Chief executive Brad Banducci noted consumers were switching to cheaper private label groceries and canned food and eating out less often as they dealt with soaring interest rates and pressure on household budgets.
"Inflation is continuing to affect the way that customers shop but the overall impact on our business at this stage remains modest," he said on an investor call.
"Inflation is coming down but not as quickly as we would like. We remain very focused on ensuring that customers can get their money's worth through our various programs of prices drops, low-price specials, personalised offers and range curation."
Australia's top supermarket operator on Wednesday reported first-half net profit of $845 million from continuing operations, a 24.9 per cent increase from a year ago.
Profit fell sharply on a statutory basis because last year's number included gains on the demerger of drinks group Endeavour.
Overall sales for the 27 weeks ended January 1 were up 4.0 per cent to $33.17m.
"Our first-half result benefited from a focus on improving our customer shopping experience, restoring our operating rhythm, the non-recurrence of material COVID-19 costs in the prior year and strong seasonal trading," Mr Banducci said.
The gains were led by its main Australian supermarkets business, whose sales rose 2.5 per cent to $24.39 billion, while earnings before interest and tax jumped 18.2 per cent to $1.44b thanks to food margins ballooning 48 basis points in the half to 30.7 per cent.
The company said price growth averaged 7.7 per cent in the second quarter despite some fruit and vegetable prices moderating as supply improved.
Rival Coles had outlined first-half food inflation of 7.4 per cent on Tuesday.
Sales growth in the company-owned private label and exclusive brands averaged 5.0 per cent in the half but some categories had "hard double-digit growth", Mr Banducci said.
Woolworths' other major gain came from a recovery at its Big W discount chain, where half-year sales jumped 15.3 per cent to $2.7b and earnings surged fourfold to $134m.
Sales at its business-to-business segment and New Zealand operations rose 23 per cent and 1.3 per cent respectively.
The retailer has had a strong start to its second half but warned about earnings growth.
Food sales at its Australian supermarkets were up 6.5 per cent in the first seven weeks of the second half, while Big W sales were up 9.7 per cent.
However, Woolworths expects earnings growth in the second half will be below the first half as the company cycles to a more normal second half that last year didn't have as many direct COVID-related costs.
He warned, though, that cost inflation in areas such as wages, energy and supply chain remained material.
The company lifted its fully franked interim dividend to 46 cents a share, an 18 per cent rise from a year ago.
By 1500 AEDT, Woolworths shares were up 2.0 per cent at $37.46 in a weak Australian market.
