Australian grocery giant Woolworths’ New Zealand division eked out a 3.8% increase in its third-quarter sales, primarily through hiking prices.

The supermarket chain’s NZ businesses – which span the Countdown, SuperValue and Fresh Choice brands – generated sales of $1.86 billion in the 13 weeks ended April 3, up from $1.79b a year earlier.

Woolworths said the NZ sales were driven by higher average selling prices, which rose 3.6%, with the volume of transactions shrinking 9.7% and comparable item volumes contracting 2.8%.

More expensive commodities, such as dairy and meat, and higher freight costs underpinned the price hikes, and chief executive Brad Banducci warned it would hit the wider group’s earnings.

Woolworths anticipates earnings before interest and tax in the six months ending early July would drop by as much as 28% to between $120 million to $140m.

“New Zealand food had a very challenging quarter. The impact of omicron, which was felt later in the quarter, led to supply chain disruption" and stock shortages that peaked in March, Banducci said in a statement to the ASX.

“The expected reduction in profit is largely a function of higher covid costs associated with keeping our customers and team safe and minimising disruption to our supply.”

Woolworths NZ managing director Spencer Sonn said almost 3,000 Countdown employees contracted covid-19 through the peak of the omicron outbreak.

The group’s flagship NZ chain, Countdown, reported a 1.8% increase in sales to $1.46b, while SuperValue and Fresh Choice sales were up 3% at $152m. Its ecommerce sales rose 18% to $253m.

NZ’s supermarket chains are currently under scrutiny from commerce minister David Clark, who’s mulling over his response to a Commerce Commission investigation into the sector.

Woolworths said it supports the commission’s recommendations – which stopped short of major restructuring – and that it would continue to “engage constructively” with the government.

The NZ arm underperformed the wider group, with Woolworths’ group sales from continuing operations up 9.7% at A$15.12b from a year earlier.