Taking the knife to meat and vegetable prices has helped Coles lift quarterly food and liquor sales to $7.1 billion amid a fierce price war with Woolworths.
The supermarket giant slashed prices on more than 150 products, including bread, cheese, sugar and rice, during the March quarter as part of its "everyday low prices" campaign.
And the cuts have paid off, with total sales up 5.4 per cent lift on the same time a year ago.
Comparable sales, which strip out the effects of store openings and closures, rose 3.8 per cent but were slightly weaker than the four per cent lift in the previous three months.
Coles shaved one per cent off its food and liquor prices during the March quarter.
Prices are down 0.8 per cent for the financial year to date.
Parent company Wesfarmers dismissed fears that Coles' cut-throat price war with Woolworths and Aldi could see profit margins squeezed to the maximum.
"We understand we are in a competitive market," the conglomerate's managing director John Durkan told reporters on Wednesday.
"We'll continue to invest in price. Our aim is to put ourselves in the strongest possible position against all competitors."
Finance director Terry Bowen said Coles had concentrated on discounting products shoppers value the most, and those that have the most competition.
"We have done a lot of work with our meat business in the quarter which we compete with thousands of thousands of independent butchers," he said.
Rival Woolworths has previously said it's ready to spend half a billion dollars on driving down its food and grocery prices.
The impact discounting will have on the supermarket giants' profit margins was of great concern for investors, Morningstar analyst Gareth James said.
"Exactly how Coles and Woolworths are going to protect their margins against a business model that has caused problems for large successful supermarkets overseas, like Tesco, remains to be seen," he told AAP.
Wesfarmers's home improvement chain Bunnings reported an impressive 12 per cent lift in total sales and comparable sales growth of 9.4 per cent.
Its Kmart business also lifted comparable sales by 6.3 per cent, while Officeworks recorded a nine per cent increase.
However, department store Target's comparable sales slipped 3.2 per cent, while a drop in petrol prices led to a 16.6 per cent slide in Coles' fuel sales.
OptionsXpress market analyst Ben Le Brun said Coles had performed well despite the intense price war.
"It's dealing with a lot of competition and some very heavy discounting, but continues to put out positive like-for-like sales numbers," he said.
Wesfarmers shares dipped 15 cents to $43.00.
WESFARMERS' DISCOUNTING PAYS OFF:
* Total first quarter retail sales up to $13.1b, up 3.3pct
* Coles food & liquor up 5.4pct to $7.1b
* Coles convenience down 16.6pct to $1.6b
* Home Improvement up 12pct to $2.3b
* Office Supplies up 9.0pct to $485m
* Kmart up 10.9pct to $937m
* Target down 1.6pct to $663m
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