Woolworths says food prices dropped in third quarter

Overall Woolworths reported its total sales - including its New Zealand supermarkets, Big W stores and business-to-business sales - were up 2.8 per cent to $16.8 billion.

""It was a challenging quarter across the group with a noticeable shift in customer sentiment and shopping behaviours since Christmas," chief executive Brad Banducci said.

Mr Banducci told reporters on a conference call renters had been socked with big increases since the start of the year and it was showing up in their shopping habits.

Consumers were looking for more ways to save, buying more own-brands and products on promotion.

On Tuesday, Coles reported its supermarket sales rose 5.1 per cent in the third quarter, with price inflation moderating to 2.2 per cent.

Mr Banducci said he couldn't explain why Coles was reporting price inflation while Woolworths was reporting deflation, but he was confident in his company's figures.