Woolworths Holdings Ltd

Thank you for standing by. Welcome to the Woolworths Group Limited F25 Q1 sales announcement. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to 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 2025 financial year. I'd like to start by acknowledging the traditional custodians of the land on which we meet today, Dharug country, and I'd like to pay my respects to elders past and present. It's a pleasure to be here today with you as Woolworths Group's new CEO. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Spencer Son, Managing Director of Woolworths New Zealand, Sally Copeland, Managing Director of Group E-Commerce X, Von Ingram, Managing Director of W Living, Dan Haig, Managing Director of Big W, Guy Brent, Managing Director of Woolworths Food Company, Paul Harker, Chief Commercial Officer, Australian Food, Annette Carantoni, Chief Supply Chain Officer, Bill Reid, Chief Legal Officer. Now turning to our results. Our customers remain under real cost of living pressure and we delivered much needed value to them during the quarter. We offered our customers more specials with larger savings, increased shelf capacity to improve the availability of our own brand and made it easier for customers to find the best unit prices. We also provided extra value through everyday rewards and brought a little joy to families through our first group-wide collectible program, Disney Worlds of Wonder. We remain committed to providing value to our customers, whether they shop in stores or online. Group sales increased by 4.5%, with solid item growth in our food businesses, along with ongoing strength in e-commerce. Excluding the impact of the recent acquisition of pet stock, group sales increased 3.3%. Pleasingly for customers, food inflation has continued to moderate in Australia and New Zealand, with average prices in quarter one below the prior year for the third consecutive quarter. We saw our customer scores gradually recover over the quarter in Australian food before ending the quarter slightly below the prior year following the announcement of ACCC legal proceedings and the interim report. Group voice of customer NPS ended down one point on the prior year. Looking at the results by business, Australian food total sales increased by 3.8% to 13.6 billion, primarily driven by item growth of 2.1% and strong e-commerce growth of 23.6%. Woolworths food retail total sales in quarter one increased by 3.6% and comparable sales increased by 2.3%. A strong promotional program, improved availability, our Disney collectibles campaign, and increased convenience through e-commerce all contributed to growth. Woolworth Food Company's own and exclusive brand sales grew by 6% in quarter one, materially exceeding the overall sales growth rate as more customers recognized the strong value provided by Own Brand. Long Life Own Brand sales were particularly strong, with 8% growth driven by pantry, frozen food, snacking, and household care. Average prices in quarter one declined by 0.3% compared to the prior year. While fruits and vegetables moved back into modest inflation during the quarter due to cycling abundant supply in the prior year, this was offset by the pass-through of lower livestock prices in meat and deflation in long-line categories such as pantry, freezer and everyday needs, with increased promotional uptake. EcomX sales increased 23.6% to 1.952 billion, with penetration reaching 14.5% in the quarter. Over a million B2C customers have placed an order within the last four weeks, with active customers increasing 16% on the prior year. Digital is the virtual door to our stores and engagement continues to grow strongly. Weekly average traffic to our group digital platforms reached 28.9 million in quarter one, up 16.1% on the prior year, driven by increased use of Woolworths and Everyday Rewards apps. This was supported by a number of innovative new features introduced in the quarter, including watch lists to notify customers when their favorite products go on specials, Voice Product Finder that shows real-time information on products in store, and Scan and Go Trolley, which we're currently trialling in 10 stores. Cartology revenue increased by 15% in the quarter, with strong growth across all channels and banners, particularly in digital. The successful Disney Collectible campaign also contributed to growth, and we completed the rollout of screens in vicinity centres. Rewards and services sales increased 17.7% in quarter one with more than 10 million active everyday rewards members in the quarter and over one million mobile and insurance customers. I'll return to Australian Foods outlook in a bit. Australian B2B sales increased by 6.9% with PFD sales growth remaining strong at 8% driven by growth across all channels Third party primary connect revenue was also strong, reflecting growth from new crosstalk facilities. In New Zealand, customer scores improved further in the quarter, particularly in the key focus areas of value for money and fresh. Total sales increased 2.7% to 2.1 billion New Zealand dollars, with comparable sales growth of 3.4%. Similar to Australian food, item growth and e-commerce sales were strong with sales momentum improving in the second part of the quarter. E-commerce sales increased 15.9% to 317 million, with penetration increasing to 15%, largely driven by growing contribution of milk run and pickup. By the end of the quarter, Everyday Rewards had grown to 1.8 million active members since its launch in February, with scan and tag rates increasing on the prior year as customers recognize the increased value from the program. The rebranding to Woolworths New Zealand from Countdown is progressing well, with 82 stores rebranded by the end of the quarter, and another 52 planned for the remainder of the year. The reporting segment, W Living, was established in the quarter, which comprises Big W, Petstock, Healthy Life, Woolworths Market Plus, Woolworths Market Plus, The group's marketplace platform business includes Everyday Market, My Deal, and Big W Market. W Living sales increased by 17%, reflecting the pet stock acquisition in January 2024. Big W sales declined by 0.9% in the quarter, with strong item growth being offset by lower average selling prices as we increased our range of opening price points, lowered prices, and customers traded down to more affordable options. Comparable sales in home and everyday were up on the prior year, but clothing was impacted by delays in stock receipts in the new spring-summer range. Stock flow has now improved with solid stock position ahead of the key Christmas trading period. Pet stock sales increased approximately 5% compared to the same period in the prior year before Woolworths ownership. Sales growth was driven by item growth as customers looked for value in specials and own brands, particularly in pet food categories. Woolworths Market Plus GMV was $97 million in Q1 F25, up 28.2% on the prior year, largely driven by Big W markets, partially offset by a decline in MyDeal GMV. Big W Market now offers over 200,000 additional products to customers. Turning now to outlook and current trading. As we focused on delivering more value for our customers during the quarter and building sales momentum, promotional activity in Australian food increased as customers responded strongly to specials and in particular, larger savings. While this has contributed to improved sales momentum, It has also led to a lower margin sales mix. Additionally, e-commerce growth has remained stronger than anticipated in the quarter, which has also impacted margins. While we wouldn't normally provide earnings guidance at quarter one, and the key quarter two trade-in period remains ahead of us, Australian food EBIT for the first half is forecast to be below our previous expectations. We currently expect H1 F25 EBIT including 40 million incremental supply chain costs to be within a range of 1.48 billion to 1.53 billion compared to 1.595 billion in H1F24. While only a three-week trading period, Australian food sales growth in October to date has been circa 3%. In New Zealand food, the improved momentum in the quarter has continued into October and Big W sales in October are broadly in line with the prior year. In conclusion, we're pleased with our current trading momentum in the lead-up to the important Christmas and summer trading period. However, as we said in August, we expect trading environment for the rest of F25 to remain challenging. While responding to customer needs and maintaining our trading momentum remains our priority, we are taking steps to improve our financial performance We are optimizing our commercial program to offer compelling value to customers while improving promotional effectiveness as well as adopting prudent cost settings for quarter two. Wage cost growth will remain elevated in F25. However, our productivity program remains on track to help mitigate some of these increases together with an ongoing focus on managing the impact of a growing e-commerce mix. We will also take additional steps in calendar 25 to increase our productivity ambition. Our New South Wales supply chain transformation continues to progress with several major automation projects near completion. We reached an important milestone last week with our first carton out from our Moorbank National Distribution Centre, which is on track to open before Christmas. Our regional distribution centre, on the same site, remains on schedule to go live in F26. And our Auburn Fulfillment Centre is progressing to plan to be operational in the second half of F25. On the regulatory front, we will continue to engage in good faith with a number of government and regulatory inquiries and investigations, including the ACCC. Getting it right for customers is something that I am determined to lead on I'm committed to ensuring our customers continue to choose us every day and in return we will provide them with value, quality, choice and convenience and a level of service that they expect from us. We understand the need to prioritize the areas that can deliver the most impact and simplify the way that we work to deliver strong, long-term, sustainable value for our shareholders. I would also like to take the opportunity to thank our incredible team for their efforts during the quarter. I'll now turn the call over to the operator for questions. To give everyone a chance, can I please ask that you limit it to one question per person and then rejoin the queue with any follow-up questions. Thank you.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from Tom Kerith with Baron Joey. Please go ahead.

Morning, Amanda and team. I've got a question on the Aussie food business, the voice of the customer scores. In F119, I think you're at 53. You're now at 46. What's the plan to improve the voice of the customer scores? Is it a matter of just waiting? for the ACCC stuff to die down, or is there more marketing, investment in price? It'd be good to understand what the process is to improve those scores.

Yeah, great. Thank you. Thank you, Tom, for that question. We're looking at our voice of customer scores, which are often a lead metric for us, as you know. We've been really quite pleased to see a recovery in our voice of customer scores since February, a steady improvement in terms of the overall performance NPS, but also importantly on some of those key metrics like value for money. And in fact, as we were in the quarter one in both July and August, we were continuing to see a steady improvement in those scores as well. You're right in the sense that in those last couple of weeks, given all of the recent announcements, we did see a reduction in those voice of customer scores. And so that's something we're very, very focused on. The conversations that we're having and what we're focused on in the business is to say we connect with our customers two or three times a week and so it is an important opportunity we have each and every time that a customer connects with us to get it right for them and that takes many different directions. Yes on value for money and obviously we've been very focused on making sure that it is easy and simple for our customers to find value and I would say up until the last couple of weeks that was are actually translating into an improvement in terms of our value for money scores, and so we'll continue to focus on that as we go forward. But it's also about the overall shopping experience itself. You know, what is it, the quality that we provide in our fruit and veg, for example, which we're very focused on. It's about how can we make it easier and simpler to get in and out of our stores, and so, for example, Self-checkout, as we know, is becoming increasingly important, so we're very focused on how can we make that easier and quicker for our customers. A big contributor to experience now is the experience that you have on our digital assets as well. You know, more than 70% of customers who connect with us digitally then go on to shop in our stores, and so that's a contributing factor alongside, obviously, creating great e-commerce experiences. So given where we are at the moment, and certainly there is a job to do in terms of rebuilding customer trust, What we're focused on is to say that needs to be tangible and an experience that customers can actually see, feel and touch each time they're in our stores. And so that's what we're focused on. I don't think this is a moment for marketing campaigns necessarily. We need to be able to clearly show the proof to customers and that relates to every aspect of their customer experience.

Great. Thanks, Amanda.

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

Thank you. Good morning, Amanda. A question just regarding the EBIT guidance that you've provided, which is below market. When did the deterioration in margins start? Was that something that commenced straight away on the 1st of July or did it happen further during the quarter? The reason I'm asking is I'm curious around when the impact was. Does the reduction in guidance reflect only a partial period of the half and hence a continuation of these trading conditions would actually have a greater impact on a full six-month basis, say in the second half, 25? So when did the margin challenges start for you, please?

Well, I think, Sean, as you know, we connected with everyone at the full year result. We talked then about the fact that we're clearly seeing customers being very focused on and seeking more value and we've seen promotional uptake of promotions and particularly at that deeper price points increasing. And so that was something that we had absolutely been seeing. We'd also spoken about the fact that we need to continue to build momentum. And we, as you know, had a softer quarter three. We built momentum through quarter four. And we were very focused on building both sales and unit momentum in quarter one. And so I think that's something that it's a contributing factor here in terms of promotions, but I just want to also call out that e-commerce is a factor in this result as well as you'll have seen in our announcement. And Steve, I might just turn to you to just provide a little bit more colour for Sean on that?

Yeah, Sean. So obviously we called out in August this increase in promotional penetration. At that time, we really only had one month of fiscal results and a few weeks. What you see in this update is our projections of the range of outcomes over the first half. And I think it's important to just contextualize that is a function of now where we are close to the end of October but also factoring our expectations for November and December and the reason we've given a range of outcomes is actually the next eight weeks is the most important trading time in retail and so starting really tomorrow with Halloween leading right through to Christmas in eight weeks time and so We have been monitoring our performance. We're obviously very conscious of our continuous disclosure obligations and we felt that it was appropriate to update the market today based on that range of potential outcomes. We're only giving you an estimate here for the first half. We're taking steps, I think it's important to know, we're taking steps to improve the outcome for the first half. And we know that we'll need to take further steps in the second half. But essentially, we're very focused on continuing to maintain our sales momentum, have a strong customer experience through the most important second quarter, but control the things we can control in Q2, knowing that we do have multiple levers within our business over the medium term from an earnings perspective.

I guess maybe just to clarify that, given the slowdown in e-commerce which you called out and moreover the fact that you didn't guide in August, does that suggest that things deteriorated for you from a margin perspective during the quarter? Otherwise, if you had... degree of visibility around where these earnings would be, you would have been providing this guidance in August. I'm just curious around, again, really when did things sort of deteriorate and when did you realise you had to comply with continuous disclosure when you had to sort of come to market and provide this guidance that's a bit lower than the marketplace?

I mean, Sean, we We called out the customer behaviours that we were seeing in August and we had one month of financial results, so it was premature to provide any sort of earnings outlook in August. We're providing this update based on a very live view of where we are trading and where we expect to trade for the half.

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

Good morning. I've got another question on the Australian food earnings outlook that you've provided. So it looks like, depending on where sales land, EBIT margin will be down about 50 basis points in the first half, which is a big move and a big change in direction relative to what we've been seeing in recent halves. Can you give us some sense of how much of this is customer behaviour, more online, looking for promotions, et cetera, versus deliberate price investment that Woolworths has made in response to a consumer that's looking for value and the political and media attention that you're getting at the moment?

Yes. Thanks, Michael, for that question. So let me just start with Absolutely, when we're looking at where customers are at, we've certainly seen an increase in terms of customers seeking more value across the quarter. And we know we've seen this across the calendar as well, but particularly in this quarter, a more active participation in terms of switching from one brand to another that might be more special. For example, in looking for deeper discounts so that has absolutely been a component of that. There's also our own promotional program of which there's different optimizations and mixes that are happening within there. So that's a factor. There is an element of own brand in here as well as more customers actually trade into opening price points and they're seeking that value. So there's the margin from a GP perspective where that's certainly which we've got some compression And then there's also the increase in e-commerce, and e-commerce just growing at a faster rate than what we had anticipated in the year, and particularly in that on-demand space. So in the two-hour, one-hour space, I do want to say that we have continued to actually improve in terms of our productivity overall in e-commerce, but it's the fact that it's making up a larger proportion of the business As Steve has already said, and I just want to reiterate, what we've provided is our latest sense and guidance as to where the business is up to, and it's very much based on where customers are, which is they're looking for value, they're looking for ways to save time as well, so e-commerce has become even more popular. We will and are working on how we optimize the business in the second half given the new shapes that we're seeing.

Okay, so if I take all those comments just to wrap it all up, it sort of sounds like the vast majority of this is shifts in customer behavior rather than deliberate investments. Do you think you need to make investments?

Yeah, thanks, Michael. I do think that's correct. I think we've been very focused, as you know, on how do we build sales momentum, unit momentum, and how do we meet the customer where they are, and that's what we said we would do, and that's absolutely what we'll do on the go forward.

Amanda, I would just say, Michael, we think our price settings are in line with our guardrails against each of our key competitors, and so we don't feel like we're out of whack on price. We think where we need to be on price, this is a customer response and looking for value.

Yep. Your next question comes from David Errington with Bank of America. Please go ahead.

Morning, Amanda, Steve and team. Amanda, listening to you today, I'm a little bit concerned, I suppose, how we measure your promotional effectiveness. How do we measure that? And it looks to me you've been caught a little bit behind because you've lost momentum, now you're trying to regain it, and now you've got to regain it through promotional effectiveness. I'm trying to measure, how do we measure you on a promotional effectiveness? And I suppose the big concern I've got is your in-store performance. Because e-commerce is growing, but e-store, in-store is really, it's been languishing and at only 0.7. And what worries me, Amanda, is that's where all your costs are. You've got your labour costs increasing, the depreciation charges are growing heavily, you've invested heavily in all that stuff. I mean, 0.7% sales growth, no matter what you do, you're going to get smashed on your deleverage unless you can get that in-store performance up. So can you tell us a little bit about How are you going to get that in-store performance up? How's this promotional effectiveness actually going to drive sales? Because if you do it, then your competitors are going to do it. I'm just worried that this is a significant industry event that we're seeing that the returns of the supermarkets are going to get hammered for the next period of time. It's a bit of a helicopter question, but can you address that? Because I'm very concerned what today's announcement means, not only for Woolworths, but for the whole industry.

Yeah, thanks. Thanks, David, for that question. Maybe just to start with, I think we are absolutely at a point in the cycle, as you know, and it's a very difficult point in the cycle, no question. And so if we come back to, at the full year, we were talking about the fact that we have got cost increases coming through, and we've got a situation where inflation is coming down, which is good for customers, but makes for a challenging dynamic overall. And at that point in this cycle, the decision that we've taken is the most important thing that we can do is to continue to build sales and unit momentum. Because we know, as you pointed out, if we do not have that, that becomes an even bigger challenge for earnings in the short and mid-term for us. And so that's the decisions that we've taken, which is primarily to meet the customer where they are. Yes, it is a competitive market, but I'd say it's a rational competitive market. So we're not seeing anything crazy, but we do need to be competitive given the level of cross-shopping that is happening. When it comes to your question in terms of stores, we still have traffic in our stores, and so what we've been focused on is actually saying customers are physically coming into the store, and our job as a retailer is to make sure that when customers are in store, we've got the right prices at the right quality and a really good experience so that they add more items to their basket and that we're their first choice to shop and that we are also the first choice for as many categories as is possible. Now we've still got, as you rightly point out, work to do there. And as you know, we look at the asset of the store in a network economics sense. So we're looking at that asset and saying how incredible that we're able to be within 10 minutes drive of 85% of Australians. And so how do we think about the way in which Australians want to shop on the go forward? And they absolutely want to shop in stores, but also in e-commerce. And how do we optimize that asset to be able to deliver the best possible results for customers, but also the best possible economic and earnings outcome for our shareholders? Now, that does mean, as you're rightly pointing out, there is work for us to do to optimise both e-commerce and our stores as we go forward, as you look at the shape of the business. That absolutely is one of the challenges that we have in the year ahead. But I do just want to come back to, we are at a particular point in the cycle where value-seeking is at almost an all-time high, as inflation has now come back for customers from a food perspective. You know, we'll see what calendar 25 brings, but certainly, rest assured, we are absolutely focused on how we optimise that store asset for both in-store customers visiting and trading the business, but also for e-commerce. We need to do both efficiently and effectively and productively.

Just to follow up, Amanda, the actions that you're doing, and, you know, full power to you, I mean, you're doing what you have to do, But do you think it's going to get us slightly ahead of the market with your promotions, or do you think you're just going to match the market? You're talking about a rational market. Do you think you need to be slightly ahead to get your perceptions back, or do you think you're just going to match it?

I think what we're seeing in terms of the market overall is, again, we'll wait to see results coming out in the next days and weeks. We think we're growing broadly in line with the market in quarter one, and as you know, in quarter two, Three of last year, that certainly didn't seem to be the outcome. We are very focused on the fact that we've got, again, traffic, customers shopping in our stores, so it's just about having the right value offered. It's about also leveraging our everyday rewards loyalty program effectively and our digital assets in which we're connecting with customers, again, nearly 20 million connections each and every week. All of those are opportunities for us to deliver what customers are looking for, which is value. I think Steve called it out earlier. We don't think our price settings broadly in terms of indices and the like are out of alignment. It's more about making sure we've got the right price at the right time for the customers.

The next question comes from Lisa Ding with Goldman Sachs. Please go ahead.

Hi, Amanda. I wanted to follow a little bit on this promotional effectiveness discussion because joining a couple of dots, like we were in line with the market in the first quarter, as you mentioned. Our value for money scores, I think, are still down four points versus prior year, but we've given, you know, call it 50, 60 bits of margin away. So by the sounds of it, you know, we were a little surprised by the reward us for it. So going into, I guess, the rest of the year, how are we going to optimize the promotional effectiveness so that if we were to continue to give margins away that actually consumers reward us for it in market share gains and the voice of the VOC or the NCS?

Thanks. Thanks. Thanks, Lisa, for that. Yes, and you're right in your observations on on value for money, and obviously given recent media coverage, there is work for us to do there in terms of continuing to build on value for money perceptions. When it comes to the question of promotions, we have a number of different tools in terms of managing our promotional effectiveness, and I know we've talked about this before in terms of next-gen promotions, and really we need to be focused on running fewer loser promotions and really optimising that overall mix. And what you're seeing in our results and what we've talked about already is a mix shift. And yes, there is an element of customer shift here, but we actually have the opportunity to be able to optimise that as we go forward into the second half and across this trading period. And that's what we'll do. We also, as you know, are always looking to get the balance right between promotional pricing and our shelf and everyday low prices that are available for customers. And so that's another lever that we obviously look at as well. One of the factors, and I know I called this out earlier on, is customers are trading into deeper promotions. So they're looking for more value. And of course, when that happens, we are investing slightly more as a retailer into those. And so again, that's another opportunity for us to optimize. So there are you know, many levers for us to be considering when we're managing this. Our first focus, as you know, in the quarter has been to make sure that we've got the right level of sales and unit momentum as we come in to quarter two, which is just so critical for us, as you know, and that builds through to then momentum that we look forward to seeing in calendar 25. But again, optimising promotion certainly is an aspect of that, whilst being very clear on where the customer's up to, and just that increasing competition that we're seeing in cross-shopping, which is something that we need to be very mindful of on the go forward.

Your next question comes from Adrian Leamy with Citi. Please go ahead.

Good morning, Amanda and team. I wanted to change tracks and look at New Zealand. So I understand in September there was a nationwide strike of the stores run by the union over there with the inability to agree on your pay deal. Can you give us an update on that and is that going to present further margin pressure on the New Zealand business despite sales growth improving?

Thank you. Yeah, thanks, Adrian, and I think just a comment on the New Zealand business, and I will hand over to Spencer to more specifically answer that question. I think in New Zealand it was pleasing to see an improving performance coming out of New Zealand, a long way to go, but certainly some good green shoots there. In terms of the union action, yes, we're in ongoing discussions with the union as we speak It was a four-hour, I think, or a couple-of-hour strike. So to be honest, it didn't have a huge amount of immediate scaled impact, but it's something we're very conscious of. You know, we're very conscious of our team's experience and our customers' experience within that. But I might, Spencer, just throw to you to add any more colour on that question from Adrienne.

Yeah, thanks, Amanda. And Adrian, thank you for the question. Of course, we are still underway with negotiations with the union at the moment. So I wouldn't want to make too many comments on this outside of that process. And we continue to bargain in very good faith with the union. It was a two-hour withdrawal of labor, so essentially a partial strike, which to Amanda's point, didn't have a material impact on the business as it were. had somewhat of an impact on our e-commerce operations, but we were able to recover that over the subsequent days. Where we are right now is still at a point of very constructive engagement and possibly leading towards mediation. So we're very optimistic to getting to a don't anticipate any further massive disruption. But, of course, we haven't concluded that deal as yet. And so those are probably just the comments I want to make on that, understanding the sensitivity of just where we are right now.

Yeah. Thanks. Thanks, Spencer.

Your next question comes from Brian Raymond of J.P. Morgan. Please go ahead.

Thanks. Good morning. Just following on from your comment earlier, Amanda, about the shift into deeper promotions, I just want to understand how you're thinking about the mix of red and yellow tickets going forward, given the ACCC focus on ADLP programs and price establishment periods, et cetera, and the impact that's had on customer behavior. Do you think that that is also driving people into yellow tickets, which is driving increased contributions from Woolworths naturally in that process? And how do you expect the mix of your promotional program to evolve going forward? Thanks.

Yes, thanks for that question. Look, I think, again, just coming back to we are at a unique point where customers are seeking value and an incredibly value-conscious Across all of our segments, and I think that's something I just would like to reinforce, is it's absolutely in our value segments, but we're seeing it in our premium stores as well. Now, the way that that behavior shows up is different. In our premium stores, we might be seeing customers buy more in bulk or taking the advantage of buying multiple items at the one time, so it can look different, but I think, importantly, across all of our segments, we're seeing that same you know, real focus on promotions. We haven't made any, you know, shifts in terms of red and yellow based on in this quarter, based on any of the ACCC or regulatory conversations. There is always a natural shift that happens in promotional cycles. So, you know, in some of our categories as new products come into play, so ice cream You know, looking at the other day in the trade show, you know, we've launched a lot of new ice cream skews, and so that category has actually got more promotions in it. For example, in our meat category, there's been some natural shifts that happen in terms of as prices adjust there. But they're really... You know, I don't think there's a dramatic shift I want to call out other than the natural movement that happens between red and yellow. In terms of what does that mean for the go forward, that's something we'll continue to consider as we look at customer behavior and how they're responding actually to our yellow promotions and red. I'm just looking at Paul. Is there anything, Paul, you'd like to add on that question?

That's great. Summary, Amanda, other than there's obviously some promotions that were missing last year as a result of availability challenges or price changes. So if you think of frozen vegetables, particularly potato, you probably couldn't find a promotion on a potato chip to save yourself last year, but obviously being able to add those back into our program for customers. And I think the other interesting thing, which just shows the opportunity on the go for it, is we've literally gone through a cycle of unprecedented cost inflation that we've never had before. We're coming, thankfully, to the tail end of that, but the immediate lever that you have working with our suppliers is obviously yellow promotion. But where we want to be long-term is how do we work together to structurally bring prices down for customers and not rely on promotion. So that's the work that's ahead of us. Clearly, at the moment, it's meeting the customer where they're at and making sure we're in a great position as we go into Christmas.

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

Good morning Amanda and team. My question is, it seems like this is a Woolworths related issue when we look at the Metcash's update and I suspect when we see Coles tomorrow and look at Chemist Warehouse and a few others. I suppose my question is, do you feel that you've overcomplicated your promotional offer to the consumers? You talked about obviously getting alerts with promotions coming in, selling the milk on deals look like they're extremely attractive and probably hard to make money at the moment. You've got an everyday extra, obviously doing more promotions in store. It feels to me that you either need to get back to basics and really simplify the promotional programs Or do you need to lean into this more aggressively to really show your points of differentiation around your promotional program and all the additional extras you're giving consumers? It feels like you're sort of in between at the moment. You either need to go harder and lean in on really pushing all these points of differentiation or just get back to basics. Just keen on your view around that.

Yes, thanks. Thanks. then for that question, I'd start by saying where is the customer at right now? And at this stage in the cycle, customers are stressed and under pressure. And so they bring obviously that pressure into their shopping experience. And so I would say that actually the simpler and the easier that we can make it for customers in this type of environment where there's a lot going on in household budgets in the environment overall is important. And certainly as we've been talking to customers, whether it's me doing shop alongs or listening to focus groups or looking at what's coming through in our various data and tracking, certainly there's an opportunity for us to continue to just make it simpler and easier. And so some of those things we've already been doing, as you know, around best unit price or increasing the size of fonts and the like on our ticketing sounds small but actually do make a difference when you're trying to whiz through the supermarket aisles. In terms of the number of different promotions, levers that we have, the way that I'm thinking about this at the moment is to say all of those represent opportunities for us to optimise as we go forward and we just need to make the right strategic choices that recognise where customers are up to but also recognise what it is that we need to deliver for the business in terms of and earnings growth on the way forward. And we need to get that balance right. And so, you know, again, we talk about the need to optimize. They're all the things that we'll be looking at on the go forward. Of course, with that backdrop of we need to really be building customer trust on the go forward given the various media headlines and the like. So, yes, the need to optimize is something that's on our mind and in our plans.

Next question comes from Craig Wilford with MST Marquis. Please go ahead.

Good morning, Amanda and team. One of the other comments you made about the margin pressure for the Australian food business was the digital or the online business. Can you just explain that a bit further? I think you said that on demand, which has gone faster, was a factor there. Does on demand have lower margins than the other parts of your online business?

Yeah, thanks for that question. So yes, so e-commerce growth is above what we were expecting in the quarter. And a lot of that, you know, we're actually very pleased with the growth overall, can I say. Starting with the fact that about 54% of our orders are same day. And so the strategy that we've talked about before in terms of convenience matters to customers on the go forward and speed matters is absolutely playing through in terms of what we're seeing from our customers in terms of their behaviour. When we're looking at, to your point, your question on demand, that's actually the fastest growing part of our offering so that sub-two hour milk run delivery now is really in that triple digit growth. Now, there's lots of things that we think about there in terms of what we're seeing from our customers overall who are shopping e-commerce is that they're actually spending more with us overall. And importantly, we've talked about the fact that we want to hold baskets and we want to hold as many categories as we can. Actually, e-commerce is very effective at helping us be able to increase overall spend in store and online. And as we've talked about before, that's, you know, 2.3, 2 1⁄2 times more than a customer who only shops in-store. They also shop a broader breadth of categories with us, which is really important on the go forward. The opportunity that we have now, seeing that growth coming through in that on-demand space, is really around the picking of those orders in our stores. So we're able to use in the last mile Our crowd delivery, and often we can put multiple orders in the one crowd delivery, which is, again, attractive for our economics. It's as these orders are now flowing through into our stores, there's a real opportunity for us to be able to just become more effective at managing those flowing through in terms of the way we're thinking about rostering and managing multiple picks. So at the moment, we're doing a single pick on each order, and really there's the opportunity, given the volumes that we're now hitting, to be able to pick multiple orders at the same time, which just creates some efficiencies for us. I'm just looking at Sally Copeland in the room. Is there anything, Sal, you would add to that?

Yeah, and I think the other thing too is it's really, you know, we work the same as the rest of the business about maintaining the items for basket across those propositions so the more that we can curate that experience, make it really quick for the customer to shop because they are wanting to shop quickly, but make sure that they're getting everything that they're looking for. So we do look, you know, yes, Amanda, around how we want to optimise the picking and the last mile on these propositions and how we can balance across propositions all about volume and the stores more effectively, and then at the same time making sure that that basket is really complete for the customer and full of the things that they're looking for.

I think importantly, just to close that out, coming back to the beginning of your question, on-demand is absolutely profitable for us when we look at it in an individual level. Of course, the different basket sizes mean the dollar value looks looks different to that. So when we're looking at a fleet delivery, it's got a very high average order value. When we're looking at some of our delivery now and on demand, whilst the number of units in the basket might be slightly lower, it is absolutely accretive in terms of the margin that's delivered, but the dollars that we bank are slightly less. So there's a mix impact there. But again, that's why it's really important for us to have a look at what's the behaviour of those customers and what we're seeing. Actually, customers are shopping more and more frequently with us and we'd rather they shop with us and that we're able to serve each one of those missions than they're shopping somewhere else.

Thanks, Amanda.

The next question comes from Richard Barwick with CSA. Please go ahead.

Hi, Amanda. Can I just clarify, in today's release, you referenced the guidance includes $40 million of incremental supply chain costs. Is that $40 million a part of the $90 to $100 million that you'd previously disclosed for the full year, or is this an additional $40 million on top of that $90 to $100 million?

Oh, thanks, Richard. I'll just hand to Steve. It's not additional, but Steve, if you want to... No, that's right, Richard.

Yeah, we called out in August that over the course of F25, there'll be an additional 90 to 100. That 40 is the estimate for the first half as part of that full-year amount.

All right, so the full-year amount remains 90 to 100. That's the guidance? Yes. Yeah, OK, cool. That's all I need to know. Thank you.

Your next question comes from Phil Kimber with E&P Capital. Please go ahead. Please go ahead, Phil. Your line might be on mute. We have a follow-up question from Sean Cousins with UBS.

Please go ahead.

Thank you. Some questions regarding W Living and the resegmenting. We've kind of got more clarity now on some of these startup businesses and the losses they're making. And you've called out $25 million in healthy life and everyday market in the first half, $24 million. What was that in full year 24? And do you expect the losses to reduce, fall, stay the same? And then also Woolworths Market Plus, which I think is coming out of other and now going into W Living. What did that lose? I'm just curious in that you've spoken about looking at cost savings for the business. These startup businesses seem to be loss making themselves. So they could be a source of opportunity to improve profitability there. But just want to get a shape of these businesses that are now sitting in W Living. What are the losses in there, particularly in fiscal 24, and the outlook for those businesses, please?

Yeah, thanks. Thanks, Sean, for that question. You know, I think, as you know, all start-up businesses require a level of investment and are at different stages of maturity as well. You know, I think what we've tried to do here is provide you with more information transparency in terms of some of those newer businesses of the group, which are in important categories for us. So if we think about marketplaces and the growth we're seeing in the broader industry in that space, it makes sense that we would obviously want to be involved in building out a business such as that. If we think about healthy life and the fact that it operates very much in those adjacent categories to food in terms of health and well-being, that too is a logical adjacency for us. As we've said today, given the performance of the business and our absolute commitment to delivering mid-term sustainable growth for shareholders, we'll obviously be considering anything as we go forward. But I might just turn to Steve on some of your more specific questions there on earnings

Yeah, thanks, Amanda. Sean, look, a couple of comments. I mean, Amanda's already said, yes, early-stage and high-growth businesses do need investment, and these are businesses that we're currently investing in because we believe that they've got future growth prospects. And our expectations are that the performance of those businesses will continue to improve and that they need to deliver an appropriate return over the midterm for them to be part of the portfolio, and that is the expectations. In terms of the guidance, what we've tried to do in the consciousness is a sales announcement with some earnings guidance. We've tried to just reflect the restatement of the first half of F24 to provide clarity associated with the creation of the new W Living segment, which is all about how do we house all of our everyday needs businesses in one location. And so as we're trying to clean up the presentation of of the way we report our segments. What we'll do, Sean, is at the half, provide a restatement of the full year so that you can understand those full year projections.

Okay, I mean, were these businesses profitable in the full year? I assume they've got to be loss-making as they're start-ups, but I'm sort of curious. So, yeah, sorry, it's just be, I mean, the transparency is really helpful. I mean, I think there was an expectation that these were loss-making businesses. And I think the history of moving to profitability would be really interesting to see because I think investor feedback is they're not always comfortable with the ownership of these businesses and the losses that do persist. But any sort of history you can provide about how things have improved where cartology has been a tremendous success, but the other ones are a little difficult to sort of identify. So any more transparency would be much appreciated. Thanks.

And Sean, what you'll see at the half is not just the prior year but also we would expect some improvement in the current fiscal and we'll also provide that resatement for both the half and the full year when we talk to you in February.

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

Hey, Amanda and Steve. Sorry, technical issues there. And I'm not sure whether this may be the question that was just asked, but a question for Amanda, just, you know, just big picture. I mean, it feels like it's quite a complicated business now, the overall group. I mean, you've got to restore momentum in the food business. New Zealand's, you know, going through a similar process. Big W's operating in a pretty tough space. You've now got, you know, food service business, a pet business. I mean, how do you feel about that as the sort of new incoming CEO? Is the business almost too complicated now and maybe that needs to change?

Yeah, thanks, Phil, for that question. Look, we've heard this question and feedback before. And as you know, we have a strategy which is about being a connected group around food and everyday needs. And as we've talked about on this call and I know in many conversations, the most important thing that we've been focused on right now is making sure we've got the right sales and units in each of the businesses. And as Steve just mentioned earlier, each of the businesses also needs to be able to contribute individually and collectively to the group's performance. And clearly, as you've just called out, each one of the businesses are at different stages. It is incredibly important that we have the right momentum in our food business. You know, customers and teams sit at the heart of our group but it all starts with food in terms of the connection we have with customers two or three times a week and so that is an absolute focus for us. As we come out of the first half into the second half, we'll obviously be taking the opportunity to have a look at what the current conditions are, have a look at where customers are at and we'll take the opportunity to again consider the overall shape of our group but right now as I've said before I think the food and everyday needs strategy connected with our everyday rewards loyalty program makes sense and particularly if we start to look at the way that customers are shopping incredibly important that we are present across those key food and everyday needs categories and how we continue to shape that so that it's delivering both what customers want, but also what our shareholders want to see and we want to deliver is an important consideration. So hence the need in the second half to obviously consider all of that.

The next question comes from Nicole Penny with Rymor Equity Research. Please go ahead. Good morning. Thank you for taking my question. I'm back on Willy's food. Willy's has made significant investments in digital tater. to stay ahead of the economic conditions and understand the customer behavior better. You earlier mentioned there's work to be done in optimizing and balancing responses to the data received. Could you please elaborate on this work, please, and where and what specific actions can be taken to ensure, I guess, improved strategic responses to the data and reduce the time taken to respond, please?

Thank you. Thank you, Nicole, for that question. Just to clarify, what I would say and share in terms of what we're seeing is that those customers who are very connected with us, so they're an Everyday Rewards member, they're shopping online and, of course, in our stores, connecting with us on our digital assets, actually are the customers that we're seeing very pleasing, strong growth and, I'd say, increased loyalty And so a lot of those digital and data investments are playing through well for us in terms of those loyal customers who are deeply engaged. The opportunity that we have is for those customers who perhaps are not as engaged. They might be scanning their card but not boosting, for example, in everyday rewards, where we... do need to take the opportunity when they're in our stores to continue to optimize our promotions as we've talked about our next gen promotional tool and making sure that we've got the right promotions that customers are going to respond to, but that we're also able to manage that in terms of the overall margin of the business. So, you know, I'll just clarify by saying a lot of that investment that we've put in play is working very well for a large portion of our very loyal, deeply connected and engaged customers. it's those customers that perhaps are not shopping us as frequently where we have the opportunity.

Next question is from Lisa Ding with Goldman Sachs. Please go ahead.

Hi, thanks for taking a follow-up. Just in terms of the statement of stepping up our productivity ambition for calendar 25, can we talk a little bit more about exactly what we mean? Where are we stepping up?

Yeah, thanks, Lisa. I might kick off and I'll hand over to Steve for some further bills. So to start with, I do want to just call out in terms of our productivity plan in Australian food, we're absolutely on track and as you know, we have hundreds of millions of dollars worth of productivity that we have planned in this financial year and pleasingly, that is absolutely on track. We have, when it comes to productivity, we will take the opportunity in the second half to absolutely increase that ambition again, given, you know, obviously the conditions that we're seeing. And so we're working on that now, you know, what can be brought forward in terms of our productivity pipeline. And then from a cost perspective, particularly in our support areas, very cognizant, by the way, that this is the key trading period for our retail stores. And so when it comes to support costs, certainly at the moment we've got very prudent settings that we've applied there. And Steve, I might just turn to you for any further builds.

I think you're right. We've taken the necessary steps on the things that we can control for the second quarter and We've got those teams who are always working on longer-term productivity initiatives, looking more deeply to say, what can we accelerate? What can we bring forward? A good example would be in stock loss, where actually we've identified some stores where stock loss is higher than we would like, where we're actually going to deploy some more initiatives, including stock. anti-sweep shelves. We're actually going to be testing some exit gates in about 100 of our higher-loss stores. So a number of things that we're bringing forward. And then more broadly, we will look at ways that we can optimize and simplify the way we work across the organization, conscious that we need to find more efficiency just in the current environment.

We've come to the end of our Q&A session. I'll now hand back to Amanda for closing remarks.

Thank you for joining us this morning. We are early on in the financial year with really the critical trading period ahead of us. Our focus right now is making sure that we continue to build that sales and unit momentum that we've spoken about, critically important for this quarter, that we respond to the feedback that we're hearing from our customers and that we continue to balance the needs of our customers and our shareholders, appreciating that today the results are not what we would have liked to have delivered, but do reflect the need to meet customers where they're at. And we will come back in the second half and provide a further update on everything we've talked about today. Thank you.

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