Trevor Bish-Jones has agreed to remain in his post for three months while Woolworths searches for his successor. Woolworths said the search would include both internal and external candidates.
Woolworths chairman Richard North said: "Trevor has been with Woolworths for six years. In that time he has been a tireless chief executive and has made a very significant contribution to the group. It has been agreed between the board and Trevor that this is an appropriate time to seek new leadership for the business."
Woolworths said that group sales were down 1.9% for the 19 weeks to June 14. Like-for-like sales within Woolworths' stores were down 2.2%.
Woolworths added in a statement: "The margin rate in retail in the year to date has been influenced by cost price pressures and the strength of the entertainment market meaning a higher proportion of sales have come from lower margin entertainment products and a lower proportion from higher margin sales of warm weather outdoor products and clothing."
Woolworths added that it remained cautious about the consumer economy because of rising energy and food prices.
Separately Woolworths said it had sold four of its London stores to Waitrose for £25.5 million.