Heavy discounting and a cooler summer have taken its toll on supermarket giant Woolworths, with a big slowdown in sales growth from its key supermarket division.

Sales growth for the division, after accounting for the opening of new outlets, was up just 1.1 per cent for its latest quarter compared with 1.9 per cent previously.

Woolworths managing director Grant O’Brien said the lowest December Australia-wide temperatures since 2001 had dampened second quarter sales growth.

Price cuts made in a boost to drive sales volumes also kept a lid on sale revenue.

Mr O’Brien added that the liquor business was growing strongly.

“It’s a patchwork. Certainly liquor is growing strongly but there are elements of the supermarket business that have seen increases as well,” Mr O’Brien said.

Some analysts are concerned that grocery price falls at Woolworths could accelerate in the upcoming quarter after a 4.1 per cent drop in average shelf prices.

They are also worried about the cost of heavy discounting and whether the company will maintain its guidance when it releases its half year results in February.

However Woolworths has maintained guidance for net profit growth of between 2 per cent and 6 per cent for the full financial year.

City Index chief market analyst Peter Esho said second quarter sales were in-line with expectations or perhaps slightly below.

Mr O’Brien said Woolworths, the nation’s biggest supermarket chain, was confident that business would pick up as more customers came through the doors in search of a bargain.

“Customers are winning at the moment. They’re having a good time of it, with prices in their favour,” Mr O’Brien told analysts in a briefing on Tuesday.

He said customer numbers were up almost five per cent in the second quarter, but the quantity of groceries in each trolly was falling.

Mr O’Brien also accused rival Coles of misleading shoppers with its latest round of price cuts to fruit and vegetables.

Coles this week slashed fresh produce prices by up to 50 per cent in a move it said would help farmers shift excess stock.

Both retailers have previously tried to undercut each other on a range of other staples including bread and milk.

Mr O’Brien said discounting was part of everyday supermarket promotions but stopped short of saying it was a price war.

“Reduced prices are an outcome of this. Would I describe it as a price war, no I wouldn’t,” he said.

In the 27 weeks to January 1, Woolworths recorded first half sales growth of 5.6 per cent from the previous corresponding period in its supermarket division when the effect of new store openings was included.

Sales growth was 16.4 per cent in its home improvement division.

However, Woolworths said comparable store sales in Australian food and liquor business for the half year increased just 1.5 per cent.

Woolworth is also putting Dick Smith Electronics up for sale as part of a $300 million restructure plan.

Woolworths will close 100 Dick Smith stores in the next two years.

Woolworths plans to open another 14 supermarkets and six Dan Murphy’s liquor stores in the 2012 financial year.

Woolworths shares closed up 34 cents or 1.39 per cent, at $24.79 on Tuesday.