Woolworths Group Limited

Thank you for standing by and welcome to the Woolworths Group FY27 Q1 sales announcement. All participants are in a listening 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 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 first quarter sales results for the 2027 financial year. I'd like to acknowledge the traditional custodians of the land on which we meet today, Dharong 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 Ecom X, and Dan Haig, Managing Director of Big W. Turning now to our quarter one sales results. It has been a strong start to the year with a continuation of our trading momentum into F27. Group sales grew 4.7% in the quarter, led by Australian food. customers continue to respond to the progress we have made to improve value, enhance range and provide more convenience. This has seen more customers choose Woolworths first and shop with us more frequently. We know household budgets are under pressure and we have remained focused on doing more to help our customers. For an Australian budget family with a mortgage, we estimate groceries make up around 10% of household spending. to provide dependable low prices. We've added more items to lower shelf price with over 1,000 products now part of the range. We've also seen increased boosting of everyday rewards offers during the quarter and customers continuing to shop specials as they look for value. In the context of broader cost of living pressures and low consumer confidence, customer scores have remained resilient. However, we know we have more work to do so that customers continue to choose Woolworths first, particularly as we head into the key Christmas and holiday trading period. Now turning to performance by business. In Australian food, total sales increased by 6.9% driven by strong item growth. In Woolworths food retail, sales also increased by 6.9%. Sales growth in the early part of quarter one benefited from the success of our Disney issues collectible program which drove strong customer engagement. Importantly, growth remained strong throughout the quarter with solid item growth driven primarily by customers responding to value in our stores and an increase in customer transactions compared to the prior year. All categories grew sales in the quarter with fresh and grocery food sales growth particularly strong. We've added more items to lower shelf price to provide customers with affordable and dependable prices. The range is resonating with customers and continues to perform well with increased sales and strong item growth. Fresh, meat and chilled were the highlights with double digit sales growth. We saw strong customer demand in meat for family essentials like beef mince and value added proteins as well as yogurt and cheese in chilled. reflecting investment in price through lower shelf price and a reset of the category. In grocery food, we saw solid growth across all categories with health and international foods growing in the double digits and drinks, freezer and snacking all growing in the high single digits. Everyday needs growth rates improved in the quarter and benefited from strong supplier engagement in the Ushies campaign and key promotional events in the period. within everyday needs, wellness and baby, and personal care and beauty showed the strongest growth supported by key promotional events in baby and oral care, which drove solid unit growth. Own and exclusive brand sales grew 8.5%, driven by strong growth in fresh and neat. Some notable new products launched in the quarter include our first ever gluten-free chocolate mud cake, new premium flavor-versed apples as well as market-leading value sausages and new side salad options. Average prices excluding tobacco in quarter one declined 0.7 with lower prices supported by the expansion of lower shelf price and price reductions, particularly in everyday needs categories and deflation in fruit. This was partially offset by higher meat prices reflecting higher livestock costs. In e-commerce, sales increased 20.2% compared to the prior year, with on-demand continuing to be the fastest-growing delivery proposition as we expanded our on-demand capabilities to provide our customers with even more convenience. We continue to invest in our network, and during the quarter, we opened two new supermarkets and renewed a further 14 stores. Weekly traffic to group digital platforms was up 14.2% on the prior year, supported by strong growth to the Woolworths app due to the success of Ooshies, as well as the launch of Olive and our new Smart Basket feature. Cartology revenue was largely unchanged on the prior year, with strong digital media growth, led by sponsored search and off-network, offset by in-store and publishing channels. Supplier uptake of major events remained strong during the quarter, including Ooshies and Fisla. In everyday rewards and services, we saw continued member engagement with strong boosting numbers, supported by promotional campaigns in the period, including Ooshies and Fisla storage containers. Mobile was also a highlight with strong double-digit growth. In New Zealand, sales increased 2.9% in the quarter, with growth benefiting from ushies early in the quarter. Sales growth has moderated following the conclusion of the campaign, reflecting a weakening macroeconomic environment and a highly competitive market. While customer metrics softened in the quarter, value for money, voice of customer, increased two points compared to the prior year, as customers responded positively to significant value investments. e-commerce sales increased 4.6% with a more subdued growth rate in the quarter, reflecting some operational disruption and strong competitor activity. While we expect the challenging trading environment to continue in New Zealand, we are focused on building sales momentum and making further progress on our strategy. In Australian B2B, sales increased by 4.4%, driven by solid growth in PFD, QSR sales remained strong in the quarter and food service sales improved relative to quarter four. However, we saw softer sales in the key accounts channel reflecting the known exit of some customers with new customers expected to come on board in the second quarter. More recently, we are starting to see some renewed pressure on out-of-home spend following rising fuel prices and the recent interest rate increase. B2B supply chain sales increased compared to the prior year, largely driven by double-digit revenue growth in PC+, third-party supply chain sales with higher volumes in domestic freight and rail. In Big W, total sales declined modestly in the quarter, reflecting a more challenging discretionary retail environment and ongoing cost-of-living pressures on households. While overall sales growth remained below our expectations, clothing, play and home grew items in the quarter. While performance in every day continues to be more challenged as we undertake a strategic recess in this category. Big W's e-commerce, GTV, increased by 7.7% and we continue to grow our same day delivery proposition. In October, we launched the Big W range on DoorDash, offering 35,000 items to customers in over three quarters of the network. PetStock total sales increased by 6.1%, benefiting from the opening of new stores in the quarter and solid comparable sales growth, which was supported by strong e-commerce growth of 24.7%. The rollout of PetStock brands into Woolworths supermarkets is progressing well, and we've seen strong performance from Billy's Bottle and Tilly's. Own and exclusive brand sales grew strongly compared to the prior year, reflecting the strong value proposition and continued range expansion of pet stock brands into Woolworths supermarkets. In October to date, sales in Woolworths food retail is broadly in line with the Q1 post-Oshiz trading. in New Zealand Food and Big W, our focus remains on building sales momentum in challenging trading environments. With only eight weeks until Christmas, we are well positioned for the key trading quarter ahead. We're determined to give our customers every reason to choose Woolworths first this Christmas, including our new festive range of over 500 products. We recognize household budgets remain under significant pressure and we're committed to helping our customers celebrate the festive season with quality and value they can count on. I look forward to sharing more on our strategy at our upcoming Investor Day next month. I will 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 one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Adrian Lemme from Stiddy. Please go ahead.