Australia’s largest supermarket chain, Woolworths, continues to woo investors with a 5.6% share price rise in the past couple of days on the back of strong sales.

Woolworths revealed that sales in the December quarter were up 19.6% and up 13.4% to A$12.75bn (US$6.6bn) for the first six months of the financial year. These figures have maintained Woolworth’s position as one of the darlings of the Australian stockmarket, particularly as Woolworth’s main rival, Coles Myer, had been cost-cutting during the same period.

Most analysts remain positive about the outlook for Woolworths in the year ahead and many are upgrading their forecasts.

But there are a number of clouds on the horizon. Coles Myer is fighting aggressively for market share under its new chief executive John Fletcher and some analysts worry that Woolworths will be able to maintain these double-digit rates of growth. There is also concern that food prices may have to be pulled back as increases have been blamed for recent higher than expected inflation figures. If the prices for fruit and veg are too high customers will desert the supermarkets for cheaper alternatives like Aldi.

By David Robertson, correspondent