AFR.25/08/2011.Photo by ROB HOMER........  new ceo of woolworths GRANT O BRIEN on the grounds of the woolworths headquarters at norwest in sydney,

Woolworths CEO Grant O'Brien. Photo: Rob Homer

WOOLWORTHS chief executive Grant O'Brien has stuck his head above the gloomy cloud shrouding the retail sector to argue that the worst might be over, with consumer confidence growing.

But he said it was unlikely that spending would bounce back to the bonanza days before the global financial crisis.

''There is no doubt that this isn't going to be a flick back to the sort of confidence we saw in customers in times gone past, but a relative improvement - and I'm hopeful that perhaps we are seeing the early signs of that,'' Mr O'Brien said.

The chief of the nation's largest retailer made the comments as he revealed Woolworths first-quarter sales, which showed an increase of 4.7 per cent to $14.78 billion for the 14 weeks to September 30.

Its flagship Australian and New Zealand supermarkets division, the biggest contributor to sales and profit, lifted sales by 3.4 per cent to $12.99 billion for the period, while its clothing and merchandise business, Big W, had a surprising strong quarter as sales jumped 6.2 per cent to $1.1 billion.

Overall robust sales were in line with market expectations and reflected a continued improvement of the final quarter of 2011-12, which was helped by a cut in interest rates by the Reserve Bank and a cash splash by the federal government to compensate households for the carbon tax.

Mr O'Brien adopted a more bullish stance on consumer trends and the possibility of a return to better times for retailers, saying the longer the world went without a major financial crisis the higher consumer confidence should rise.

''The longer things go on and remain relatively stable, the likelihood of customer confidence returning increases, and that's been my view for some time. I think generally there is a bit of a light at the end of that tunnel.''

He said the recent 25 basis point cut in official interest rates was feeding that confidence. ''It is helped with interest rate reductions, but of themselves they are not generating a particular kick, but it's more and more confirmation to consumers that they should be feeling a little better about things and my sense is that is starting to occur. But that's dependent on those trends continuing''

Woolworths' hotel business reported a 17.3 per cent increase in quarterly sales to $379 million, driven by new hotels, and stronger food and bar sales.

The sales jump at Big W was helped by strong sales of footwear, clothing and books, with the chain the biggest seller in Australia of the bestseller Fifty Shades of Grey.