Woolworths Group Limited

Thank you for standing by and welcome to the Woolworths Group F26 Q3 Sales Announcement Analyst Call. 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 1 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 2026 financial year. I'd like to acknowledge the traditional custodians of the land on which we meet today, Dharung Country, and pay my respects to elders past, present and emerging. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Annette Carantone, Managing Director of Woolworths Retail, Sally Copeland, Managing Director of Woolworths New Zealand Amitabh Maul, Managing Director of Group EcomX and Dan Haig, Managing Director of BW Before I turn to our performance in the quarter, I'd like to recognise the uncertainty that the conflict in the Middle East is creating for our customers, suppliers and teams. While the impact on the Group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing impact on inflation as we move through the calendar year. However, I am confident that we are well positioned to navigate the current environment. Our primary focus since March has been to take the necessary steps across the Group to minimise the impact on our customers, while also recognising the genuine cost pressures being felt by our suppliers and transport partners. We have mobilised rapidly to respond to this environment and we're engaging with the government as their response plans are developed. We have already implemented a range of measures to support inventory availability and supply chain resilience and are supporting our transport partners through regular fuel price adjustments. For our customers, today we have committed to a price freeze on 300 of our own brand and exclusive brand basket essentials. including chicken, pasta, sausages, nappies, to provide more certainty at the checkout. This price freeze is an addition to the existing lower shelf price program and the thousands of weekly specials that we offer to our customers to provide more value. We have also encouraged use of the existing Woolworths fuel discount at Ampol and EG Ampol sites and are seeing higher redemption rates. Turning now to our quarter three sales results, the group's overall performance in the quarter was strong, driven by Australian food, supported by further progress on our strategic priorities and the quarter. While group customer metrics remain above the prior year as a result of improvements in key metrics like value for money and out of stocks, we have seen a decline compared to quarter two, reflecting a normalisation from the Christmas seasonal peak a rapid reduction in consumer confidence and some disruption during the quarter. Rebuilding trust with customers and ensuring that we continue to provide meaningful value is even more critical in this environment. Now turning to the performance by business. In Australian food, total sales increased by 5.9% with Woolworths food retail sales also increased by 5.9%. Excluding tobacco, Woolworths Food Retail's total sales increased by 7.3%, supported by e-commerce growth of 23.8%. Sales growth in quarter three was largely driven by item growth, with an increase in customer transactions and items per basket compared to the prior year, reflecting investments in value, fresh and convenience that resonated with our customers. growth also benefited from cycling the residual impacts of industrial action in the prior year, which normalised over the course of the quarter, as well as some pantry stocking in March. By category, growth in fresh and grocery food was strong, both growing in the high single digits. In fresh, meat and seafood were highlights, and in grocery food, we saw strong growth in drinks, snacking and health and wellness. Everyday needs growth rates improved compared to the prior year, following action we took to address range and pricing gaps in key categories, as well as providing more value to customers with market-leading promotions. Within everyday needs, Home Essentials showed the strongest improvement, driven by strong promotional plan, particularly in storage and cleaning. During the quarter, we ran the most successful baby event since 2023, which was supported by nationwide relaunch of our Little Ones, Nappies and Wipes. In pet, we introduced almost 80 new Baxter's and Smiton own brand products to our range, supporting solid growth. Billy's Bowl was also launched in Woolworths supermarkets during the quarter as we begin to leverage the strength of our pet stock own brand portfolio. However, growth in everyday needs remained below the other categories and we know we need to do more to improve our competitiveness in this space. Average prices excluding tobacco in quarter three declined 1% driven by deflation in fruit and vegetables due to increased supply in berries and capsicums and deflation in grocery food reflecting lower shelf prices. This was particularly offset by higher meat prices which continued to be impacted by rising livestock costs. Building inflammatory pressures from the conflict in the Middle East do not have a material impact in quarter three. In e-commerce, sales increased 23.8% compared to the prior year. Growth in sub-60 propositions almost doubled compared to the prior year, supported by the continued expansion of Milk Run and our new partnership with DoorDash, with on-demand delivery now available in over 70% of the network. Direct-to-boot now sales more than doubled compared to the prior year, supported by network expansion. Cartology revenue grew 14.4%, driven by several successful promotional events in the quarter, including Easter and the fifth-level cookware continuity program in Woolworths supermarkets. Everyday rewards and services growth was strong, driven by continued growth in rewards and mobile. was the strong member engagement we saw during the quarter following investment in rewards offers to return more value to customers with active members reaching a record of 10.7 million. Campaigns launched in the quarter include points lists, boost your budgets and the Fisla Cookware Continuity Program also helped drive strong engagement. In Australian B2B, sales increased by 4.9%, driven by B2B food, with solid growth in PFD and export meat sales. On an Easter-adjusted basis, PFD sales slowed somewhat in March compared to prior periods, reflecting more caution from PFD's food service customers. B2B supply chain sales were below the prior year due to declining tobacco sales in state independent wholesalers in Tasmania, third-party supply chain sales through PC Plus increased on the prior year, reflecting higher volumes across road and rail freight. In New Zealand, sales increased 1.4% or 2.1% on an Easter-adjusted basis, with a more subdued growth rate in the quarter reflecting lower market growth and a competitive environment, as well as some disruption from the new store operating model. Customer metrics softened in the quarter, reflecting seasonal trends, operational impacts from the rollout of the new store operating model and a decline in consumer confidence. We have seen an improvement in our operating performance over the quarter and are committed to further improvements over the remainder of the year. Pleasingly, the launch of member prices in New Zealand in March has seen an improvement in our value for money customer scores and supported increased member engagement reflected in improved tag rates and increase in active members and higher rewards advocacy. In VW, total sales increased 3.9% or 1.1% on an Easter-adjusted basis. VW's growth transaction values, including VW market, increased by 6.5% with strong marketplace growth. The quality of sales growth in the quarter remained strong reflecting a higher proportion of full price sales as well as a solid Easter trading period. We saw positive momentum continue in clothing benefiting from strong sell through of the summer ranges and early autumn winter trade as well as solid growth in play and home. Every day remains a focus with big price drops launched two weeks ago delivering strong value for customers in the category. Big W e-commerce sales increased by 17.9%, driven by solid 1p growth and strong 3p growth through Big W markets. Pet stock total sales increased by 15.9%, largely driven by the opening of four net new stores over the last 12 months, franchise repurchases and the acquisition of own brand pet food and manufacturing businesses in H2 last year. Comparable sales increased 4%, supported by a value reset, increased marketing and solid own brand and e-commerce growth. Turning now to current trading and outlook. In Australian food, Woolworths food retail sales for March and April to date have increased by 5.4% or 6.5% excluding tobacco, with underlying momentum remaining solid despite some signs of increased customer caution. Reported F26 Australian food EBIT growth is still expected to be in the mid to high single digit range, but no longer at the upper end of the range. This reflects incremental costs associated with direct fuel exposures in quarter four, as well as investments to support customers in managing their budgets in a period of rising inflation, including the price freeze we've announced today. In New Zealand food, market growth has continued to slow and the market remains highly competitive. While New Zealand foods transformation will continue in H2, progress will be slower than previously anticipated with lower sales growth and higher fuel costs and store operating model disruption expected to result in H2 EBIT being modestly below H2 S25. S26 EBIT is still expected to be above S25. While BW sales remains modest, the quality of sales is strong. BW remains on track to deliver positive even and cash flow for F26 in line with previous expectations. It is still too early to predict with any certainty the direct and indirect impacts on F27 from the conflict in the Middle East and how this will impact customer shopping behaviours. We will provide a further update at our F26 full year results in August. Finally, we acknowledge that the ACCC court proceedings against us is concluding today and tomorrow. As the case is before the courts, I won't be commenting on the proceedings. Looking ahead, while the outlook remains uncertain, by putting customers first, maintaining a strong focus on productivity and cost discipline, I am confident that we can navigate the current environment to continue to build a stronger, more resilient business while balancing the needs of all of our stakeholders. I would like to finish by thanking our team for their hard work and commitment to our customers. 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. Your first question today comes from Sean Cousins with UBS. Please go ahead.

Hi, good morning, Amanda. Just a question on the outlook for inflation, possibly for the remainder of calendar 26. Woolworths seems to be accepting fuel-related price increases in fresh, and I think inflation is commencing in, say, milk. But I'm curious around the outlook for long-life prices. Branded dry grocery suppliers have rising costs, some coming from Woolworths Primary Connect division. So should we expect to see a list in dry grocery prices, including list prices, or will... these branded supply costs be absorbed by Woolworths so you have lower gross margins you seem to be lowering your gross margin in own label with price freeze but not in branded or will you be seeking suppliers to absorb these costs related to the Middle East recognise there's process to deal with this with supply costs and there's nuance sort of by category but just keen to understand the outlook for food inflation for Woolworths given the step up in dry grocery supply costs please yeah

Thanks Sean for the question and so just to start and say of course the full impact of the Middle East is unknown to all of us and we too like everyone are navigating that as we engage. We are expecting to see price increases come through from our long life suppliers. What we've called out today is to say the initial wave of requests has been very focused on fresh, as you would expect, so fruit and vegetables into then bread and milk, for example. But we certainly are seeing now an increasing number of long-life suppliers reach out for a conversation around their individual circumstances as it relates to some of those grocery products that you're referring to there and so we would expect to see some of those prices increase across the calendar year. The timing of this is of course uncertain and it's such an individual conversation. What we're focused on in those discussions is first and foremost to make sure that we're creating the right value for customers right now and we've been really clear about our commitment to that. It's incredibly important that we continue to build a price trust with our customers at this moment and take all of the learnings of the last inflationary events and make sure that we're as transparent and as upfront as we can be with our customers whilst also managing the needs of our suppliers. And so each one of those conversations are happening individually. On long life, it has only been in the last couple of weeks that we've started to see some of those requests come through. And I might just, Annette, pass to you to give us any other insights on what we're hearing from suppliers, particularly as we're shifting now from not just the conversations with our fruit and vegetable and fresh suppliers, but also into now long life and grocery categories.

Yes, thanks, Amanda. I think it's becoming more apparent to those suppliers that the impact of those fuel increases that have happened over the last few weeks and months a lot of those larger suppliers have further outlooks and commitments on fuel and so it's really only starting to impact their future pricing from now. As you can imagine, we are working through those as a case-by-case basis and understanding the impact of those increases on each individual supplier and the range that they carry and utilize in our customers and on a needs basis we'll be making those decisions around these the price increase itself and then where necessary the flow through if we have to and of course we're trying to mitigate as much as we can that impact to our customers.

Thanks Amanda.

The next question comes from Michael Simotas with Jefferies. Please go ahead.

Good morning everyone. I know there are a lot of moving parts and things moving quickly but I just want to sort of delve into the impact that you're expecting to see in the 26th year a little bit more. You upgraded food guidance in February obviously before the conflict started. Your commentary suggests to date there hasn't been much impact at all, which suggests that the downgrade is really driven by your expectations for trading over May and June. So I just want to confirm that that's right. And then do you think there's an ability to recover some of that in time, and it's just because this has all moved very quickly, or is it just that you need to absorb this and if we see continued pressure, you'll continue to absorb it?

Mm-hmm. Yeah, thanks, Michael, for the question. And so that's absolutely correct. We haven't seen any substantial impact in quarter three, and we've called that out. What we are experiencing in quarter four, however, is firstly the direct fuel impacts on our own transport operations across supply chains, so from distribution centres to our stores, and then also across our very extensive e-commerce network as well. And so we're experiencing an increase there in our fuel costs. So that's certainly a factor that, as you say, we weren't aware of when we last spoke in February. And then the other is the commitment that we are giving to our customers around being there for them now in this time of great uncertainty. And so the announcement around price freeze is also an investment that we're obviously making in creating that level of certainty alongside our commitment to continue to grow the top line sales of the business and so in doing that with all of our existing promotional activations, lower shelf prices and the like, that's really what's driving the adjustment that we have announced today. In terms of the further outlook and your question around recovery over time, for us that becomes a focus around our own productivity and efficiency. We've already signalled very clearly in August our commitment to being an incredibly efficient retail business going forward and so as we go forward now with the current outlook for customers where they're under pressure the inflationary impacts coming through from our suppliers our commitment to an always on cost discipline is incredibly important over the next 6 and 12 months ahead and we're focused on that as well as we look for ways to manage this to the benefit of all of our stakeholders.

Okay, thank you.

The next question comes from Adrian Lemmy with CERTI. Please go ahead.

Hi Amanda and Steve. I just wanted to clarify on fuel. We've seen a dramatic reduction in the last couple of weeks in both petrol and diesel. So is the fuel commentary driven just by what you've seen in April or are you expecting fuel sort of rebounds from here?

Yeah, thanks Adrian for that question. So we're looking at fuel on the basis of everything we just talked about, which is really only in our transport operations. And Steve, perhaps you might just want to talk about how we've been managing our... hedging as well, which is part of the consideration here.

Yeah, thanks Amanda and Adrian. I think there's a couple of dimensions to it. There is uncertainty on what happens on fuel prices, right? You know, they were over $3.20 a few weeks ago, $2.64 when I drove past on Tuesday, $2.50 this morning. And so you're seeing a lot of volatility on fuel price. I think what we don't know is what will happen moving forward. Probably the other dimension that's worse, just to take is in all of our transport contracts we do have fuel rise and fall mechanisms but they have a time lag to them and so some of the impacts of those higher fuel prices will flow through to it in the fourth quarter and so we do know that some of those impacts that were seen earlier are do have a lag impact for us. We have had some hedging in place. We do have hedging in place for the second, sorry, for F27 as well. And so, you know, we do think that there is impact and that's part of what we've called out in our earnings outlook. But we are aiming to manage it as effectively as possible into F27. Thanks.

That's very helpful.

Your next question comes from Tom Carrasque with Baron Joey. Please go ahead.

Morning, Amanda and team. Just got a question on the impact of pantry stocking. I noticed that the sales growth actually accelerated through the quarter despite lapping some industrial action earlier in the quarter. Are you able to just give us some numbers there on what you think that pantry stocking impact was? You're just cognizant that we'll lap it in a year and just want to have that kind of, I guess, settled in the base. Thanks.

Yeah thanks Tom for that question and so yes we did see some pantry stocking in March which did result in an uptick in sales and it wasn't if I could just say right across the network necessarily there were actually pockets particularly regional areas where people have to travel further where we saw actually a greater level of pantry stocking. We're not going to be able to share the specific numbers on what we saw, but I would just suggest it's relatively a modest number. It happened. It caused us to actually increase our own inventory holdings as well to make sure that we were in consistent supply on particularly those pantry products. but today we won't be sharing the specific number. If I give you a sense of the shape of the quarter, just in terms of the sales outline, January for us was very strong. There was a slight setback in February as customers came to terms with the breaking news around the inflationary outlook, the rate increases to the latter part in early March, the Middle East conflict. in March, we did see that sales line pick up, as you say. So March was strong. I would also just call out when we're looking at March, Easter is not like for like. And so, you know, there's a lot of noise yet again in the way that we need to look at the numbers. And so if you look at March, Easter's not comparable. School holidays was also not fully comparable as well. And that's why we shared today that number with March and April in there so that we're able to give you an indication of that full period so that when you're comparing year on year you can at least take that into account.

Thank you.

Your next question comes from Peter Marks with Goldman Sachs. Please go ahead.

Good morning. Just to follow up on Michael's question, trying to understand the slip of the downgrade to the Aussie food feed growth expectations. Can you give us a sense, I guess, of the split between the impact of fuel costs and the price investment you're making? I would have thought like sales are probably growing faster than you thought they would in February, so maybe that could have offset the fuel costs and that would leave like a pretty chunky price investment, I guess, on my map. So, yeah, anything you can give us on the split I think would be helpful.

Yeah, thanks. Thanks, Peter. So in terms of the fuel impact, the fuel impact, the direct fuel impact on our transport operations is estimated at the moment, and again, as Steve just called out, continues to move and is volatile, between $15 and $25 million for the quarter. So that's our estimate. We're not providing an estimate on the investment that we're making in price freeze, which is our commitment to absorb any increases that we receive from our supply partners during that period. If I come back to your question on sales, what we're very mindful of is consumer mindset in terms of customers are under immense pressure, great level of uncertainty. We had a strong Easter trading period and as we've come into now April, we have seen that the cycling impacts with Anzac Day trading hours being adjusted in various states has made it actually a little difficult for us to get a real sense of these early weeks of momentum into April. And so if you're sensing that level of cautiousness, that's really what we're just indicating. We're very satisfied with our sales momentum overall. We're cycling a lot of non-comparable periods right now, and we're very mindful of just the consumer mindset right now. Great level of uncertainty. I'd say peak actual stress that we've seen in the way that we've been tracking our customers for many years now, and so we're just mindful of how that might play out in the coming weeks and months.

That's very helpful. Thank you.

The next question comes from Caleb Wheatley with Macquarie. Please go ahead.

Good morning, Amanda and team. Maybe it's a bit of a follow-up to Peter's question asking in a slightly different way. Appreciating, yeah, you're not going to comment specifically on the price freeze initiative, but there's been several comments throughout the prepared remarks around kind of investment in value and, you know, you mentioned loyalty as part of that. Just relative to kind of where your outlook was, in February for the Aussie food business. How do you think all of their required investment in the customer has tracked in terms of expectations relative to a month or two ago, please?

Yeah, I'll give you a sense of that and then I'll also hand to Annette so that she can share her perspective on that. I would say that compared to when we spoke in February, we've been increasingly satisfied actually with the investments that we've been making in value. and how that's translated into some very strong sales momentum and also some ongoing share gain across that period. So when we look at the value of those investments, whether that be our commitment to lower shelf prices, the commitment to giving more value back through everyday rewards, and indeed our commitment to making sure, by the way, that when the customer comes into our stores, the products are on the shelf and they're having a great experience in store. All of those investments that we made around the fundamentals we believe have been a key driver of item growth both in our stores and in e-com across the quarter and we're certainly feeling satisfied as we've come out of these last couple of weeks post Easter. All we're just calling out here is a very non-comparable period that we're cycling We've also got a very uncertain customer and therefore the outlook, we're just cautious as we look forward on that. But we feel that we're in a really strong position overall to be able to navigate it. But we want to make sure that we are there for customers. That's the very clear message that they've been giving us and we're making a clear decision as a team to make sure that we take the learnings of the last inflationary cycle and show up in the right way for all of our stakeholders. So Annette, if I just come back to the core question we hear around just the sales momentum, that sense of that we've created from those investments.

Is there anything you'd like to add on to that? Oh, I think you're right. This really is an end-to-end execution focus when you look at, yes, we need to get those offers right for our customers and work really hard with our supplier partners to get the right products and offers into our programs. It also is a very strong end-to-end piece of work with our replenishment and supply chain and store team to make sure the right inventory is in the stores to make the best of those moments when our customers are in our stores. Some of those investments, and I'll probably take everyday needs as the category that was a big focus for the quarter. We moved out of multiple quarters of not seeing unit growth into the first quarter in Q3 of seeing that unit growth well above 2% in item growth for the quarter. and those very specific investments in whether it was in EDLP through the pet category, the relaunching in baby and some really good LSP lines and collaborations with our suppliers in personal care, it really did drive customers back into those key categories that we really wanted to shift momentum in. So maintaining that, the core business growth in fresh and grocery but accelerating everyday needs was certainly the place we were investing.

Yeah, and I think that's absolutely right. And so those investments that we're making are choices. They're driving that top-line sales and that momentum. You know, what we're really focused on going forward is to say we want to drive item growth at Woolworths and get that flywheel moving faster than it was certainly 12 and 18 months ago. So for us, that is about investing in all the places, Annette, you just called out, thank you, so that we can get that sales momentum and, of course, then us being super efficient on the way through.

Your next question comes from Craig Walford with MSP Marquis. Please go ahead.

Good morning Amanda and team. My question is on a similar theme. As you called out, you had very strong item growth. Can I understand a bit more about the promotional intensity that played out in the third quarter? Can you share what proportion was sold on promotion and whether that was higher or lower than a year ago and we understand from various forms of feedback that you're looking to put more products on lower shelf price or LSP. What are the targets there over the next 12 months?

Yeah, thanks Craig. So yes, we are very pleased to see the item growth and particularly the item growth that we saw in our stores which as you know has been a key focus of our team's attention over the last six and eight months period and so firstly I'll just call out that item growth we believe is primarily driven by improved availability and a more disciplined execution in our stores and frankly just better merchandising as well. So that is a key driver. Promotional intensity in the quarter certainly did increase on last year but was actually flat to H1 and so I think that's important to call out and as you know we are very focused on making sure that we get the right balance between those yellow promotional specials which we know customers love and the lower shelf price commitment that we have which customers are also searching for you know that sense of certainty and reliability is we believe has always been important and has now become even more important so we have between lower shelf price and EDLP now over 3,000 lines that are within those programs. And yes, it is our intention to continue to focus on expanding that in the right way. We want to make sure that they're on the right lines that matter for customers and that are well suited to that program. We're always going to have specials as well. It's about getting the right balance by category right across the store is what we're really focused on there.

Your next question comes from Brian Raymond with JP Morgan. Please go ahead.

Thanks Amanda. Another one on gross margins and the sort of second half outlook. The $15 to $25 million of fuel impact is a helpful gauge there. So if we take the midpoint, that's about eight basis points in the second half to gross margin. On my maths, if you're in the range of 5% to 7% food EBIT growth, you probably have in the order of 30% to 40% basis points of gross margin decline in the second half, and obviously there's some positives in that margin bridge. So I just wanted to understand the magnitude of price freeze. I know you mentioned before it's holding prices as opposed to dropping necessarily, but I just wanted to understand if I'm missing something in that bridge, because it's a reasonable second half decline in gross margin and fuel is... one part but probably only a third or a quarter of that. So yeah, is there anything else I'm missing there?

Thanks. Thanks Brian for that question. I'll pick up and then Steve, if you've got any bills, let us know. Look, I think the fuel you've called out and that's something we wanted to be clear about in terms of the direct impact. We're not going to share the impact of the price freeze and that itself will unfold across across the quarter. It's also the case that values become even more important than it was in February and I just couldn't emphasise that enough. When we look at all of our tracking with customers, you know, 44% of customers are experiencing real budget pressures in struggling to make ends meet. Many customers are calling out certainly a search for more value overall and in fact many are also indicating that they're going to do things like cook more at home, for example, to save on eating out and spending at restaurants and the like. And so every way in which we track where consumer sentiment is up to and their potential shift in behaviour says that value is going to become even more important. And so, of course, in this quarter, we're very focused on, yes, putting the price freeze, which is really about putting a ceiling on the current prices of those 300 products. but we also want to make sure that we are absolutely there from a value perspective and that we continue to build on the positive sales momentum that we've been tracking now since quarter two. We're very pleased with the turnaround that we saw in quarter two, the momentum that builds from a sales perspective and a customer perspective into quarter three and we certainly want to make sure that we're maintaining and bringing customers with us over this quarter four period, even though there is a high level of uncertainty and values become even more important. And so we are, of course, within that, putting a strong emphasis on making sure that across all parts of the store, we're providing great value. And that can be in places like meat, where we are seeing certainly an increase in livestock prices come through. But that's a core part of the customer basket, as you know. certainly an area where we're continuing to invest to make sure that customers have got affordable offers in the meat category, for example, which we believe is important. Annette's called out already the investments that we've been making in everyday meats and we've started to see again some positive signs from those investments in terms of item growth. Certainly it's moderated somewhat the ASP in some of those categories as we've activated those plans, but our intention is to continue to build price trust through our actions around the price freeze we've announced, continue to build momentum through investing in value, and make sure that we drive that top line. Steve, is there any other questions? sales you have?

No, it's a sales announcement. Yeah, we have given an earnings update but we don't, Brian, want to get into the details of gross margin bridges and, you know, there are many drivers of the mix and the sales and the margin and the cost that, you know, we're trying to manage and so, yeah, we're trying to give an update of what we think the key drivers are today and we'll look forward to providing more detail on all this. Okay, great, thanks.

Your next question comes from Michael Toner with RBC Capital Markets. Please go ahead.

Hi, Tim. Thanks for taking my question. Just actually on availability, I'm curious how availability is tracking in store more recently and particularly over the last month and how you expect that to track through the full queue. and is that related at all to the sequential drop in voice of customer for the Aussie food business? Because going from 52 to 47 in the space of a few months does seem like quite a sizeable drop on face value but acknowledging that there's some natural seasonality in there too.

Yeah, thanks Michael for that question. So as you say, the voice of customer scores generally in quarter three do moderate on the performance that we see in quarter two and so we did see that seasonal impact. We also had a number of disruptions across the quarter and when I say a number it's actually something like 13 different types of events that happened across the country whether it was cyclones, floods or derailments as well which do have an impact on customer experience and so that we need to factor that in alongside just the uncertainty in the environment right now. We know that we're seeing consumer confidence that are at a broader level, sitting at all-time lows. And so we think that has also had somewhat of an impact in terms of our subdued voice of customer scores. I mean, we're always focused on the fact that we need to do better. However, when we look at performance in the individual breakdown on voice of customer, the two that actually really stand out as the strongest performers are actually arguably the two that matter most, which is on value for money, and also on out-of-stocks from our customers. And so, yes, it's one we're watching very closely. We know how important that experience is. But there was a lot of other operational disruptions that have potentially played a role there. Lynette, I don't know if you've got any other builds on voice of customer.

No, maybe just on availability though, I think there was some good improvement on last year, marginal improvement I should say, on last year with all those disruptions taken into consideration. I think there were some good disciplines and practices just around getting that inventory back in flow. we did see some good improvements in meat, as an example, and chiller, with some categories that have... Great improvements, I would say. Yeah, and meat chiller in particular. But, yes, it was a challenging period with those disruptions that you talked to. But, you know, it's hard to say it's stabilised because you never know when those are going to occur, but I think our discipline and agility around solving those is actually very strong.

Thank you.

Thank you.

The next question comes from Phil Kimber with E&P Capital. Please go ahead.

Hey, Amanda and team. My question was just around, you've mentioned a lot about the consumer uncertainty, but you also talked about, you know, things that companies can do to help manage it themselves. So without giving, obviously, numbers, but, you know, the Customer Offer Reset Program and other cost-saving initiatives remind us, you know, the work that you're doing on there and how they might flow through over the next 12 months.

Yeah, thanks, Phil. So, yeah, absolutely spot on. You know, we're very focused on what are all the things that we can do to mitigate the impacts here. And so that starts, first and foremost, with continuing to drive strongly outstore productivity and distribution sense of productivity. And so that continues to be a big focus for us, particularly as we think about supply chain and the substantial investment we've made there in Moorbank. in the year ahead it's incredibly important that we continue to see the positive implementation and ramp up of those facilities and that they start to deliver some of those improved productivity benefits and so that's certainly a big focus for the team. In our stores of course there's an always on focus on how we best continue to manage productivity and then as you know we're also very focused on how across our support offices we continue to find ways to be more efficient as well. In the past, we've always been very focused on our stores and our distribution centres, but it is equally important that in support we look for ways to be more efficient and that's clearly going to be important in the year ahead. When we look at then also the way that we're managing the business, for us it starts with making sure that we're driving sales and unit growth. That's where it all starts for us, hence our focus. on making sure they're offering great value. And the Customer Offer Reset Program is very much a systematic opportunity for us to go through category by category and make sure that we have got the right offers for our customers, that it's easy for them to shop and find value at the different tiers, and that we're driving at the same time important unit growth for our supply partners as well. That's a really important part of that program. this is actually a good time from our perspective to be well and truly now set up with that program and starting to see that flow through all of our categories over the coming months is important and good timing. So there's many things we're doing across the board. From a team perspective, we're very clear that we need to play our part here in making sure that we're as efficient as possible across all of our leaders.

The next question comes from Richard Barwick. What's the LSA? Please go ahead.

Hi Amanda and team. Good morning all. You've talked a lot, we've talked a lot on the call about what you're doing in terms of the pricing and value. Can you give us some commentary how you've seen the competitive environment in terms of what you're seeing from competitors and because I think value is very much a relative game. So it sounds like you're happy that you've improved your relative value. But yes, just love to hear some commentary there in terms of what you're seeing from competitors just on those metrics.

Yeah, thanks, Richard. Well, it continues to be a very competitive market. Certainly that's continued from quarter two into quarter three and into quarter four as well, I would say. overall it's also been in a relative sense a relatively rational market and so that's important as you know and so we are seeing strong competition particularly in areas like e-commerce for example where it really has continued to ramp up in terms of the customer interest in e-commerce as part of their grocery shopping but also in terms of the competition so whether that Our main competitor, or whether that's the introduction of Aldi, Costco, through DoorDash, Coles with Uber Eats, that continues to be a very hotly contested market. And when it comes to value overall, there's the rational value, as you say, and then there's perception. And that continues to be an opportunity for Woolworths to improve our price perceptions. and hence why you see us continuing to take the opportunity to make sure that as customers are under pressure that we are doing the right thing and being there for them because that is what creates long-term momentum and value for the business and for shareholders ultimately.

Okay and just to clarify on that point, if you're saying that the market is rational but competitive, Does this mean that you're not seeing anything alarming or any sort of behaviour in the market that you should be calling out?

No, we're not. We're not seeing anything that we would call out. It's competitive. It's always very competitive, as you know. And apart from e-commerce that I've called out specifically because we've got... entry into some new channels for some of our competitors. You'd expect to see it a little bit more competitive from a customer acquisition perspective. But no, I wouldn't call out anything different to what we've seen over the last six or so months.

Okay. Okay. Thanks, Amanda.

Your next question comes from Ben Gilbert with Jarden. Please go ahead.

Morning Amanda and team. Just a question for me. It feels there's been a bit of a shift in terms of focus around value. If we look at fuel and we just do the math, it looks like the fuel's probably about a third of the delta for the guidance and then there's another 30 to 50 million bucks into price. What I'm just trying to understand is, are you deciding in this backdrop, given sort of, I suppose, criticism in the past about not leaning into your scale and position in market, you're leaning a bit more into value? And obviously, fresh is a big focus, but value and being more vocal and driving that in consumers' mind has been a step change because there's an opportunity to do that now. The second part of that, I'll just tip off to the question, is how are you going to communicate that and win the marketing message? Because this has been an era, I think Woolies probably hasn't been as strong in the past, but it feels like you've got a real opportunity to do that now. Are we going to see a step change in messaging around how you're lending into things like chicken, et cetera, that you put in the price freeze announcement today? So two parts to that.

Yeah, thanks, Ben. Look, I'll just reinforce what I've already said, which is, in all of our tracking, whether it's our research, whether it's the behaviour that we're seeing from customers, value is increasingly important. So it is more important than it was when we last chatted in February and hence why we're continuing to put more emphasis on that because that's the number one focus and priority for our customers. Certainly it's also been the reason why we've seen a good increase in terms of our sales momentum across quarter two into quarter three assisted by improved availability and execution as well. And so, yes, it is incredibly important. We have seen a shift in consumer sentiment. It's not a minor shift, it's a major shift. It's really driven by the uncertainty. And so we see it as an opportunity to build on the momentum that we have, to invest in the right places, to make sure that we continue to be the first choice for customers, that we can continue to drive that item growth that we've spoken about and we can continue to do it right across the store. I think that's really important for us in terms of yes, fresh is the gateway to the Woolworths store but we want to see that growth right across all of our grocery lines but then importantly over into everyday needs and that's been an area that we have put increased investment and focus on and we intend to continue to do that in quarter four so that we can build the momentum into the year ahead. I take your feedback on we could do a better job on communicating and we can always do things better and certainly announcing the price freeze today is an opportunity for us to make sure that we're showing up to our customers and demonstrating that we're listening to them, that we've heard their concerns, but that we also understand that they want us to show up differently this time. And I made it very clear in the last inflationary cycle, that perhaps we were slower to move than we should have been. And this is our opportunity, we believe, to build long-term trust and ultimately improve the outlook for the business over the mid-term. And so we'll take your challenge on in terms of making sure that the value of communication improves, but that's certainly our intention.

Thanks, Amanda. I appreciate it.

Your next question comes from Sean Cousins with UBS. Please go ahead.

Thanks for taking another question. Just on New Zealand food, could you just talk a bit about the execution issues for the change in the store operating model? Maybe what needs to sort of be improved or corrected and then maybe when that could be done by such that it doesn't appear to be an issue anymore?

Yeah, thanks. Thanks. Sean, as you know, it was a very large change that we made to our store operating model in New Zealand. We believe it's the right change, but as we've implemented such a large change, there has been some teething challenges in terms of the execution. I'll hand to Sally to talk more about that. The primary areas I know that Sally and the team have been focused on is on availability and particularly then into e-commerce. I also know, Sal, that we've been seeing some improved performance, certainly, over the last month or so, and so we're confident that we'll get back to where we need to be. But I might just let you talk to a little bit more of the detail there.

Yeah, thank you, Amanda. Yeah, it has been, I guess, a challenging implementation of a very significant change in our business. So just to contextualise, I think 3,500 new team members in New Zealand business are and really how we've focused on that, I think, from an implementation perspective. It did impact, in the initial stages, our availability experience for our customers and our e-commerce, which we know is a very complex operational model for us to get right every day for customers. And so we did implement a very focused recovery plan. It has been pleasing to see, actually, our availability metrics both on our customer scores from a VOC perspective, but actually... customer first availability scores improving on average about 7% across the board and so we continue to remain really focused on that and have a better offer that we are executing now for our customers and so for us it is about how do we embed and actually come out of this model even more strongly so deliver a really improved result we've also importantly from a team skill perspective really wanted to embed some things like multi-skilling so we've gone from about 6% of our team being multi-skilled to over 20% of the team being multi-skilled. And that's an important unlock for us to provide meaningful hours for our team, but also to be able to better service our customers on a longer-term basis. Thanks, Sal.

Sorry, does that mean it's resolved now or it's going to be resolved during the fourth quarter? Sorry, it seems to have gotten better. Is it really more something that's been isolated? The issues have been isolated to the third quarter?

it was I think the biggest impact certainly in the third quarter but we importantly remain very focused in the fourth quarter to make sure we've got it right across 190 of our stores so we're tracking every single store in terms of that recovery and performance and then making sure importantly that we our customers know that we are back to business and trading really well and that we're focused on recovery from a customer driven perspective and that is a part of the fourth quarter focus also

Thanks, Sally. Thanks, Amanda.

Your next question comes from Tom Curath with Baron Joey. Please go ahead.

Oh, thanks. Just want to ask a question on the delivery fees and whether they've gone up as a result of what's happened with fuel. I've noticed that e-commerce growth is pretty strong in the quarter and just kind of thinking about what your plans are there to recover some of the higher fuel costs in that channel in particular.

Yeah, thanks, Tom, for that question. And we're pleased to see that step up in the e-commerce sales growth across the quarter. And as you'll know, we also added for Sunday a service fee earlier in the year as well. And so we are very mindful of getting the balance right again there around the cost of serving customers in this channel with the convenience and the value that they experience. And Amitav, you just want to talk about how we're thinking about that on the go for me?

So maybe a couple of things there, Amanda. Firstly, you know, for our customers who are having stuff right now, the best option for, you know, to manage their costs is actually still to come into stores and shop in our stores. Most of our customers live within 10 minutes drive from the store. But a number of them prefer the convenience of shopping online. And we do have, you know, thousands of vehicles running on the road any given day and a few million kilometers that you drive every week. being very mindful that there is a cost increase and we are looking at all options quite carefully. Amanda, you did refer to service increase and what we saw in that is a number of customers who preferred to still shop on Sundays, kept the business on Sundays and were happy to pay the premium on Sundays and quite a few actually moved it to other days of the week. So it's for us to make sure that we are providing all possible options to our customers and giving them the value of the convenience that they really care about while managing obviously the profitability of the business.

Thanks, Senator.

The next question comes from Brian Raymond with J.P. Morgan. Please go ahead.

Thanks for taking the follow-up. Just a quick one. Just back on the pantry stocking issue, it sounds like that's kind of largely in the past. I mean, who knows how this issue evolves around Iran and diesel and so on. But I just wanted to understand, that's probably going to be a bit of a headwind in the June quarter as it was largely in March. I'm not sure why we wouldn't try to quantify it here. Is it because it's not meaningful in terms of basis points or percentage points of growth? Because we're going to probably pick up a bit of a slowdown in sales momentum. I just don't want this to come up in the future when it's not called out now. So is it that it's not meaningful or that you just don't want to call it out from a for some other reason, just so we can think about our 3Q to 4Q profile in terms of sales growth. Thanks.

Yeah, thanks. Thanks, Brian. Look, it certainly was a pattern that we identified pretty quickly, so it's a very real behaviour on the shift that we saw from some customers. As I said, it wasn't necessarily even experienced in all stores. and so we're not going to call out the specific number. What we're mindful of is, and that's why we shared that seven-week number, so that you were able to have a look at, you know, the like-for-like relativities across Easter, across the school holidays, the industrial action cycling, you know, out in March and so not in those April numbers and then, yes, you've got the pantry stocking that did occur in March as well. And so all of that is actually quite noisy, as you know. So I appreciate why you're asking the question, but we're not intending to share that number. It happened over, you know, I'd say a two-week period, and it has dissipated. We've not seen a return. And obviously, as you'd imagine, we're watching it very, very closely. And so, you know, we didn't think it was significant enough to call out.

Okay, great. That's helpful. Thanks. Excellent.

Thanks. Your next question comes from Michael Simotas with Jefferies. Please go ahead.

Thanks very much for taking another one. I know it's a sales call, but you've changed guidance. Was there anything in CODB that's going to play out differently in FY26 to what you expected when you gave us the last update in February? And as an example, I presume there's no provisioning that you need for the junior wage rates?

Thanks, Michael, for that question. Yeah, CODB wasn't the driver of the change that we've announced today. And Steve, just on...

We've continued to invest in our stores to drive availability and I think that's part of our plan to make sure we're driving the top line. In terms of the junior wage rates, mine doesn't come in until the end of the calendar year so there's no provisioning, there's no significant shift in our outlook on CODB other than just the volume driven variability of costs that drive most of the costs of our businesses.

Got it, and you'll just take the increase as it comes through in December? Yes. Thank you.

That is all the time we have for questions today. I'll now hand back to Ms Bardwell for closing remarks.

Thank you for joining us today. I'd like to reinforce that we are pleased with the sales momentum that we saw in quarter three and the execution and the commitment that the team has demonstrated during this period as we navigate uncertainty due to the Middle East and we are determined to be there for our customers right now at this time of great uncertainty whilst also balancing the needs of our suppliers so that they remain viable and sustainable and also delivering long-term value for our shareholders. To do that we know we need to be even more efficient going forward and we're committed to doing that together as a team. Thank you for joining us today.

That does conclude our conference for today. Thank you for participating. You may now disconnect.