UPDATE 3-Australia's Woolworths Q2 sales up 11.5 pct

(Adds company comment)

By Victoria Thieberger

MELBOURNE, Jan 31 (Reuters) - Woolworths Ltd. (WOW.AX), Australia's largest retailer, said on Wednesday second-quarter sales climbed 11.5 percent as its market share increased, and maintained its sales outlook for the year.

Shares in Woolworths rose 0.4 percent to A$23.74 by afternoon, having climbed 2.5 percent on Tuesday on hopes of strong sales, amid a weaker broader market .AXJO.

"It's a pretty strong result, no doubt about that. The momentum is very strong," said FW Holst analyst David Spry.

"At this stage they haven't provided any (profit) update but I wouldn't be surprised at their half-year result if they tick it up a little bit, and some analysts may increase their forecasts as well," Spry said.

For fiscal 2007, analysts expect Woolworths to post a net profit of A$1.24 billion, up 23 percent from fiscal 2006 and roughly in line with company forecasts for a 16-21 percent increase, according to 10 analysts surveyed by Reuters Estimates.

The Australian food and liquor division, which accounts for about two-thirds of total sales, saw sales rise 8.9 percent to A$7.29 billion, with food inflation running at about 4.0 percent.

Chief Executive Michael Luscombe said the all-important December trading period had been solid.

"The positive momentum has continued... with strengthened sales results in all divisions delivering both accelerated growth and increased market share," he said.

Comparable food and liquor sales were up 6.4 percent in the quarter, and comparable petrol sales were up 4.5 percent.

Food inflation was about 4 percent in the quarter, but improved into the mid-3 percent range in January, Luscombe said.

Woolworths posted second quarter sales of A$11.35 billion

($8.8 billion) for the 13 weeks to Dec. 31. For the first half, sales rose 15.9 percent to A$22.09 billion.

Comparable sales at discounter Big W were up 1.1 percent in the quarter, a small improvement after a recent slump. Discount stores generally have suffered in the recent solid sales period, as consumers moved upmarket.

"Our reading is that around the world and here in Australia consumers have become a little more aspirational in what they are seeking," Luscombe said.

SALES IN INDIA

Woolworths' consumer electronics sales jumped 7.3 percent in the quarter, and its first store in India opened in October under a business venture with the Tata group.

Luscombe told Reuters the store's sales had "well and truly" met expectations, and the company was considering options for an eventual expansion.

"Several more stores will open in the remainder of the financial year..." Luscombe said in a phone interview.

He also said improvements in the company's supply chain had helped domestic supermarket sales, with the stock position in December improved over previous pre-Christmas seasons.

Sales at New Zealand supermarkets, where Woolworths has a 43 percent market share, improved 3.8 percent for stores open at least a year, recovering after industrial action dampened sales in September.

The company said it maintained its sales outlook for the full year. Last year Woolworths forecast overall group sales growth of 8-12 percent in fiscal 2007.

"We expect sales from continuing operations for the full year to grow in the region of 8 percent to 12 percent," Luscombe said.

Shares in Woolworths, which has been gaining market share at the expense of main competitor Coles Group CGJ.AX, have gained 33 percent over the past year, while the broader market has climbed 18 percent.

Earlier this month, Woolworths applied for clearance with the New Zealand regulator to make a takeover bid for retailer The Warehouse Group Ltd. (WHS.NZ), in which it already has a 10 percent stake.

($1=A$1.29)

((Reporting by Victoria Thieberger, editing by Kim Coghill; victoria.thieberger@reuters.com; Reuters Messaging: victoria.thieberger.reuters.com@reuters.net; +61 3 9286 1421)) Keywords: WOOLWORTHS/SALES

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