Wesfarmers managing director Richard Goyder believes shoppers are feeling the benefits of lower fuel prices. Photo: Philip Gostelow

Wesfarmers says its "strongest set of numbers for some time" demonstrate the health of the Australian economy, but unemployment remains the biggest risk to consumer confidence.

Wesfarmers, Australia's largest private sector employer, on Wednesday reported a 3.3 per cent increase in retail sales to $13.12 billion for the March quarter compared with the same quarter last year.

The result was boosted by stellar sales at its Bunnings hardware chain and market-share gains by supermarket chain Coles, but dampened by weakness in liquor and at its discount department store Target.

"I think consumers right now have got the benefit of lower fuel prices, probably lower energy prices," managing director  Richard Goyder said.

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"For some but not all, lower interest costs, and then, in Sydney and Melbourne particularly, there's the wealth effect of higher house prices. And [share]markets have generally been OK so people's superannuation balances are probably looking OK."

Mr Goyder said the main threat to the resurgence in sentiment was unemployment.

"The thing that we always worry about is unemployment because we think that's the thing that can knock consumer confidence. That's the one thing I'd be watchful of," he said.

"But at the moment, you know, I think these numbers in some way belie a sense of negativity on the Australian economy."

Excluding new store openings, Wesfarmers on Wednesday posted 3.8 per cent growth in Coles  food and liquor sales in the three months to March 31, 2015. This was its weakest growth rate for a year, as deflation took a toll across its 775 supermarkets, with food and liquor prices falling 1 per cent. 

Including new stores, total food and liquor sales posted 5.4 per cent year-on-year quarterly growth to $7.1 billion.

Meanwhile, Bunnings exceeded expectations with quarterly same-store growth of 9.4 per cent, and discount department stores Kmart and Target reported disparate results: Target same-store fell by 1.9 per cent, while Kmart's rose by 6.3 per cent.

Bruce Smith, portfolio manager at Alphinity Investment Management, said the results were pretty much in line with expectations. "Bunnings is a brilliant business and going strongly, the Kmart recovery continues and Target's still pretty ordinary," he said.

Deutsche Bank analyst Michael Simotas said the third-quarter results were solid, with all divisions stronger than expected except Target. "We expect this result to be well received by the market but it is too early to judge the impact of Woolworths' planned price investment," he said, referring to supermarket rival Woolworths' announcement in February that it would spend at least $500 million on cutting its prices and improving its stores.

Mr Goyder said Wesfarmers "changed nothing based on what any competitor has done in the past few months".

And finance director Terry Bowen said Coles had plenty of opportunity to steal market share in fresh food, such as meat, from independent and specialty retailers. "In broad terms, independents have lost market share [over the past five years] and if you look ... more holistically at the market, Aldi and Costco ... have gained market share and Coles and Woolworths have basically maintained and moved their market share around a bit.

"But the big movements have been Aldi and Costco growing - bearing in mind they are the largest retailers in the world, multinationals. And the independents have lost market share."

Wesfarmers estimated Coles had about 25 per cent of the Australian food market, about 20 per cent of liquor and less than 20 per cent of the home improvement and office supply markets.

Shares in Wesfarmers defied a 1.85 per cent fall in the broader market to close down 15¢, to $43.