Woolworths Holdings Ltd

Thank you for standing by and welcome to the Woolworths Group F24 Half Year Earnings 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.

Good morning, everyone, and welcome to Woolworths Group's High Peer Results for the 2024 financial year. Joining me today are Stephen Harrison, our CFO, who will present our financial results a little later, Matthew Davis, Managing Director of Woolworths Supermarkets, Amanda Weigel, Managing Director of Woolie Jacks, Von Ingram, Managing Director of W Living, Spencer Sondheim-Lewine from New Zealand, Managing Director of Woolworths New Zealand, Dan Haig, Managing Director of Big W, and Guy Wendt, the Managing Director of the Woolworths Food Company. We also have our Chair, Scott Perkins, with us today, who will make some brief remarks shortly. Before we begin the results presentation, I think you all will be aware at this stage of today's announcement, confirming my intention to retire from the role of Managing Director and Group CEO of Woolworths Group at the end of August of this year. After eight years literally to the day of the role, and as we go into our centenary, it felt the right time to pull aside the baton And I'm proud to inform you that the new CEO designated for this group is Amanda Bible, the current managing director of WillysX. More on this in the upcoming months, but I want to share a hot dog thanks to all of you for both your support and challenge over the years. Thank you very much. And over to you, Scott.

Thank you, Brad. Look, I think this is a big day for Woolies and in particular a big day for Brad and Amanda. We don't do this often as a company, Brad being the 12th Chief Executive in our 100-year history. I first do want to acknowledge Brad's contribution. While he remains very firmly in the seat and charged with delivering our full-year results and working with Amanda through to 1 September, it is natural to reflect on what he's achieved and it is remarkable. Despite Brad's insistence on a low key approach, we will of course internally mark all of that in due course. The board is thrilled with Amanda's forthcoming appointment. I believe she's everything that we look for in the next leader for Woolworths. We think about the vision she has for the business, her proven ability to carry a team with her, and as you all know in retail, the need for a relentless execution. We are very excited by the prospects of her leadership. CEO succession has been an important element of our board work ever since I joined the Woolies board when I took over as chair in 22. We refreshed our future CEO criteria and have been working with our internal venture talent on their development towards that goal. And throughout that time, we've been in discussions with Brad about what his plans were and what was in the best interest of Woolies timing-wise. In the middle of last year, we decided to move into a different phase and commence the planning for CEO succession with today's date in mind. Throughout this, Brad has been flexible. The board's subcommittee first met on this in May, actually, and working with two external advisors, we proceeded to do an external search and continue with our internal development. We did conduct an extensive international search, and I interviewed a number of world-class retailers, as you would expect this role does attract that caliber of leader. And against that group, the board was delighted to appoint Amanda as the best person for the job, and we're confident an outstanding choice. typical Swillies fashion, we're all back to work, focused on our customers and long-term value for our shareholders. Thank you, Brad, and I'll hand it back to you.

Thank you, Scott, and you will probably see some of the questions we had in the first session. Scott, I think you're going to dial off, so we're not going to have many specific questions on the CR process, but Paul and myself, if there are any specific ones, we'll make sure that we close the loop and engage with you, Scott, to get the questions back to our investors.

Very happy to answer those. Very happy to answer those, Brad. Thank you all. I'm now going to dive into the presentation, if that's okay with everyone.

And as I do that, I would like to start by acknowledging the many traditional owners of the lands on which we operate and pay our respects to their elders past and present. who recognise their strengths and enduring connections to the lands, waters and skies as the custodians of the oldest ongoing cultures on the planet. We remain committed to actively contributing to Australia's reconciliation journey through listening and learning, empowering more diverse voices and working together for a better tomorrow. I'm going to talk to the slides so you can follow if you want to through the presentation. Just for slide three, I'm going to first give an overview of our performance and progress on the strategic agenda. Steve will then present our financials before handing back to me to finish with current trading and outlook before we move to questions. On slide four, the group's first high financial result was mixed and reflects strong results from Australian food and Australian B2B offset somewhat by the impact of a very challenging trading environment on New Zealand and Big W. As you can see, age 12 with 24 group sales increased by 4.4%, with around 40% of group sales growth driven by e-commerce sales, which grew 17.8%. Group EBIT before significant items increased 3.3%, with the group EBIT margin of 4.9%, unchanged on the prior year. In Australian food, H1 sales increased by 5.4%, and EBIT increased 9.9%, with around two-thirds of Australian food EBIT growth attributable to WSX, which I will cover in the following slides. We've made some early progress in our transformation of New Zealand food in the hot, but a value-focused customer, Moderating price inflation and material wage inflation led to an even decline of 42% to $71 million. We are confident we are on the right path to New Zealand and have a strong customer plan to sustainably improve the performance of our business, but we also recognise that this will be a multi-year journey. As foreshadowed last month, BW had a challenging first class. Outside of solid trading and key events such as Black Friday and Christmas, customers are increasingly cautious, which impacted sales during the half. Lower sales, together with wage inflation and current activity to main inventory health, had a material impact on earnings, with H1F24 EBIT of $54 million, down 60% on the prior year. I will come back to BW a little later to explain what we are doing to improve the performance of the business. On slide five, you will see a high note for me, which is our customer scores, which have held up in the half with group VARC NPS, Net Promoter Score, that is, of course, of 50, down one point on the prior year. Products available, which was particularly pleasing in the half, but especially in December, as supply chains have now largely returned to pre-COVID level. However, our customers concerned about cost of living continue to impact Value for Money scores, especially in December and January, and it is a clear watch out for us and remains our key focus for H2. Customer care remains the highest store-controllable block metric across the group, which I think is an amazing testament to our hard-working team. Just on slide six. Another key theme for the half, which we've tried to lay out there, was the moderation of inflation in our food business, illustrating the downward trend in Australian food, with first a major driver, but longer after inflation, importantly also moderating. Importantly for our customers, fruits and veg average prices declined by 6.4% in Q2, which was driven in particular by an improvement in availability, including an increased supply of berries, capsicums and zucchinis. Meats, red meat that is, was the other major contributor with prices declining 7.2% in Q2 as beef and livestock prices softened. In land life, we have seen a number of supply increases, requests reduce significantly compared to prior periods. However, they do still remain above pre-COVID level. Just moving then on to slide seven. While lower cost prices across some of these key categories have helped deliver lower prices for customers, we have also been focused on helping our customers spend less. In food, our low-price and seasonal prices drop programs are helping our customers spend less with more and more customers shopping these programs. We also importantly grew our own burn range in the half, including over 180 exclusive products as part of our Christmas range. with numerous food companies owning exclusive brands growing 6.8% in the half, with item growth of 4%. Importantly, during the half, we also launched member prices. We did actually start at the end of Q1 and continue to fine-tune it to offer even more value for our customers. Orange Friday offers, in particular, resonates strongly with customers and helps drive an increase in everyday rewards members. and we will continue to build on our member price programs over time. The enhancement of our digital tools, including best unit price filter, is helping our customers save and drive an increased engagement with our digital assets, and we are pleased to once again achieve a new record for our Everyday Awards Back Bank for Christmas program. The W delivered great values during the key events in the period, including Black Friday and Christmas, and we lowered the price of over 2,300 items and continued to find drive opportunities to introduce great products at low prices. A key example of this is our own brand toy range, Somersault, which launched more than 150 products in the past and grew strongly. Slide eight is a reminder of our connected group and how we organize ourselves for sustainable value creation in the mid-term. I will discuss some of the highlights in the next couple of slides. Slide nine, I just like this slide, which is why it's in the material. It just shows you our desire for increased convenience in e-commerce. So what you see over there is the continued growth in e-commerce over penetration, but then working that very importantly, the proportion of it that is same day. It is amazing to me personally that our thumbnail mix reached 43% in Q2, and importantly, 85% of all customer orders were fulfilled within 24 hours of order placement. In order to do this, we've had to materially adjust the way our network works, in particular our supermarkets. And as you'll see on the right-hand side, we are just having to challenge ourselves continuously to move essentially to a continuous flow order-fulfilled process away from a batch process, which has been the tradition of the segment. And you can see what our cut-off times are today. But I think it's an amazing testament to our team that we have a cut-off time of 4 p.m. in terms of being able to get Sunday direct-to-route or home delivery. And, of course, more work to do to open even more capacity into that space. We reportedly opened 19 new direct-to-route sites during the harvest. and we now have DTB, as we call it, available in 740 stores. We also opened our first standalone direct-to-group site in Raleigh, in Sydney, which is an interesting innovation for us as a group, and I'm delighted to be able to say it's actually performing ahead of plan with, I think, 283 orders last week. Average annual traffic to group digital platforms reached 29.3 million users customers in Q2 up 17% on the prior year due to the ongoing resonance growth in our apps. This looks like 10. Again, a very, I guess, complex slide, but again, one of my favorites. I'm about to have my best consumer material, so please humor me. What you will see over here is just how we think about our rewards program and the funnel in which we look at it, and so the context and the growth Active Everyday Rewards members reached 9.4 million customers, or members in the half, with over 675,000 new members joining the program, around 8% in the prior year. Scale and tag rates increased by 3% compared to the prior year as well. This reflects the continued focus on delivering personalized value and the launch of member prices and ongoing enhancement to Everyday Rewards digital assets has really resonated with our members or customers, with 2 million weekly active app users, up 28.2% on the prior year. As illustrated by the chart on the left, we know that as members become more engaged, we can move our depth of insight to a better value for them, and increase, hopefully through doing that, their loyalty to our group. Every day, Australia also continues to grow strongly, with total subscribers increasing 70% in the last year, And we saw a strong uplift in paid subscribers following a positive customer reaction to our Orange Friday offer. Everyday Mobiles, and we've taken, for those who are not aware, all of our services and put them under the Everyday brand. But Everyday Mobiles customer base increased 30% in the half with Everyday Insurance. We launched private insurance on Everyday Insurance in December, so we'll wait and see how that goes. But as we do these things, we see very strong resonance and growth. On slide 11, I want to provide some examples of the progress within the context of the adjacencies around our B2C food business. And these are not definitive, but just to give you some sense of colour and progress that we're making, and the end outcome is we are making progress in activating our connected group, and that's true in every part of the group. We will come back and talk specifically as we look at our retail platforms to the contribution of Cartology in gross margin, and it's in the Australian food segment at the moment. But Cartology is not a new business for us. It has been around amazingly for five years, and it is a material profit contributor to the group. But the good news is that its growth continues to be strong, up 14%. And just at the end of the half, we announced our new partnership with Facility Centers, which hopefully will leverage the capabilities we acquired through the acquisition of Shopper Media, and we look forward to adding 1,000 screens to our store network, effectively about a 40% increase to the overall size of our screen components of Cartology. In terms of advanced analytics, Obviously, within advanced analytics, for those who are not aware, it does include all variations of AI, from machine learning to predictive AI, to increasingly, hopefully, as we go forward, gen AI. But we have worked in partnership with the group around certainly high-priority use cases. Virtually every part of our group can be materially involved through the use of advanced analytics, and that's becoming more true, not less true. I think we can all agree. But we have three high-priority use cases underway at the moment, and the ones we wanted to cover, of course, is our next-gen buying promotions, which is a platform developed with all the supermarkets that we are now in the process of rolling out across the group, and that has led to material improvement in promotional effectiveness. We're still running a very full promotional program, and we can come back and talk about that, but we are just getting better at making sure they're winner promotions, not loser promotions, and that is another... in addition to Cotology, material contributor to GP percentages reported in AU Food. We're also then taking the capability we've brought around promotions to create a broader commercial platform, and we are very actively building what we call our next-gen buying platform, or the tool we use, OptiCost, which has given us a data-driven approach to commodity price changes and how to engage constructively with suppliers around underlying cost trends and therefore what we may expect in terms of negotiation around prices or costs. And of course we have more direct leverage of that on our side through the Wall Street company. A real highlight for us in terms of where importantly is Quick Assist, which has been led by Natalie Davis and her team, which helps our store teams be much more focused on data-led insights so that they can prioritise what they do in the context of their stores and amazing resonance on that. And it's also saving our team a lot of time and getting them focused on their priorities. Just moving on from that to Primary Connect. Primary Connect in general had a very good half-life and to have productivity where it was pre-COVID in the context of material, ongoing, weather-related supply disruptions in Australia. I just can't emphasize the impact that we can find. I think two-thirds of the time we have a disruption somewhere in Australia, weather-related. So to have achieved that in that context, I think, is key. And then looking at, of course, we're working on enhancing and digitizing that network as well. And so we have a lot going on with my piece here, as we call it, very effective and growing. In terms of PC Plus, hopefully everyone would be aware, we took over three of the Old Scots warehouses when the business went into administration. Those businesses have now been, or those warehouses have been effectively onboarded into our platform and we're continuing to engage and grow capacity into those and we, with over 900 suppliers and carrier partners, onboarded our digital platform during the half We referenced our PFD sales. If I went to the world's food company, I hope everyone's aware the world's food company includes our own brands. I've talked about the growth there. But also our food service partnership with the Smith family, PFD, and then Greenstock, our meat business, its red meat business, which we do in partnership with Hilton. I just needed to call out that PFD had another strong hop with sales growth of 8.1%. They were supported by a whole range of activities, including new customer acquisition, but also a recovery of key segments such as cruise ships and airlines. And then last but not least, WLB, which is a new part of our portfolio. It includes Big W, but a range of other businesses. That group has really come to life for us. Importantly, I'm sure I get questions on my deal, but my deal, partnership with the MyDeal executive team, particularly Sean Severin, where we could leverage their capability to provide extended range into the rest of our group. It was a priority on the Big W Marketplace. We call it Woolworths Marketplace. That had a very successful half with the Big W Marketplace launched in November. And Dan, you're going to correct me. I think we now have an extended range of about 20,000 products from 50 key strategic partners. We're not only generating good sales out of that, but it's really helping big W customers get a more realistic experience when they come to our digital platform. And we're going to get a lot better at talking about GMB as a group, gross margin, but instead of net sales value, the GMB of our world's marketplace increased by 7.9% on the prior year, which I think was a testament to the team and the work that's going on there, and we expect hopefully a lot more going forward. One of the areas that we have invested in is hopefully, well, you all are aware, I'm sure, Mr. Erickson is listening assiduously to this, but it's our supply chain. We continue to progress that journey, and it's always a challenge, given the weather disruptions in Australia and everything else that's going on, but a real achievement for us was our Moorbank NDC has reached practical completion two years after the first side turn as it's called. If we have questions on that, I'm sure we'll come back and get to those going forward. And the site remains on track to be operational in the first half of F25. As everyone is aware, we have an MDC and an IDC, and our IDC is also progressing to schedule with high-value racking completed in the half, and are scheduled to go live in F26. Construction of our on-brand CFC, in partnership with Canat, is also progressing well, However, it is likely that the opening will be delayed until calendar 2025. So happy to take further questions on the journey there in the Q&A section. Then just moving, keeping reading to slide 14. Obviously we should get questions on Woolworths New Zealand and Big W. The financial results clearly are below our collective aspirations. But despite that, we have made good progress in terms of fundamentally transforming both businesses for the future. And I just wanted to call out some of the highlights. In Woolworths, New Zealand, as of the end of the half, we had rebranded 34 countdowns to Woolworths, New Zealand. I think the number as I talk today is 43. Actually, it might be 44. I'm a little bit nervous. But what's important to me is that when we've done the re-branding and we've reactivated the store, we do see a sales list and we do see a customer and a team block list. And so what the re-branding is doing is giving us an opportunity to profile the amazing value in our stores, as well as re-engage with our team on what's important to them, and that is very pleasing because we know when we do the right thing for customers and teams, we will see sales as an outcome of sales growth. We have a plan to transition another 40 stores during the half and I think Steve is fair to say we're well ahead of that and we'll probably do a lot more of that in the half just given the way progress is. In New Zealand we've also reset our price mechanics and invested in price in the half which has led to an uplift in value for money scores which is terrific. and we're starting to see the size of our customer baskets grow, and that's also reflected in our unit volume increases, in particular in the first seven weeks. Everyday Awards is now a trans-tasement program. We launched it on the 1st of February in New Zealand and transitioned our one-card customers into Everyday Awards. With over 2 million members transitioned as I speak, and really importantly, 150,000 new members joining the program that weren't in the one-card program. In New Zealand, we still have a major opportunity in the e-commerce space, and extending our leadership in this and continuing to acquire for convenience is key. And we launched Moncrime in New Zealand during the half, and it's now 32 stores and really showing great growth as our earnings out of moving from pick-up extent to service desk to a direct to boot and now being also replicated in New Zealand. We've got 12 stores now with a new direct group rolled out and great resonance with it. In terms of New Zealand, we've proven our fresh offer. It's a priority to whoever, but particularly New Zealand. And we've been investing as we've talked about our Auckland Fresh DC before. It's nice now to have our Christchurch Fresh DC open in March so that we can make sure that we deliver a great fresh experience across the whole of New Zealand. So those are some of the highlights. I'm sure we'll come back to some of the trading in one of Spencer's online to help answer those questions. I think that we did trade very well in key events. It's how we actually manage outside of those events within a very cautious customer. The highlights for us there are just incredibly strong continued customer resonance with the business. It's very pronounced. And actually when we look at the topic of value, we now have market leadership on delivering value, which is So we've now got to translate that into sales and sales residents and they can come back to us but we feel we're in a good position there and we have a whole series of exciting initiatives landing in Q2. This includes the ongoing transformation of our clothing business to improve our customer offer and as we're getting much better at managing size based allocations and Dave can talk about that as well as, of course, our own brand I've alluded to earlier, our Somersault range in particular, which is having great resonance in the toy category. The learnings we've had out of using WIP to partner with all supermarkets have been replicated back into all parts of our business, but in particular into BW, and really promising early results in terms of our promotional replication of what we've learned from all the supermarkets, and it's leading to much more effective as well as improved cost trust. Finally, and certainly not least, I've alluded to investments in our digital assets and to play out with BWMarket really helping that overall experience, but a lot of upside I think we still haven't seen going forward. On both of these, when we talk about the outlook, of course we do expect it to remain challenging in the second half, but the The key focus from us inside our business is just keeping focus on building a stronger business and we are confident that we will achieve the results we want over the medium term. Slide 15, this is some of the highlights of sustainability. Very important just to highlight, well I think this is a great page for improvement. Groups have actually had a material ongoing improvement in the past, but in the context of groups we've seen an increase in TRIFA, and we needed to call that out. It's become a key focus for us. We've agreed with our board we're actually going to include TRIFA as one of our step metrics for the year, so that we make sure that management is not only intentional to variety rate, but on TRIFA in the context of the year. So more work to do there, and a whole ton of work underway, particularly on just manual handling injuries. I've still won two admissions, about 40% below 2015 levels, about an 11.6% reduction in the half. Solar panels continue to be rolled out, 19 supermarkets, five big Ws, two distribution centres, 257 sites across Australia and New Zealand with solar rolled out, which I think is amazing. We've used him through the St. Hung Initiative, really that's continued to build steam, We've delivered over $11.5 million to our charity partners in the half, including the oil farmers, Food Bank and Fair Share, and Salvation Army in Australia and New Zealand, and this is leading to, hopefully, the equivalents of our schemes of over 18 million meals provided to those in need, and importantly, food diversity from landfills. A program we don't talk enough about is our Mini Woolies program. We achieved our 50th school opening at Kareen School in Blacktown during the half, Myself and the next guy, he personally attended what was one of the most, I would say, emotional days I've had at Woolies. And it's just terrific to see how we work in partnership with schools, with these amazing children with disability to help them engage and get life skills. And I think many of them come to work at Woolies, is our great hope. And so, as I speak, we now have 52 mini-Woolies. And by the end of the 24th, we plan to open another 28 in Australia. And our first two are in New Zealand. In our brand, we reduced over 15,000 tons of virgin plastic, which is a 29% reduction on our F18 baseline. And pleasingly, we also named Australia's healthiest supermarket our brand for the fifth year running, pushing our broader commitment to making healthy food more affordable. That's enough for me. Steve, I'll pause here. We just got into the financials, and I look forward to coming back and talking about the trading outlook.

Thanks Brad and good morning everyone. I'll start today on slide 18 with the F24 half year results summary for the group. Group sales for half increased 4.4% to $34.6 billion driven by solid sales growth from Australian food and Australian B2B offset by more challenging trading results in New Zealand food and Big W. Group EBIT for four significant items increased 3.3% to $1.7 billion. Australian Food and Australian B2B were positive EBIT drivers. Other segment net costs were below last year, while New Zealand Food and Big W EBIT declined in half. Group EBIT margin before significant items was 4.9% broadly in line with the prior year. Group NPAT attributable to equity holders of the parent entity before significant items increased 2.5% to $929 million, with EBIT growth moderating. interest attacks in the half, and I'll discuss that dividend later in the capital management section. Turning to slide 19, our group trading performance. In Australian food, total sales increased by 5.4% to $25.9 billion, with sales moderating over half one as inflation continued to fall. Island's returns were modest growth in the half, driven by strong e-commerce growth. with two-thirds of the Australian food even growth driven by Woolies X, with store even margins stable in the half. In Woolies Food Retail, which is our stores and e-commerce business, even increased by 8.2% in half-wine, largely driven by the growth in e-commerce profitability. Woolies X profit increased by 96 million to 168 million in half-wine, an increase of 132%, with the profit margin increasing by 186 base benefiting from the exit of the summer gas business and the international businesses, announcing higher and cycling bulk meat sales. Team Z's trading performance remains strong with 8.1% sales break in half one driven by new customer growth and growth in key segments including airline. New Zealand food sales increased by 2.3% in the half and even declined by 42% to New Zealand's $71 million, reflecting the highly competitive and value-centric market, moderating price inflation and material wage inflation. As announced last month, we recognised a New Zealand $1.6 billion of goodwill in the half, which has been treated as a significant item. Big W also had a challenging half with sales declining 4.1% and EBITs down by 60% versus last year, impacted by ongoing customer adjustment to cost of living pressures, most evident in the more discretionary categories, particularly in home. Results were also impacted by cost inflation and high clearance activity as we carefully managed autumn-winter seasonal clothing through markdowns, ending the half with lower inventory versus the prior year in Big W. property group overheads and Woolworths Group's investments in Quantium, MyDeal and Endeavour Group. The segment recorded a loss before interest and tax of $68 million, down 20% on the prior year. This reflects the benefit of lower advanced analytics costs in the half and higher proceeds from property sales from the prior year, offset somewhat by a lower contribution from Endeavour Group, reflecting our lower shareholding in the half compared to last year, following a partial sell-down of our Endeavour stake in December 2022. The group reported non-cash-divided items of $1.7 billion, related to the previously mentioned impairment of goodwill in New Zealand food, and a mark-to-market loss of $209 million on our investment in Endeavour Group, Average inventory days were in line with the prior year, with reductions in Australian B2B and New Zealand food average inventory days offset by a modest increase in Big W average inventory days in the half. However, Big W's closing inventory days and dollars declined on the prior year due to the prudent management of inventory and policy. increased by 78 basis points compared to F23 and was up 148 basis points on half one F23, largely driven by a higher group EBIT. However, group ROFI also benefited from the New Zealand food goodwill impairment in the half. Excluding the New Zealand goodwill impairment, ROFI would have been 15.3% up Slide 21 is a reminder of our capital management framework. During the half, we generated strong cash flows, which were reinvested into maintaining our assets, increasing dividends to shareholders, as well as growth initiatives and a small reduction in debt. I'll explore some of these further on the following slides. and our cash flow statement. The group generated operating cash flow of 3.4 billion and a half, an increase of 18.5% from the prior year, driven by solid EBITDA growth and net working capital inflows. The improvement in working capital and a half reflects an increase in payables due to volume increases, inflation, and later purchases in the prior year with inventory well managed across the group broadly flat versus December last year. Cash interest costs increased 7.5% largely driven by higher floating interest rates on bank debt. Tax paid increased by 20% compared to the prior year driven by higher taxable income, the F23 paid in half of F24. The cash flow on investing activities increased 42% to $1.2 billion. The increase was a function of the priority, which included the proceeds from the partial sale of the Groups in Shareholding Endeavour Group in December 2022, offset somewhat by the MyDeal and Shopper acquisitions. I'll provide more detail on CapEx on the next slide. Finally, our normalised cash realisation as previously discussed, was 111% benefiting from the favourable working capital movements, offset somewhat by higher interest and tax payments. Moving to slide 23, which covers CapEx. Operating CapEx for the half was $907 million, down slightly on the prior year. An increase in productivity spend was offset by a reduction in growth CapEx. Growth CapEx was down on the prior year, driven by a decline across all categories, in particular e-com and new stores. Investments in productivity initiatives increased and the half of the group focused on mitigating higher inflation in F24 and included the continued rollout of electronic shelf labels as well as scan assist across the store network, the implementation of double welcome gates and front of store upgrades. CapEx also included $49 million on projects with strong sustainability benefits in areas such as refrigeration, guidance with operating capex expected to be around $2 billion. Moving to dividends and funding on slide 24, the board today approved a mid-term dividend of $0.47 per share, an increase of 2.2% compared to the prior year, in line with the impact growth for the half and our typical dividend payout ratio for the first half. Turning to debt, net debt to EBITDA was 2.5 times at the end of the half compared to 2.6 times at the end of F23. However, we completed our investment in pet stock on 3rd January which will add approximately $1.1 billion to our net debt balances including leases in the second half. We remain committed to a solid investment grade credit rating and have significant headroom under our current ratings of BBB from S&P and BAA2 from Moody's. tenor of 7.5 years. Proceeds will be used to refinance $400 million of domestic medium-term notes, maturing in April 2024. Thank you, and I'll hand back to Brad. Thank you, Steve.

Just on slide 43, I turn to our current trading after the first seven weeks. So, the 27 weeks have continued to moderate, reflecting lower inflation and, of course, a more cautious consumer. Given the impact of time on New Year's Day, on a relatively short reported period, we have disclosed a New Year's Day adjustment to that. I hope everyone is aware it was in large share of the share of the fund in the first seven weeks. In Australian food, Woolworths food retail sales increased by approximately 1.5% for the first seven weeks, impacted by monthly inflation and also affected in lower item rates. One underlying cost inflation in H2 is likely to remain high with a strong productivity pipeline for the remainder of the year and into F25. However, even growth in H2 is expected to be below H1, which given the price deflation we've seen and elevated cost inflation, I don't think should come as a surprise to anyone on the call. We look forward to questions on that in the next section. New Zealand food sales, the first segment, has increased by approximately 1%. While we see early progress in our transformation, it will take some time to reach full potential. With the launch of Everyday Awards and the ongoing rebranding, we expect transformation costs of $15 to $25 million in H2, with H2 EBITs, as with food, expected to be below, H2 EBIT in dollars, actually, not percent, is expected to be below H1. And big W sales have declined by approximately 6% for the first six weeks, seven weeks, We expect to see an improving sales trend in Q4, as we begin to cycle material sales declines in the prior year, and as new initiatives land, which will be more in Q4 than in Q3. However, as I hope you're aware, H2 is at a pretty low profit high for Big W, and at the stage we expect, we expect even in H2 for Big W to be around break-even levels. Other costs are expected to be $200 to $220 million, fully expected, through the Moore's Group contribution from Endeavor Group and PetStock Group. H2 will include PetStock for the first time. EBITDA is expected to be $60 to $70 million for H2. Managing cost and living pressure remains a key issue for our customers, and we need to work ever harder to deliver value and help our customers to continue to spend less every time they shop with us. We will also continue to invest in our teams and platforms to strengthen the group, and deliver long-term sustainable outcomes for all of our key stakeholders. As always, I would like to finish by thanking our hard-working team for their commitment and focus on building a better slide, and I will now turn the call over to the operator for questions. They can ask limited to one question per person today. Everyone can have a turn.

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 then two. If you're using a speakerphone, please pick up the handset to ask your question. We ask that questions be limited to one per person to allow everyone an opportunity. Please feel free to rejoin the question queue if you have follow-up questions. The first question today comes from Tom Curath from Baron Joey. Please go ahead.

Morning, guys. I just wanted to ask on the cost growth in the Aussie food business. 9% is a pretty big number, probably the biggest number you've reported outside of kind of the COVID period. I had thought that there'd be some RT3 benefits coming through in the half. Can you maybe just talk through those and maybe give us some colour outside of the, I guess, the labour cost increases that have come through? Because obviously the 9% is well ahead of... the labour cost increases that we've seen. Thanks. Thanks, Tom. A really good question. I'm going to get Steve to go into detail. I'll just make some contextual comments. Hopefully everyone is aware of the wage increase that we had.

We had a 5.75% of muted YRT and then a half a percent of super. So you've got about a 6.25%. and wage increase, and of course the number of other costs went up. Then we've also got the item growth, as you'll be aware, on top of that, Tom, and then very importantly, while e-commerce is an amazing thing for a GP percentage mix, because you just get this bigger market that's got more and more products in it, some of the costs of actually picking that are in the CODB, so that's material pressure in the CODB that it's not easy to back-solve when you look at it. But in terms of the rest of the things going on in that CODB alternatives. Thanks Brett.

I mean Tom, it's a fair question. When we look at it, you've got CODB growth of about $480 million or excluding depreciation about $400 million of cash increase. Just under half of that is the wage inflation. So 6.25% when you include super is a very big number for us. The other key drivers I think it's worth just building on Brad's comments, volume grew in the half of the grade to be back in volume growth. We opened a number of new stores and e-com grew very strongly at over 20% and the combination of those volume and mixed drivers is worth about 40% of the cash cost growth. We did work very hard on productivity and we feel like we generally in the half, but as we flagged back in August, we always thought it would be very challenging to offset the level of inflation that we were expecting in the current year. I think just a couple of other bits of colour. We do have spend on a number of areas of our business, including our investment. that sit in our CFEB lines that drive both revenue and margin benefits. And we also did see inflation in a number of other areas, including energy costs, which are up material, as well as inflation on labour-related spend, including contracts that are repaired for maintenance. So, yeah, we're very sensitive to the need to manage our costs, and we have a very full productivity agenda of working very hard to drive more productivity in the second half.

So, just like that productivity agenda, and we alluded to it in the second half, Tom, we actually had a very good half in terms of building momentum in that productivity agenda, and we're actually ahead of what we were expected to be at this point. But obviously, as with all these things, that sort of boils down to the context of the year, so that sort of you know, sort of ramping the second half, and that becomes a key wraparound into our F25 plan. And so it is not an immaterial agenda, but it's an agenda not done on just

we're agnostic about where the productivity falls in our P&L, right? So a number of our initiatives are driving stop-loss improvement. If you think about our investment in assistance scan or double welcome gates, they manifest in the GP line, but they are productivity initiatives the way we think about them. And we reflect them in the CRDP. Thanks, Tom. Good question. Wonderful.

Thanks. Thank you. The next question comes from David Errington from Bank of America. Please go ahead.

Morning Brad, morning Steve. Brad, just before I start, I'd just like to make a comment that I've really enjoyed you as an MD. I think you've been a wonderful CEO for Woolworths. I mean, most people on this call should remember. If they don't, they should be reminded that when you inherited Woolworths, it was a basket case. And more importantly, what you've done is you've not only turned this business around to be back to where it normally should be as a leading supermarket business, But you've also got humility into the company. Previously, the management was very arrogant. That was on the public record. I think you even admitted that. And what you've done as a CEO is you've actually brought back humility into Woolworths, which I've really enjoyed. So I've really enjoyed you as a CEO, and you've been responsive to any challenge come your way. So congratulations, and I hope your legacy goes very, very, very warmly. Now, on that, we can't go without a slap. The productivity, following on from Tom's question, which I think is what's concerning me, I suppose, is this cost increase, but with no fallback in CapEx. And what really concerns me is this growth CapEx is falling, you know, 283 back to 200, and sustaining CapEx is increasing. and we haven't seen an improvement in the cost. Now, I know you articulated very well to Tom's question, but cost of doing business is really challenged. We're not seeing any improvement from that big investment that you made on slide 13. I mean, that is a huge amount of investment that you've made, and yet I'm concerned that your outlook statements on your productivity, et cetera, we're going to be having to expect at least 5%, maybe 6% cost of doing business growth, whilst you're still spending $2 billion of CapEx. So what's your vision for the next three years that we can expect as investors? Because I just worry that this is just a cost, not an investment.

Yeah, thank you. Thanks, David. Look, I mean, I think, you know, it's too particular. You know, I think at a segment level, it's coming to you from CODVI at some point. Logically, in my mind, we do it because you've had it forever. At the group level, it works out, but there, we're always trading with, we just kind of make the right decisions and drive value, and often those values are manifested And it's all about how we drive value and therefore how we drive value for our customers being highly price competitive but also then balance it out against our shareholders. If I then look at that issue, we've been working very hard on it and I look at the team at the table that's sitting with me, we have our most meaningful productivity pipeline we've ever had in the context of all this group and we're tracking ahead of it and we will need to deliver on it. because realistically, the wage increase would only resolve problems from our team. It was needed. They are key customers who have key value issues, and we're about this balance. We can talk about one thing, but we're the biggest employer in this country. We have an immense obligation to do the right thing for the people who work for us. So we are working on the productivity to offset the wages. The plan does look very robust and good, and we will continue to execute it as is. IT3, to Tony's point, is an underlying platform to deliver the change effectively to the school, how it sort of works, and as I say, we feel very good about that. In terms of wage, price inflation does need to come down, David, it is, so we will get into the negative jaws, which you understand, which is essentially costs are driven by items, but, and you know, if the cost of the average item comes down, it puts a lot of pressure into the PLL. So that will be the challenge in the next 12 to 24 months. Outside of productivity, the thing that I'll say is that, of course, is the profit growth out of our adjacencies, which become key. And I can't underestimate to you the critical contribution of, as I say, cartology, how we're going to use WIC, PC+, which is our extension of services to our supplier partners and hoping them to be more effective, but also, of course, getting a fair return on the way through. And we are going to be a lot more disciplined outside of that on other investments in the group. I think it's unavoidable. Included, I would have to say to you, above stall, we are, just like every other corporate in this country right now, need incidents. leaning to the issue around how we want to manage our bus door costs and investments, and you can expect extreme prudency in the context of this half and into F25. Specifically on the supply chain, it is starting to deliver for us, David. Our productivity is very, very strong. The issue we're still having is really disruption costs that are still playing through, but hopefully there is some work we get better at managing those. You will see quite a lot of mass leverage came out of it, and I'm looking at you as I talk. And hopefully, the cost that we're all dealing with right now is elevates transportation costs, and that's from the back of, we say the truck drivers is what it fuels, so hopefully we'll start to see that balance off. So I don't feel unconfident, David, in the mid-term, and we're always trying to play for the mid-term, But it's going to be a relatively painful transition from a world of price inflation to a world of elevated wage or input inflation and very muted price inflation. And we don't desire from acknowledging that.

Well, thanks, Brett. Thanks for your answer. And the CapEx, just why is the growth CapEx is falling and the sustaining CapEx is rising?

I think we can improve how we articulate this issue. My good colleague, Matthias, I'm going to pass to him to talk about that.

in our capital in the half in the knowledge of the wage inflation that we have. Now, the implementation of those initiatives generally doesn't deliver full benefit in the half. You get them in subsequent halves and years. So productivity going up is a conscious choice. The shift in mix in some of our growth capital is really just to do with the timing of some projects and some projects coming having larger spend in the first half of last year so in particular in e-commerce we had a lot more spend on automation in the first half of last year on our Auburn CFC we had the completion of the replatforming of our rewards platform or our real-time loyalty program that ended in the prior year and the timing on new stores is just very cyclical based on just where the development cycle is at and we are just seeing some delays in new stores coming through just with the pressure on that cost and interest rates on developers. So I wouldn't see those as timing-related, primarily, but a conscious choice to step up productivity investment.

Okay. Thanks, Brad. Thanks, Dave, and well done again, Brad.

Thank you, David. Thank you. The next question comes from Michael Simotas from Jefferies. Please go ahead.

Good morning. Before I ask my question, can I just echo Ero's comments? I think most people on this call, Brad, would agree that you've left Woolworths in a much better place for shareholders, staff and customers. And congratulations, Amanda. My question's around... margins in Australian food and your comments that the split between gross margin and CODB are not necessarily intuitive and lost on me particularly given the scrutiny on supermarket pricing right now. Can you talk a little bit more about the drivers of your gross margin during the period? You've given us some colour on tobacco. Just be interested in, you know, what the impact from the adjacent businesses was, business mix, efficiency, stock loss, et cetera, just so we can understand the benefits of the investments that you've been making and as they're coming through that gross margin line, please. Yeah.

Yeah, thanks, Michael, and I'll start, and then I'll pass on to Steve. Thank you for your kind comments. Legacy will be defined of how well this performs in the next three years, not in the past three years, and that will be defined by everyone at this table and how we deliver for our shareholders in the midterms. I'm confident in the team and I'm confident in their ability to do that. So that, I think, will be the metric. In terms of our gross margin, did we take the deals off the plate at all? We can come back to things that are actually a flat stock loss in broad terms, which was a good result, can I just say, given the changes in stock loss. So really flat, so we just kind of I want to take that one off the table right up front. Of course, tobacco continues to materially decline as a percentage of our mix. We thought it would actually start plateauing, but it's not. And then with the CPI increase on tobacco, it's actually creating more of that distortion, but it's quite a meaningful movement in mix. And you just need to just park it. It's just a very different issue with very different dynamics associated with it. So I think just park that. Then we get back to really all of these adjacencies have, and are starting to deliver for us, as they should. You know, we've invested materially in them, you know, in the Catholics, but also in our P&L. So they're starting to deliver. They have been starting to deliver for us. Got a bit crowded in COVID, and now you're really seeing it come through strongly, which is terrific. And if you look at, Michael, just to bring it to life, you'll see it will break down for any of you, but I'm just... So you look at e-commerce, right, and we had a very strong DAP, and you'll look at the performance of e-commerce, the materialistic. Now, that caused some issues in CRB because there's no question it cost a lot to pick it, but you see the benefits in GP. In particular, GP, what you see is the benefit of a very broad basket versus a narrow basket. So when you get to these 40, 42 items, you're picking up a lot of non-food, non-life products in there, and they tend to be higher GP mix. You see the material mix movement come through in the benefits of that basket board, which has been a particular focus of the team. How do you build a profitable basket, which is the key in e-commerce? So you sort of ask you those distortions, but there's no question on the strength of performance of all of those businesses sitting under X, starting with e-commerce. The real achievement is the basket, we've managed to actually grow the basket, and it materially improves the basket mix through personalization and a whole range of things that we can The biggest individual productivity improvement in the heart was how our store teams actually managed picking, and that was through all the work done by WIC and the way we wrapped pickers and how we consolidated orders. And it was, as I said, literally the biggest individual process improvement which happens going forward. So we sort of got the double leverage, and then the third one we got, and it's still early, and we're really excited by this, is with our new last mile performing business home runs how we manage the mix between trucks and crowd, and we're just starting to see some amazing results that we need to work on and deliver in the second half. I know we haven't had the time to get our staff numbers yet, but Michael, if you get in there, you will see that. So that's e-commerce. If you look at everyday work, it's just continued to grow and, of course, benefit from all the partnerships that we are starting to have, which is terrific. Some of those costs are reflected in the individual business, but you see them They're affected actually from gross to net sales. So a lot of the GP, we're reducing gross to net sales and then we're taking profit from every day of hours into the GP line. But there's a range of services there. It's so important to have a subscription business. We now have hundreds of thousands of people in subscriptions and you've seen the benefit of that sitting there. Early days, Paul, I would tell you, an everyday extra, but really pleasing results, and pleasing for our customers as much as it is for our members. They resonate with it. As I said, to rebrand our telco business and get the growth that we did, and that was probably, I mean, I look at you in October, right, that we rebranded, or maybe even November. So, you know, and the reason we did that was we can be more personalized and provide those offers to members is what we're doing. So it's fun to see that really really work for us. And then, you know, things like WPAY, we don't really talk about, really nice half out of it. So you really see just some great movements in there. And then in the supermarket business, the great achievement is actually with that very lucid item growth, basically zero item growth at a store level to deliver the outcomes we've built. And, you know, the cost management was excellent in supermarkets through Product 7093. It was more the investments we laid out. And so you've seen that go through. And also you've just seen what you've seen in supermarkets. And I do want to come back and talk about it. I should be asked a lot of questions about where the arts and growth is going or not. The real issue that's happening in our group is our food businesses are doing more, but all the non-food categories have become incredibly competitive across markets. This is an inconvenient truth for anyone who wants to talk about that competition. It's extraordinary that we've got very high arts and growth in our grocery food businesses. which is helping the mix of the numbers that you see in what we do. So those are the broad color pieces. Steve will do much better job of breaking it up forensically.

Thanks, Brad. I'll try to be brief just to build on your comments and not repeat too much. But roughly a third of it, Michael, is coming from our media and service income in cartology and Woolly Decks. So cartology continues to grow strongly. Brad referenced a number of the service businesses If I think then about some of the other levers that we tried, or drivers that we described in the profit analysis, unprofitable promotions. We also cycled the collectibles program in the prior year, and so the combination of those next two is worth roughly another third of the, and so just as I've described, we're talking to the 76, 78 basis points, not the 96 because of tobacco is ultimately gross profit dollars that we don't have, but it does drive a basis point improvement. And then finally, the balance is from a range of things. Long life grew more strongly than the fresh, and in our business, long life is a high-margin category. Actually, a lot of that's fueled by the growth of e-commerce, where there is a mixed orientation towards long-life, more so than the in-store shopper. We've been working hard on achieving sourcing improvements on commodities, particularly supporting our own brands, and we've also been working hard to improve the end-to-end economics of meat, and in particular, partnering with Hill by our stores and pleasingly we're actually able to pass on falling lifestyle prices to lower prices for customers in red meat which is really important for us and so hopefully what you get from that description is a lot of the improvements are things that are within our control. We are very focused on delivering value for our customers and there's a number of weeks, I'm sure Natalie or Brett can talk to them, that we're particularly focused on in both the first half and moving forward on how we continue to drive value for customers and whether

opportunity arises where we get a lower cost of goods that we pass on a lower cost to customers.

Thank you.

Thank you. The next question comes from Sean Cousins from UBS. Please go ahead.

Thanks. And Brad, I concur with Mike and Dave regarding the work you did culturally, particularly in the first role that you had in Australian food came at a time when Woolworths had not put the customer first and trade feedback had definitely been that arrogance rather than humility was the culture within the organisation. So I think that the culture is better for... your tenure, maybe just to touch on volume if I can, why are you seeing such subdued item growth and it even moderated a wee bit in the second quarter to 1.2 relative to 1.6 in the first quarter below population growth? Is it loss of share to Aldi and also maybe touch on some of those non-food peers like Chemist Warehouse, Bunnings, is it or are you still seeing sort of strength in eating out? I know PFD's up 8%, but that's a combination of new and existing customer growth. So why is your item growth not better, please? I think it's a great question.

Sean, you will see in the announcement, by the way, I finished up at CI and I intend to be at React at 1 until the end of August and make sure I represent all of its effectiveness at all these various forums. I've agreed to spend my last few weeks working in the store, and I invite you to join me there. I know your passion for it, and so I'm going to work in the customer service. And right in front of you guys, I invite you to join me. I think we can have some fun together. We might be in the productivity of the store, of course. I think that, which is a big issue, as I say, it is an incredibly competitive market. Customers, it's already the most cross-shopped market in the world, in the Western world, where we can get data. and that level of cross shopping is increasing and you will be well aware with the material penetration in particular of LD together with collagen in local geography starting or finishing at an LD and you know it's going up and not down and that should not be surprising and therefore we need to work incredibly hard at Retaining that customer and retaining the basket. So, you know, what happens, as you well know, is you lose a portion of the basket, not the total basket, but it goes up over time. And we're working very hard, as you can imagine, you know, on this issue. So I think that's it. But it really is then a non-food, which is where the issue is. It's all the everyday needs categories, as we would call it. whether it's home care, personal care, pets, baby, where you see there's intense competition across the whole market and everyone that leads into the market. You know, I would like to go and spend a Sunday in a store before we do results, and I would do that on Saturday, and, you know, I was hanging out as I tend to do outside of calls, and, you know, the local pharmacy I was at was more than the, you know, everyone's got into toilet paper, as we well know, but they were sitting there selling dishwashing detergents, you know, and a whole range of categories that are just not logical back to a pharmacy, but they are looking for traffic boulders, additional items to add to the basket, and you've seen everyone do that. A particularly pronounced version, and I think they've done a fabulous job, of course, is discount campus warehouse. And you've seen the manifestation of the focus they've put on those categories and how it's gone through. So this market is unbelievably competitive. It's an inconvenient truth to believe, but it is statistically unequivocally true. The traditional competitors are getting more competitive, but they're including everyday needs. Essentially, you've seen virtually every retailer get into these categories because it drives traffic and basket for them. That includes Big W. So when we talk about Big W, we will be talking about some really positive trajectory in bulk lines and everyday essentials, which is happening. We're doing this in the context of our own group. It's good for competition. It's a very important part of the overall basket. It's where we see the most price inflation. Everyone wants to talk about price inflation, and we'll give numbers that are thrown around which are very temporal in nature. The big issues have been things like a dishwashing tablet being a shelf price of $1.64. You know, so there's lots of price pressure. They're very expensive items, and therefore... Our competition is good for consumers. We just need to be more focused and execute to hold our share of item growth in that. So that's primarily what's happening. There are many other items and items, as you might imagine. One of the great things I've been able to, as Mike was pointing out to me, to reduce prices of fruit and veggies that we get within one unit, in particular in fruit.

So, you know, that's starting to come up a little bit, but that's the major driver. Sorry, Brad, are you holding share in item growth or are you losing share in item growth? Sorry, that's the colour of the question. It's very messy.

In the right sense of the word, Sean, it's very messy to be unequivocal. We are holding channel share in item growth. As I said, though, if you look at whole of working and everyday needs, we are losing, I think, market shares. We can't calculate it for you. But we're holding channel share in everyday items and the overall channel share is It's sort of in the right realm. It's a very noisy time of year, as you know, but broadly, at the moment, we look okay. But in the normal market, there's no question in everyday needs we're losing share to rest of market as a supermarket industry as much as we're losing. And no share lost due to the Australia Day issues? No. No, that doesn't mean we can't learn from what happened. We know we can do a better job, and I would publicly acknowledge that. We will come back and be very thoughtful in how we respond and how we operate going forward. So we know we could have done a better job with that, but no, that hasn't really impacted us. It would be fair to say the announcement of the Senate inquiry has led to a material drop in overall confidence reputation and brand NPS scores for the major supermarket chains in Australia. That has been the major factor on the continued press on the way through. But, you know, we had some customer segments that, yeah, we could have done a better job of making fuel welcome and included in our business in Australia, and we will address that going forward.

Thank you. The next question comes from Adrian Lemme from Citi.

Please go ahead. Yeah, good morning and congratulations again, Brad, for the turnaround you executed at Woolworths and also congratulations to Amanda on your appointment. I was just going to ask a question on New Zealand, please. I've heard of there being a material increase in 50% off type promotions on front-end displays compared to the more typical 20% to 30% off in that market. Can you talk to how much of that extra discounting is actually being funded by Woolworths?

Thank you, Adrian. We've just been, in replicating the learnings from Australia, much more deliberate and intentional at the end and the delivery of value through the end, and it's resonating very well. So we often have these... you know, promotions across the store and often we can fragment the message on an end and we've just been much more deliberate on getting right messaging on it. So that, you know, what you're seeing is as much a merchandising issue as a change in strategy. We are investing materially in our own brands in New Zealand, and you are therefore seeing huge item growth, but it is causing us short-term margin and price pressure, but it's the right thing in the context of an even more challenged market in the value set than Australia. So, you know, with Australia, you've got to invest in the customer, get the resonance, and then you can really build from there, and that's happening and working. But when you look at the overall results for the heart, that is reflected in the overall performance of the heart. But I wouldn't call something out that's dramatically different in the last couple of months. Spencer, I know you're online. Unless there's anything you wanted to add, perhaps do that.

No, I think we've covered it there. The reset of our price mechanics is what could be reflecting that. But again, it's very similar. In fact, a copy of what we've done in Australia. Our specials penetrations are still running at similar levels in the 50% penetration to overall business. And the funding between ourselves and suppliers is consistent with what was there before.

Thank you. The next question comes from Lisa Deng from Goldman Sachs. Please go ahead.

Hi, Brad and Amanda. Congratulations, first of all. And then I did want to ask a question on Bullies X. So if we look at the data... It seems that we actually grew profits by nearly 100 million, 96 million, I think, during the period, and that is almost over 80% of the growth of Aussie foods. Can we understand a little bit why e-commerce has actually been... been so profitable or not profitable but increased profitability by that much especially because same day I remember previously Amanda talked about that being quite costly and that increased as the material percentage so that's first question and then the second question is the digital media and rewards that also has come up a lot in terms of profitability what's contributing to that and how do we think about that going forward as well thank you

Thank you, so I'll sort of come at a high level in the matter, if there's anything on these specifics. Well, as I said, we're still talking about GPD quite widely in commerce. It's just a reflection on the capabilities and investment the team has had, including at Boris Stadelic. So we are, we're just at our benchmarking globally, and there's always something to learn, I believe, passionately from everyone globally. But if you look at productivity, actually, one of the On call to that note, in general, they're two of the most productive retailers globally when you look at unit volumes and how they manage them. But when you come to e-commerce specifically, we find we are very, very comfortably in the top quartile in terms of the overall productivity and the way we do it, and that's a testament to the way we've worked and the analytics that underpin us and so on. So, as I've mentioned to another question, our individually biggest process of cost improvement in the whole was just the whole way we pick e-commerce across our stores, in particular in our CFCs. Amazing testament to the team. A lot of RP that goes into that. And actually, it's just a lot of fun when you're with the team and you're watching. It's our supermarket team that's delivering in partnership with Woolies X and what they're up to. Importantly, I do need to reference that having a DTB, as we call it, or a side of the store where you can actually dispatch these items is incredibly important, so there is a structured element. And the cap index we've put into our other 750 stores for DTP is important because if you're thinking about e-commerce, it's going from batch to flow. And even if you stage an item in a back of house, you actually have to put it away and then you have to take it out. Once you get the same day or delivery now, you move to a flow, you don't stage. And that is actually a huge improvement. When Amanda would have referenced what we did before, when you stage and do that, it's really difficult. But once you flow and you do it into a DTB, then all changes. And the other point to make, which I made to Michael earlier, is we're building a bigger basket generally in e-commerce. And that's through all the personalization tools that sit there and the decision-making that helps the customer. But mostly some of our most important saver customers use that because they can price compare better, they can get the specials, they can use best unit price. But we've seen a much better basket, and that mix in the basket is benefiting the general percentage. So, and maybe I've moved on in the e-commerce, but we're building capabilities, and the capabilities are coming through. If I look at our market performance standards for the moment, which we've done together with Takeoff, they would I fully acknowledge that all of our micro-performance centres are in their top ten worldwide in terms of productivity and the way they flow and the way they work. It doesn't mean we don't want to do more with them, but that's what's going on. On the rest, Lisa, it was again this continual drive for improvement. We don't talk about it now, but we spent a huge amount of money back in F23 And it was real CapEx money with our E2R re-platform of everyday rewards. This was a huge investment for us. You know, I forget now, $35 million a month dropped, direct CapEx in the air, plus all the other OpEx that went around it. We re-platformed the whole business. We can now do real-time rewards. The way the matter is, by the way, is if you go to the store and you get a digital receipt and you pay by everyday rewards, you will get a digital receipt. But four, the POS has completed the transaction. Now, the POS is too slow, by the way. I need to speak to John Hunt about it. He's heard it on this call. That's true story. But it just shows how fast our platform is. It's a world-class platform. We're using the scenario leverage. We're then re-forming all the personalization tools in there in context of WIP. And we're starting to use that to be better at targeting boosts to customers, to support the member prices in-store, to suggest items you might have forgotten from your basket, to build the basket, and then to build that services business. You know, that's how I'm really extraordinary. I don't want to over-talk it, but from a cold start, and a relatively, for us, commoditized business is what we're doing, to actually have driven that, there's a lot of that personalization and targeting. So, many of those are benefits you've seen come through in that old portfolio. In cartology, and I mentioned this to someone earlier, and I've seen an article the other week, and they've said it's still a business to be proven. I like to repeat the publication. Cartology is five years old. It's not a new business. We've put world money and investments into that business. We've brought the headcount there more than anything else we've done inside Woolworths Group. We've got a more chopper media group. We've invested materially. We've rolled out screens in the last six months into our health and beauty aisles, which look fabulous by the way. If you haven't seen them, you can go for it. Go and have a look at them. You'll see what we've done with the coffee aisle. And then, of course, now we tend to go more around into the more with facility. And so you see that business develop. We do look more at it. And then the individually strongest growth in that business, Lisa, was in sponsored ads on our digital platform. And we've got traffic on our digital platform. Of course, we want to get sales, but we also want to get personalized ads. And so that's really starting to grow in maturity for us. So you've seen all of that come through. The key thing for me as I talk to you, and we're all talking about the future, not the past, and I've got this vision of you, the king is there, the king kind of moment. I'm very actively involved in this for our needs. But all of these, I'm just starting, they're not finishing. This is the start of the journey on all of the things I'm talking to, the material next generation series of opportunities we're about to live up. is exciting, energising, stimulating in every possible way, so it's not flash-in-the-pan stuff.

Can I follow up with Amanda? Your appointment to CEO, obviously, of Woolisex is the key growth engine. Will someone replace you as sort of head of Woolisex, or will you continue?

Lisa, I'll take that question if you don't mind. Amanda, as you might know, she only found out the news this morning. So we will work to that in a very representative process as well. We'll do with everything over the next six months. We've got plenty of time before the September start date. So thank you for the question. We might have to keep moving. If you don't mind, I've told my point, I've been a bit too fresh. So we'll get on to the next question.

Thank you. The next question comes from Brian Raymond from JP Morgan.

Please go ahead. Good morning, and again, congratulations to Brad and Amanda. End of an era, Brad, or coming up in time. But, no, I'll certainly echo everyone else's positive comments there. Just on... I'm just interested at a high level on whether you feel like you've got the balance right in the business between, you know, I don't know gross margin versus CODB as an artificial separation, but just thinking about within the current climate politically and from a regulatory perspective, printing an almost 100 basis point uplift in gross margin, the optics of that, and I understand the drivers, and you spelled those out quite well, but the optics of that and then the slowdown in comps to 1.4, in total sales to 1.5% early in the calendar year, Do you think you've got the amount of reinvestment in the business right at the moment, or do you think that needs to evolve and become, you know, really a higher level of reinvestment in price, in service, in whatever else you need to do to reflect the current climate that we're in and to drive competition and to drive sales and ultimately earnings? Thanks. Yeah, that's exactly the right question. Look, you know, our issue is that...

you know, that number, all bank headlines, and I'm sure I'll be able to account for it at the end of the inquiry next month. The truth is, we came from one of these adjacencies, so you've just got to be very authentic in where it comes from, and we've got to be very thoughtful and balanced in what we do, so it wasn't trying to go marginally against our customers, hopefully one is aware. Our price indices are as good as they've ever been, quite honestly, at the moment, and we continue to invest in making sure that that's the case. Yeah, we've got an optics challenge. I'd like to point out, by the way, it's an optics challenge in the context of the half. You know, this half of overall results is the same as the second half of last year. You know, so it needs to be seen in the context of the year. And, you know, we've got challenges as we've reflected and talked about coming up, right? So it just needs to be seen in that context. that makes a lot of, you know, it's a long time ago. In terms of price competitiveness and how we go forward, of course we need to adjust, and we continue to do that every day, and Matt and the team in particular are working very hard on this. I need to reference, as I say, these everyday needs categories, which is where we are as a supermarket industry losing share to other competitors, which is, as I say, great for the consumers of Australia, but we can and need to do more there, and we are certainly very focused on thinking through how we execute and do that, because that is where it's most pronounced. But we're all pretty sure right now, right? If we get cost benefits, we need to be very thoughtful with how we manifest that in consumer benefits, and can rest assured of our continued focus on that in the rest of the HOF.

Thank you. The next question comes from Craig Wolford from MST Marquee. Please go ahead.

Morning, Brad, and yeah, congratulations on your time as CEO. It's great to see the team you've got and the internal succession is really a reflection on your leadership, so congratulations there. I might shift tack on Big W. Pre-COVID, there was plans to close a number of stores. Things went quite well during COVID. What is the outlook for Big W? When I look on a pre-AAHC16 basis, profitability would be incredibly skinny. Are you looking at store closures again for that brand?

Thank you, Craig. And we're still going to come up, when the lease starts coming up for expiry, we are very tough and very challenged on what we do. So I need to share that. And we don't have the number yet, because it's the half year, but Steve can remind me. Our lease liabilities continue to reduce inside Big W. So, you know, we have been very thoughtful and very careful. And if we do renew leases, which we are, we're in very low gain for shorter renewal periods than we were. So, you know, the weighted average lease term is You say seven, I'm actually closer to 60, but I'm willing to wager something for later. So, Richard Sherman, that's key. And actually, it's key in general because where we are under-trading, if Dan doesn't mind me saying, is really e-commerce in BW. And, you know, we have been lagging in terms of delivering a great e-commerce experience, in particular for availability and apparel and things like that, and size-based availability, which is important in the sport of paramount online. and so we've got work to do and we need to move. We've done an amazing job in our food business moving the same day, but we've started to make really good progress in McDovey, but we're still way behind where we want to be. So a combination of e-commerce plus, you know, the nature of these categories means that we are cautious. That said, you will see some store openings from us. Those store openings are actually to bridge gaps in the network where we think we should have an offer, but also give us the e-commerce leverage we need. We know to do Saturday e-commerce, including in a big W, we do need a store in the local geography, so you will see a balanced story going forward. But if we can't follow up, I think it's fine to pull on the lease term and things like that. So rest assured of a very cautious underlying investment strategy inside big W.

Thank you. The next question comes from Ben Gilbert from Chardon. Please go ahead.

Morning, Brad and team. Just on your market share performance, because it's like that slide you put up with your, with all the awards, so eight or nine, I think it's a great slide, and no disrespect, but it feels like you've got these tools and you've got this phenomenal set of tools, you've got the best loyalty program in terms of your ability to flex and move around and all the retesting and stuff you've done, but I just still struggle to see how it's yielding results from a share perspective, because If you look at leakage brands like Chem Warehouse and whether it's Pet Barn or Reject Shop or whoever it is, you've got better loyalty capabilities than them and you know your customer better and you can boost and you can get your extras. But hard enough and I suppose the question there is you look at what Sainsbury's done in the UK they're flying now they're outgrowing Aldi they're going to push harder on price on price matching do you think you need to sacrifice a bit more margin in the near term to drive volumes because it just feels like that the share trends aren't doing what they should be given the toolkit that you've got I think it's the right challenge Craig so sorry for being one of us Craig it's the right challenge unequivocally you know

We're really aware, and Sainsbury's had a great Christmas tree nectar, as hopefully you're all aware. I mean, obviously, club card work for Tesco, but Sainsbury's actually, just in a comp sense, actually had a very strong, strong customer base. And we do take inspiration from what they're doing, plus what a number of other people are doing with the launch program. The launch program is growing size, which is pretty cool, but do we need to use it a bit more forensically? In particular, with these non-food categories, we're so wide as a food business, and we can't lose that. it's how we get the life balance in the program is a conversation you might imagine that we have in our corn franchise is food, but we just, it's those, lots of sharing on food. And just the way all of the mechanics work in the market, and you would know this well when you look at yours, they don't take whole market into account. So it's very hard to get a precise measurement, except to know that these are categories that people need to have if the item's not there and it's not there in, you know, in, And our competitors are either scored somewhere else. So we're just assured of our commitment and focus to do a lot more in this space and to use Everyday Awards to do that and to be inspired. Particularly what I would like to make sure is that it's a multi-format launch program.

So it's not just one launch program or one business. Like Clubcraft, which is a bit more I was going to say that unequivocally that it's just the thing you focused on, on CSCA. So we will look forward to coming back at the podium and talking about this.

Thank you. The next question comes from Richard Barwick from CLSA. Please go ahead.

G'day, Matt. It's been covered up quite a bit, this sort of this improvement in effectively the e-comm margin. and sort of how you've delivered on this result. But my question is to the sustainability of that, or perhaps even ongoing improvement. You talked about the bigger basket size, the mixer basket, et cetera. Do you see that as entrenched now? And do you see further scope for ultimately the margin delivered through EECOM to improve? The whole of, thanks Richard, the whole of retail in general is about

continuing to build capabilities and iterate going forward, so nothing is entrenched. Everything requires work and effort to be done, whether it's in a store or whether it's in e-commerce. And of course, we need to continue to improve our store experience and build e-commerce on the top. And as we know, the connected customer shops the store in e-commerce, so the store experience is very important to help grow in e-commerce as all the initiatives underway in e-commerce. I would say, You know, we've been at this for a long time, right? This is not a new initiative. You know, we created Woody's X, I think it's, man, it's eight years ago, right? The year started blurring, or seven. So, you know, it's, you know, we've been at it a long time. I would say we have a good pipeline of ways we want to enhance the experience for our customers in e-commerce and therefore execute against it. So, that's fair, but, you know, we take nothing for granted. I would not underestimate within our stores, though, or e-commerce, the importance of the app to provide a better shopping experience, as Natalie will point out. There's 560,000 customers now using the Woolworths app in store mode, and helping them navigate, find specials, find value in our stores for those customers. And that's amazing, right? We've sort of doubled the number of people using store mode on the app, I think, in the last six months. So we just need to continue to drive... Benefits for customers, in particular through the app. Converts web or mobile web customers, in particular, to the app. And then improve the personalization that sits there. Like, have you forgotten or reordered and become central to an app experience? That reorder, it needs to be smarter. It needs to be using predictive AI, generalized and extensive, simple predictive AI, basket and compositional basket to make sure that we do that. You know, it's amazing, our best unit price, which is worth It's delivering unbelievable value for customers because they're getting to see unit-based price trade often. You know, that's an issue. So we feel good about it. It's taken for granted. Let me just put it that way. We need to continue to run. I will say in the first seven weeks, our e-commerce performance has continued to build.

It hasn't slipped back, so that's really important. Thank you. That does conclude our time for Q&A. I'll hand the conference back to Brad for any closing remarks.

Thank you everyone for all of your questions and your kind wishes. As I think I've alluded to, I certainly intend to be really active during the rest of my term before our before September. And I think it's really important. Honestly, I know this sounds cliché, but it is important for me to restate it. I need to be judged what happens in the next three years and whether we'll risk the most for its potential for you as our investors as much as what's happened in the past. And that will require this amazing team that sits in the room to continue to deliver against our plans, get the right balance between our customers, our teams, our suppliers, and, of course, our shareholders. So I'm on the hook. And we'll just put it that way. I look forward to talking to you all at Q3 and at the full year. Thank you very much.

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