Woolworths Group Limited

Thank you for standing by and welcome to the Woolworths Group Limited FY24 full year earnings announcement. All participants are in a listen-only mode. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.

Good morning, everyone, and welcome to Woolworths Group's full year results for the 2024 financial year. Joining me for today's presentation are Stephen Harrison, our CFO, who will present our financial results a little later, and CEO-elect Amanda Beidel, who will be presenting with me on today's call. Also joining us in the room are Spencer Son, Managing Director of Woolworths New Zealand, Vaughan Ingram, Managing Director of W Living, Dan Hank, our new father. Congratulations, Dan. on the weekend, Managing Director of Big W, and thank you for coming in. Guy Brent, Managing Director of the Wars Food Company, and Paul Harker, our Chief Commercial Officer for Australia Food. In the spirit of always pushing forward, I'm going to try a new thing and actually talk to the slides in the right sequence. So I'll call out the slide and then give you the highlights on it as we go through our investor presentation. Starting on page two, I would like to acknowledge the traditional custodians of the land on which we meet today. I'd like to pay my respects to Elders past and present. Then moving on to talking about performance. I'll start with an overview of the group's performance and our progress on our strategic agenda. Amanda will then provide an update on our digital loyalty and e-commerce achievements as part of her Willie's Ex portfolio. And then Steve will talk to the financials and he'll come back to me to cover current trading followed by Amanda to finish with some of her observations and priorities moving forward. On slide four is really our summary of the year that was. And I think as you all know, the group's full year financial performance reflects a very challenging operating environment impacted by elevated cost of living pressures and a highly competitive market. After a strong H1, we experienced a rapid change in customer expectations in Q3, which led to a loss of sales momentum and a decline in customer scores. We worked hard In Q4, to address the areas most important to our customers, with value for money and shelf availability a particular focus, pleasingly our customer scores and underlying trading momentum improved in Q4, and this has continued into F25. Group normalized sales increased 3.7% per year, with around half of the group sales growth driven by e-commerce sales, which increased by 18.5%. Group normalised EBITs for four significant items increased 1.1%, with the group EBIT margin of 4.7%. In Australian food, normalised sales increased 3.7% and EBIT increased 6%, with about three quarters of Australian EBIT growth attributable to the profit improvements in Woody's Eggs. New Zealand Food and Big W both had a challenging year, impacted by value-conscious customers, Importantly, both businesses made good progress on their transformation plans, but there remains more to do. On slide five, we're just giving a recap on how we see the customer at the moment. And as, again, you would all know, the persistent cost of living pressures came to a head for our customers during the year. With customer behaviors catching up with customer sentiments, which have been prevalent for some time, we've sort of seen the customer talking about stress but not acting on it, and that's certainly changed, in particular in the second half. Customers tell us they've been finding more ways to save, such as cutting back on non-essential items, cross-shopping retailers, and reducing eating out occasions. Buying more and special has also seen a significant increase on last year. This is as ongoing mortgage and rent-related financial stress continues to put real pressure on household budgets, especially for younger singles, couples, and families. Let's go in a little bit more into the detail on that on slide six. While cost of living pressure is specific, customer spend on groceries as a percentage of household spend is declining. This is in part due to the significant moderation in grocery inflation with our average prices declining on the prior year in both Q3 and Q4. And then we've also begun to track a typical Woolies trolley which includes 32 key household items which is around down around 1% compared to a year ago. Coming back from the customer to how they score in us, our voice of customer scores reflect the customer experience during the year, with group bulk NPS of 47, down 1% in the prior year, and reflecting the particularly challenging environments in late Q2 and Q3. However, thanks to the efforts of our team, store controllable box scores were resilient, with customer care scores remaining above 80% across the group and largely unchanged in prior periods. In addition, a strong focus on improving shelf availability and addressing value for money perceptions led to improvements in Q4 relative to Q3, but as always, with more to do. On slide eight shows really break down a different profile by half and even by a quarter for Australian food in F24. You know, we often talk to things being a story of two halves. This really, for us, was a story of four quarters. Sales growth slowed significantly in H2, as you can see, from low inflation to item growth, and that was particularly true in Q3. However, we worked hard to focus on getting things right for our customers, and PZ saw a modest but very importantly consistent recovery in Q4, led by item growth, which we have seen continue into S25, and which, of course, we need to continue to build on. Moving to slide nine, it just gives you a sense of how we are thinking about helping our customers find value, feel valued, and connect value. We need to do a better job of communicating the great prices and specials to our customers across the shop, and we have made a number of adjustments in that regard. including making our price tickets and unit prices easier to read, continuing to prove our own brand range and tailor our range in each one of our stores. This week's launch of lower shelf price includes a price reduction on many household essentials by as much as 20%, providing customers with yet another way to get more from their Willys shop. Consistently good shopping experiences means getting the fundamentals right. And we have made good progress in addressing shelf availability in the second half through a combination of increasing stock weight on key lines and improving fresh service levels. Finally, we made it easier for our, we are making it, or have made it easier for our customers to connect value across the group by improving our online and digital experiences. And I won't steal Amanda's thunder, I'll let her talk to that a little later. I am actually tempted to steal Amanda's thunder. I shall resume. On slide 10, I wanted to provide a brief update on Woolworths New Zealand and VW. We've made good progress on the transformation plans across the year in both of these businesses, but there remains more to do with financial performance well below potential for both businesses. In Woolworths New Zealand, improved value communication has resonated with customers, and this is reflected in the strong improvements in value for money scores, up five points in the last year. We also rebranded 72 stores to Woolworths New Zealand by the end of the year. In fact, I think we sit on 77 as I talk, with another 60 planned for F25. Importantly in the rebranding, we get a sales lift of just over 1% as we rebrand, which is an incredibly important positive for the future. Following its official launch in February, Everyday Rewards New Zealand has grown to 1.6 million active members at the end of the year. I think we had another 460,000 customers join our Everyday Rewards membership program in New Zealand during the year. And we extended our lead in e-commerce as we rolled out more convenient services for customers like direct to boot and launched Mook Run to really strong residents in New Zealand. Christchurch Fresh DC had an immediate impact on availability and fruit and veg customer scores on the South Island. Our overall focus on fresh has led to strong growth in fruit and veg and meat in Q4 on both islands. Turning to Big W, the rollout of our health and beauty shop-in-shops has proved popular with customers with over 100 plans for F25. We also launched the Big W Market before Black Friday last year, which has materially increased the online range we have to over a million products for our customers to choose from, and this additional short-term choice, not only building the basket but also driving more traffic to the BW digital platform. The reset of our spring and summer clothing range, some of which you can see in stores now, has been another important step during the year with the new simplified range focused on more entry price points, improved quality and fit. I think 80% of our products in the new range are under $20 in price. And I think that's really important. It's really focused on delivering real value at opening price points in those key categories. Finally, leveraging group capabilities and new technology to improve processes in VW remains an opportunity for this work to continue into F25, including the enormous potential of RFID for us in getting the right color, size combinations available for our customers' store. I will cover the outlook for both businesses a little later in the presentation. On slide 11 is a reminder of how we think about our group and the businesses and platforms within it that work together to enforce each other to deliver on our everyday retail strategy. I will now hand over to Amanda. It's a very similar slide, by the way, you've seen before. It's just been fine-tuned as we continue to evolve the group and the strategy and the progress we've made therein. But I'm now going to turn over to Amanda to talk about our progress across digital rewards and e-commerce in F24. Over to you, Amanda.

Thank you, Brad. Turning to slide 12. Customers are increasingly connected, and it's important that we continue to enhance our digital experiences to make engaging with us easier and seamless. Growing digital engagement is also driving more sales, both in our store and online, and more opportunities for our supply partners through cartology to connect with customers in a personalized way. Since the start of the year, weekly visits to our digital assets across the group have surpassed the number of transactions in physical stores, which reinforces the importance of digital experiences as part of the customer journey. In F27, average traffic to group digital platforms reached 27.2 million visits per week, up 19.7% on the prior year. Digital tools such as in-store shopping mode, shopping lists and the best unit price filter and special filters continue to enhance shopping experiences and increasingly are helping customers manage their shopping budgets. Turning to slide 13, Active Everyday Rewards members in Australia reached 9.8 million with more than 770,000 new members joining the program in F24. Our members are also finding more value with boosting members accessing personalized offers up 9% on last year and who, on average, earn their $10 off five times faster than non-boosting members. Everyday Extra also continues to grow strongly with paid subscribers more than doubling on the prior year. One of the ways we're continuing to grow the benefits for our members is through new partners. And during the year, we welcomed Accor, Milk Run, and PetStop to the program. Finally, as Brad mentioned, in Everyday Rewards is now a Trans-Pasman program following its launch in February in New Zealand. Turning to slide 14. Group e-com sales for F27 were a little under $8 billion, with normalized growth of 18.5%. led by Woolies X e-commerce sales growth of 20.2%, which remained strong throughout the year. Including Milk Run, Australian food e-com sales increased by 21.3% for F24. Strong sales growth, higher pickup mix, and productivity programs across fulfillment operations and last mile deliveries led to material improvement in profitability. with EcomX normalized DAP up 119%. Ecom growth is being supported by the expansion of our convenience propositions, with 86% of our B2C Ecom orders now fulfilled within 24 hours, an increase of six points compared to the prior year. During the year, we launched a new sub-60-minute collection service, direct-to-boot now, in 307 sites, in addition to our 727 direct-to-boot sites across the country. We also established Home Run as the group's last-mile delivery service provider with 20 million orders delivered since launch. I'll now hand back to Brad to cover the progress within our retail platform and adjacencies in the year.