecast.