Woolworths Group Limited

Thank you for standing by and welcome to Woolworths Group F25 Q3 sales announcement. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. 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 Ms. Amanda Bardwell, Managing Director and CEO of Woolworths Group. Please go ahead.

Good morning, everyone. Thank you for joining us today for Woolworths Group's third quarter sales results for the 2025 financial year. I would like to start by acknowledging the traditional custodians of the land on which we meet today, Dharong Country, and I pay my respects to elders past and present. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Annette Carantoni, our new Managing Director of Woolworths Retail, Paul Harker, Chief Commercial Officer, Australian Food, Sally Copeland in her capacity as Managing Director of Group E-Commerce X, Peter DeWitt, Interim Managing Director of Woolworth, New Zealand, Von Ingram, Managing Director of W Living, and Dan Haig, Managing Director of Big W. The group's performance in the quarter reflects a continuation of trends from the first seven weeks with solid sales growth within the context of the challenging environments. Weather events in the quarter caused some isolated supply chain disruptions for our stores, and we temporarily closed and paused e-commerce services for team and customer safety. However, we worked hard to support affected communities across Queensland and northern New South Wales. This included the donation of groceries and essential items to evacuation centres, as well as airlifting essential items to Ingham and other communities isolated by floodwaters in partnership with the federal government and the Australian Defence Force. These events have led to additional costs of 20 to 25 million related to higher stock loss, incremental transportation costs and damage to the Harvey Bay store. I would like to recognise the incredible group-wide efforts of our team who supported their communities under difficult circumstances with many of them also personally impacted. Customer metrics remained largely stable in the quarter with group voice of customer NPS of 44 flat on quarter two and up one point compared to the prior year. While it was pleasing to see a stabilisation, we know we have more to do to provide consistently good shopping experiences for our customers and deliver the value they expect from us. Now turning to performance by business. In Australian food, total sales increased 3.6% to 13 billion, supported by strong customer trade events and solid e-commerce growth. Sales were predominantly driven by transaction growth, with items per basket up modestly. Woolworths food retail total sales increased 3.4%, with e-commerce momentum remaining strong at 16.3%, albeit at a slightly lower rate largely due to the impact of weather events. The change in timing of Easter modestly impacted growth rates in the quarter, with Woolworth's food retail Easter-adjusted sales growth of 3.6%. Woolworth's supermarket store-originated sales increased 1.4% compared to the prior year and benefited from temporarily disrupted e-commerce services in the period, which saw more customers shop in-store, particularly in Queensland. Customers remain value conscious and continue to cross shop, with customers continuing to look for bigger savings through deeper promotions and own brand. Woolworths Food Company own brand and exclusive brand sales continue to outperform in the quarter, growing 5.7%, with particularly strong growth in pantry essentials, frozen foods, snacking and household care. Average prices, excluding tobacco, in quarter three were down 0.5%, marking the fifth quarter of low prices for customers driven by deflation in long-life categories such as pantry, snacking, freezer and everyday needs. Fruit and vegetable inflation in the quarter was due to cycling a period of abundant supply in the prior year and meat prices continued to be impacted by rising costs. Same-day and on-demand propositions fulfilled by our store network continue to resonate strongly with 31% of e-commerce orders fulfilled within two hours of order placement and 55% of orders fulfilled on the same day. Cartology revenue grew by 29.1%, driven by the successful execution of the Minecraft Qubies collectibles program across Australia and New Zealand supermarkets and Big W. Rewards and services revenue increased 10.4% and member engagement remained strong with more than 600,000 new active rewards members compared to the prior year. In Australian B2B, sales increased by 6.3% driven by solid momentum in PFD, export meat and growth in the group's third party supply chain business. Sales momentum in New Zealand continued to improve in the quarter, with total sales increasing 4.8% or 4.4% on an Easter-adjusted basis. Sales growth was also supported by the successful Minecraft Qubies collectible program and strong e-commerce growth. We're continuing to see progress from our transportation initiative and transformation initiatives, which is reflected in our improved customer scores across all metrics, particularly in key focus areas of fruit and vegetable box and availability box. E-commerce sales grew by 24.3% and penetration reached 14.8% in the quarter, supported by the expansion of convenient same-day propositions including delivery now and milk run. Our on-demand services are resonating strongly with 23% of e-commerce orders now fulfilled within two hours and 89% of orders fulfilled within 24 hours. During the quarter, we marked the one-year anniversary of the Everyday Rewards program in New Zealand and we're pleased with the engagement we're seeing with our customers with 2.1 million active members at the end of the quarter. Over two-thirds of our stores have now been rebranded to Woolworths and we're on track to complete the rebranding of the entire network by the end of calendar 2025. In W Living, sales decreased 2.7% in quarter three, largely reflecting the timing of Easter, impacting Big W sales in the quarter, and the impact of divestment of 41 pet stock retail stores and 25 vet clinics, which were still owned in the prior year. In Big W, Sales trends improved in the quarter, with sales increasing 1.9% on an Easter-adjusted basis, and item growth in clothing, home, and play. Clothing sales were driven by spring-summer clearance activity, with a slower start to autumn-winter, which has continued into April. This has impacted Big W's profit outlook, with the loss before interest and tax for H2 now expected to be approximately 70 million. Excluding the impact of divested stores, pet stock sales increased 4.5% driven by item growth, strong own brand performance and the opening of three net new stores in the quarter. Woolworth Market Plus GMV increased 24.6% compared to the prior year, driven by the W market, partially offset by a decline in MyDeal GMV with solid item and transaction growth driven by strong growth in returning customers. With only two months until the end of the financial year, we remain focused on the priorities set out in February. This includes ensuring we're getting it right for our customers by improving our retail fundamentals across key areas of value, availability and range, simplifying the way we work to deliver greater efficiencies and unlocking the full potential of the group for our shareholders. We're making progress in these areas and will provide a more detailed update at our full year results in August. We have very strong foundations in place and need to continue to build on our strengths. I remain confident in our plans and optimistic about the opportunities ahead of us. I'll now turn the call over to the operator for questions. To give everyone a chance, can I please ask that you limit it to one question per person and then rejoin the queue with any follow-up questions. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. We ask today that you please limit to one question per person. If you would like to ask a further question, you may press star 1 again to rejoin the queue. Your first question comes from Michael Simotas with Jefferies. Please go ahead.