Woodward & Lothrop managed to boost its profits by 6 percent last year during the Washington area's "worst economic performance in the past five years," Chairman Edwin K. Hoffman reported yesterday.

Business won't improve significantly until the fall, warned the chief executive of Woodies, which, as the Washington area's only publicly owned independent department store, is regarded as the best indicator of local retail business.

For the year ended Jan. 30, Woodward and Lothrop's sales climbed 8.6 percent to $334.8 million from $308.4 million a year ago, and profits increased to $10.2 million ($4.18 a share) from $9.6 million ($3.95).

"Christmas business developed late in the month, and sales for the month exceeded our plan," Hoffman added. "However, January sales and earnings, affected by the snow and extremely cold weather, were very disappointing."

Fourth-quarter profits were also hurt by the cost of opening a new store in the Baltimore area and by so-called "inventory shortages" caused by shoplifting and employe thefts, the company said.

As a result, profits for the quarter increased only 2.7 percent, from $5.9 million ($2.46) to $6.1 million ($2.51), while sales for the final quarter of the fiscal year were up 5.2 percent, from $101.2 million to $106.5 million.

"All things considered, we are gratified by the results," Hoffman said, but added that "once again we are in a year that contains a great many uncertainties."

High interest rates not only hurt Woodies' profits directly by increasing the cost of financing its inventories but, along with high inflation, indirectly depressed sales, Hoffman added.

The Woodies chief executive did not comment on current sales performance in his statement, which was issued along with the earnings report. However, he predicted sales and profits "should begin to improve during the third quarter of 1982, with the fourth quarter showing even greater improvement."

Hoffman said the Woodward and Lothrop strategy for dealing with the unpredictable economy will be "to continue to exercise strict control over expenses and inventories, while aggressively maximizing sales."