Woolworths Holdings Ltd

Thank you for standing by and welcome to the Woolworths Group FY25 half-year earnings announcement. All participants are in a listen-only mode. 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 half-year results for the 2025 financial year. I'd like to start by acknowledging the traditional custodians of the land on which we meet today, Dharong Country, and I pay my respects to elders past and present. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Von Ingram, Managing Director of W Living, Dan Haig, Managing Director of Big W, Guy Brent, Managing Director of Woolworth Food Company, and Paul Harker, Chief Commercial Officer, Australian Food. Also joining me is Spencer Son, Managing Director, Woolworth New Zealand, who will be stepping down in the role at the end of March to take up an exciting opportunity at Woolworth Holdings in South Africa. Stepping into that role is Sally Copeland, who is also joining us today in her current capacity as Managing Director, Group EcomX. And finally, Annette Carantoni, who was recently appointed Managing Director of Woolworths Retail, also joins us in her current capacity as Chief Supply Chain Officer before officially stepping into her new role next month. The group's H1 results reflect the challenging half impacted by industrial action in Australian food and ongoing cost of living pressures for our customers, leading to more value-seeking behaviour and cross-shopping. Our customer scores for the half reflected these challenges. However, pleasingly, they rebounded in H2 as supply levels normalised and availability improved. Group sales for the half increased 3.7% or 2.5%, excluding the impact of pet stock. Excluding the impact of industrial action, underlying sales growth was solid, with e-commerce growth remaining strong. H1 Group EBIT declined 14.2% on the prior year to $1.45 billion, largely driven by Australian food, due to the impact of industrial action and incremental supply chain commissioning and dual running costs, as well as price and promotional investment and ongoing inflation in wage and other costs. I will cover our 2025 focus areas in more detail later in the presentation. but we know we have an opportunity to further improve the shopping experience for our customers and we are taking steps to simplify our business to make it easier for our teams to have the most impact and deliver efficiencies. We also know that we have an incredibly strong business but have more to do to unlock the full potential of the group. Work is underway to assess the shape of the group portfolio as well as ensuring that we're realising benefits and delivering returns from our investments. Turning to slide four. Importantly for our customers, food inflation has continued to moderate and household spend on food continues to decline as a proportion of overall spend. Average prices in Australian food business have now declined year on year for the fourth consecutive quarter, with food inflation low and stable. As shown by the chart on the right, the continued moderation across long life in the hearth was driven by key categories such as personal care, household care and baby needs as customers favoured promotions on products such as deodorants, paper towels and nappies. This helped offset some modest inflation across fresh as well as recycled more stable supply conditions in the prior year. Turning to slide five, despite food inflation stabilising, we know broader cost of living pressures continue to weigh heavily on our customers' household budgets. Customer behaviours in our food business have shifted rapidly in response to this pressure, as well as the increasing need for convenience in their busy lives. The importance of value has accelerated over recent years, which has led to increased levels of cross-shopping, particularly for our customer cohorts such as families and younger singles and couples that have told us they are under the most pressure. Based on our customer pulse survey, these cohorts have said they are cross-shopping substantially more since 2022. Online shopping is also increasingly a way to help manage budgets and unlock more convenience. Over 30% of all e-commerce orders are now fulfilled under two hours, which has more than doubled on the prior year, as we've continued to grow our convenience shopping propositions through direct to boot now and milk run. The culmination of these behaviours has resulted in a shift in customer transactions and baskets. Customers are shopping more frequently as evidenced by the increase in transactions over the last two years, particularly online. At the same time, customers are putting fewer items in their basket when they shop in our stores. While an online basket remains materially higher than an in-store basket, significant growth in our on-demand proposition is also contributing to smaller online baskets with an average of 15 products in a typical on-demand basket. We have also worked hard to deliver meaningful value to our customers as detailed on slide six. This included delivering more promotions with larger weekly savings complemented by more than 3,800 products on everyday low price and lower summer price programs. Work is also underway to simplify our promotion, including our red everyday low price programs and making our tickets easier to read for customers, with the next phase rolling out to our in-store shelf tickets today. In the current environment, the key sales events are becoming more important for customers, particularly Black Friday. In Big W, we responded to this by increasing the number of offers and value we provided, and through Big W Market, customers now have access to over 400,000 additional items. Members also unlocked even more value through Boost Your Budget campaigns in the period and made the most of their savings with record engagement for Bank for Christmas. Members redeem these points when it's needed most, including at Black Friday deals across the group or at their Christmas grocery shop. with each member banking approximately $100 worth of savings. Our digital tools also continue to play a critical role in helping customers plan their shop and manage their budgets. We now have approximately 2 million weekly average users of our digital shopping list and digital catalogue, which has increased 12% and 14% respectively compared to last year. This half, we also launched watch lists which notifies customers when their favourite products are on special, as well as the launch of savings summary on our rewards app for members so they can see where they've saved. Focusing now on the Australian food performance on slide seven. A number of challenges during the half led to a disappointing H1 result for Australian food, with EBIT declining 12.8% on the prior year. We had spoken previously about the rapid shift in customer behaviour we had been seeing since the beginning of the calendar year, and this accelerated in the half. Value-seeking behaviours such as a shift to lower-priced items, more deeply discounted specials, and trading into affordable own-brand options impacted growth margins in the half. Furthermore, the significant supply chain disruption caused by industrial action and broader reputational challenges faced during the year led to a decline in customer advocacy. During the industrial action, stock flow to stores was disrupted for 17 days in the lead-up to Christmas across Victoria, the ACT and some parts of New South Wales. Customers were impacted by inconsistent supply across product lines and a pause in e-commerce services as we managed the stock flow to stores. Our store teams worked hard to mitigate the impact to customers during the period and quickly responded when stock flow improved to get our stores into good shape for Christmas. We estimate that we lost $240 million of sales and EBIT was impacted by $95 million in the half, reflecting lost sales, additional transport and supply chain contingency costs and higher stock loss. Profit in the period was also impacted by wage increases of 4.25%, including superannuation, higher meat input costs, a higher cost of e-commerce mix of sales, and a modest increase in stock loss. While some of these challenges will continue into H2, I'll come back at the end and talk about our focus areas for 2025. Turning to slide eight. What is clear is that customers want more and more convenience every time they shop and our e-commerce and digital platforms are playing a critical role in meeting that need. We now have over 4 million weekly active users of our Woolworths and Everyday Rewards app as customers research online and complete their weekly shop with each growing by 18% and 9% respectively. supported by growing usage of digital tools such as shopping lists and digital catalogues. The Everyday Rewards app also maintained its top ranking among retail loyalty apps, reflecting the continued strength of the program. Our retail media business cartology had a strong half with 15.3% revenue growth as the business continued to scale its screen presence both in our stores, in shopping centres and online. the Everyday Rewards platform remains key to unlocking greater value for more than 12 million active members across Australia and New Zealand. The program was further bolstered in the half with the launch of Everyday Shop, which allows customers to use points to purchase marketplace items with more partners onboarded to give customers greater choice. In EcomX, sales increased 20% for the half, driven by strong growth in same-day, and on demand with 88% of our online orders fulfilled in less than 24 hours as we continue to grow our ultra convenient propositions. Turning to slide nine. The reach of our store network remains critical to our success. As of today, 83% of Australia's population are within less than a 10 minute drive to one of our stores. highlighting the incredibly important role our store network has in reaching our customers. We completed 34 renewals in the period to improve the in-store experience with five new store developments completed in the half. This includes new stores at Pacific Epping in Victoria and Belvidus North in WA, as well as our latest renewals in Ashfield, New South Wales, and our Metro store in Paddington, New South Wales. We're also focused on the experience within our stores, including front-of-store upgrades to improve the flow and give customers more space at self-checkouts, and continue to grow our direct-to-boot offer to support the fast-growing customer demand for same-day convenience. The next iteration of Scan & Go technology was also launched in 10 stores during the period, with the new digital trolley enabling customers to scan and bag items and track their spend as they shop. I am now on slide 10. Our New South Wales supply chain transformation reached an important milestone in the HARP with the official opening of our Moorbank National DC in November, and we are working towards achieving a full ramp-up at the site at the end of this calendar year. At the co-located regional DC, the automation installation has been completed and remains on schedule to go live by the end of the calendar year. Our fully automated CFC in Auburn also remains on schedule for launch this half after the successful completion of automation integration. Turning now to slide 11. New Zealand food sales momentum improved during the half with total sales increasing 2.7% in New Zealand dollars as transformation initiatives resonated with customers. A reset of value and improvements to our fresh offer led to value for money and fruit and veg customer metrics both increasing on the prior year. E-commerce sales growth increased 14.6% in H1 and penetration reached 14.4% driven by investment in convenient same-day delivery propositions including express pickup and delivery and milk run. I am now on slide 12. While Big W's financial performance during the half was below our expectations, we made good progress in repositioning our range to provide more value to customers through lower prices and more affordable options in store. While this helped to drive strong item growth despite the late arrival of spring-summer clothing range, sales were broadly flat on the prior year, reflecting lower average selling prices. Encouragingly, the new home range performed well and play and everyday categories were broadly flat on the prior year in very competitive sectors. We have clear priorities for the business in H2, including improving the execution of autumn-winter clothing range transition, continuing the product-led transformation in home and delivering more value and convenience through growing our own brand and marketplace offer. will also remain prudent on costs and continue to focus on becoming a lower cost operator. Lastly, on slide 13. Starting with safety, our total recordable injury frequency rate improved on S24, reducing by 3%. While the improvement in trend is pleasing, we remain keenly focused on mitigating risks related to manual handling and slips and trips. and are implementing targeted programs to further reduce these incidents. We also have done a lot of work to bolster our safety program under our group-wide safety promise, our place, we're safer together. And we received pleasing recognition in the half for our acts of violence virtual reality training at the National Safety Awards of Excellence, winning best training program. Our initiatives to reduce our scope one and two emissions resulted in a 12.5% reduction in H1 on our 2023 baseline, which was supported by our switch to renewable electricity. We know our customers want to see less plastic and we continue to make good progress in reducing plastic packaging further in the half by bringing the cumulative reduction to over 19,000 tonnes compared to our F18 baseline. The trial of soft plastic collection also expanded to 94 Woolworths supermarkets in the half. We plan to add more stores in the future as we continue to work collaboratively as part of the Soft Plastic Taskforce to develop a long-term solution. I'll now turn to Steve to talk to our financial results.

Thanks Amanda and good morning everybody. I'll start today on slide 16 with the half one F25 result summary for the group. Group sales for the half increased 3.7% to $35.9 billion, with sales growth in all operating segments. Excluding pet stock, which was acquired in January 2024, group sales increased by 2.5%. Group EBIT before significant items was $1.45 billion, a decrease of 14.2% compared to the prior year, primarily reflecting lower EBIT from Australian food and Big W and higher net costs in the other segment. This result does include a number of one-off impacts associated with the industrial actions and supply chain commissioning and dual running costs. When normalised for these impacts, earnings were down approximately 7% which I'll elaborate on in the following slide. Group NPAT attributable to equity holders for the parent entity before significant items was $739 million, a decrease of 20.6% reflecting lower group EBIT and higher finance costs in the half, somewhat offset by lower tax. Group basic EPS on the same basis declined 20.6% in line with lower group NPAT. Turn to slide 17 and our group trading performance. In Australian food, total sales for the half were $26.7 billion, an increase of 2.7%, benefiting from strong e-commerce sales growth of 20%, with solid trading momentum in Q1 somewhat offset by the supply chain disruption caused by industrial actions in Q2. Australian food sales momentum was positive through Q1 and October, but was adversely affected by the industrial action in November and December, which we estimate resulted in approximately $240 million of lost sales. Adjusting for this impact, sales growth would have been approximately 3.7%. Total Australian food EBIT declined 12.8% in the half, excluding the one-off impact of industrial action of approximately $95 million of EBIT impact, and supply chain commissioning and dual running costs, EBIT growth would have declined by approximately 5%. Outside of supply chain impacts, gross margin was impacted by livestock cost inflation in meat, customer shift towards lower priced items and more deeply discounted specials and a modest increase in stock loss. Wage increases, a shift in e-commerce mix, and higher depreciation and amortisation led to higher costs despite productivity measures partly mitigating inflationary pressures in the half. While we saw a decline in EBIT in Woolworths Food Retail, which is the combination of our stores and e-commerce business, Woolies X profitability increased by 24.8%, driven by strong sales growth and a positive contribution to earnings from cartology, rewards and our everyday services businesses across insurance and mobile, with the DAP and EBIT margin of 4% increasing 22 basis points compared to the prior year. Australian B2B sales for the half increased 5.5%, largely driven by B2B food, with PFD continuing to perform strongly across all channels. B2B EBIT increased by 9.9%, with growth driven by sales growth and a strong contribution from PC+, a third-party supply chain business. New Zealand food made good progress in the half, with sales growth of 2.7% in New Zealand dollars, with consistent growth in both quarters, supported by continued progress across a range of transformation initiatives. EBIT increased 15.2%, with EBIT margin rise in 21 basis points to 1.9%. In F25, we established a new reporting segment, W Living, comprising Big W, Pet Stock, Healthy Life and Woolworths Market Plus. Total W living sales increased by 16.1% in the half, largely reflecting the inclusion of pet stock revenue following its acquisition in January 2024, with W living sales flat versus last year excluding pet stock. In Big W, we've seen some pleasing progress and momentum with 4.4% item growth as we reposition the business to provide customers with more affordable options. However, this led to lower average selling prices in the half with sales broadly flat compared to the prior year. The late arrival of the spring-summer clothing range also impacted sales and led to high levels of clearance activity. BW's EBIT declined by 46% in the half to $29 million. Paid stock sales increased by 3.2% compared to the prior year. which is before Woolworths Group ownership, driven by strong growth in own brand pet food and the opening of 5D stores in the period with EBIT of $22 million for the half. Our other segment includes group functions such as property, group overheads and the Woolworths Group's investment in Quantium. The segment recorded a loss before interest and tax of $106 million, an increase of $52 million on the prior year driven primarily by lower property sales in the half and the loss of the group's share of profits from Endeavour Group compared to the prior year following the sale of the final transfer shares in September. Moving to slide 18 and our key balance sheet metrics, average inventory days were up 1.6 days on the prior year, reflecting an increase in investment in entry across key lines to improve availability, longer international lead times on some products, the earlier receipt of Big W's autumn-winter seasonal inventory and inventory build-up for the newly opened Moorbank National Distribution Centre. Average payable days was 0.3 days below the prior year, reflecting year-end payment timing differences and lower stock purchases during the period of industrial action in December. Group ROFI of 14.6% decreased 106 basis points compared to the prior year prior year normalised ROFI of 15.7% largely due to lower group EBIT. On slide 19 is a reminder of our capital management framework. While our cash flow was below our expectations in the half, impacted by a number of factors including investment, timing and one-off items, we distributed $489 million to our shareholders via a 40 cent special dividend in the half. And I'll provide further colour on the following slides. Moving to the cash flow now on slide 20. The group generated operating cash flow before interest and tax of $3.0 billion for the half, a reduction on the prior year reflecting lower working capital benefits and a decrease in EBITDA. The movement in working capital in the half reflects investment in stock availability, longer international lead times and earlier CW seasonal inventory driving lower working capital benefits together with the timing impact of supplier payments in the last week of the period. Cash interest costs increased 15.3% driven by higher average debt as well as a higher proportion of floating rate debt. Cash tax pay increased 55.4% compared to the prior year driven by the timing impact of higher pay-as-you-go tax instalments and final tax payment for F24 paid in the half. Cash used in investing activities was $678 million. 43% lower than the prior year, reflecting lower CAPEX and also includes $383 million from the sale of Endeavour Group shares and I'll provide some more detail on CAPEX on the following slide. Cash flow before lease payments and dividends of $1.2 billion was down 12.3% on the prior year. The $420 million in payments for the purchase of additional equity interest in subsidiaries largely reflects the acquisition of the remaining 35% interest in PFD in the half. Dividends of $1.189 billion were paid in the half including the payment of $489 million of special dividends to distribute the proceeds from the sale of a 5% stake in Endeavour Group in Q4 of F24. Finally, a cash realisation ratio was 85%. However, when adjusting for the timing impact of higher tax instalments, a cash realisation ratio was 93 on a normalised basis for the half. Moving then to slide 21 and CAPEX, operating CAPEX for the half was $1 billion with a modest increase on the prior year reflecting increased spend on renewals as part of our sustaining CAPEX. An increase in growth CAPEX compared to the prior year reflects higher spend in e-commerce. We expect operating capex of $2 billion to $2.1 billion for the full year, a modest reduction on the previous guided range of $2 billion to $2.2 billion. Moving to dividends and funding on slide 22, the board today approved an interim dividend of $0.39 per share, a decrease of 17% on the prior year, broadly in line with a reduction in earnings. Turning to our balance sheet settings, net debt increased on the prior year to $16.3 billion, reflecting the acquisition of pet stock, the acquisition of the remaining interest in PFD, the payment of a $0.40 special dividend and a half and lower operating cash flow, partially offset by the sale of our remaining stake in Endeavour Group. Net debt to EBITDA was 2.8 times at the end of the half compared to 2.6 times at the full year, well within our target levels. We remain committed to solid investment grade credit ratings and have significant headroom under our current ratings of BBB from S&P and BAA2 from Moody's. With that, I will now hand back to Amanda.

Thanks Steve. Turning to slide 24 and current trading and outlook. In Australian food, the team has worked incredibly hard to recover from the supply chain disruptions caused by industrial action in November and December. Sales have not yet fully recovered, but we are seeing availability and customer metrics begin to return to pre-disruption levels. For the first seven weeks, Woolworths food retail total sales increased by 3.3%, driven by a more stable operating environment following the recovery from industrial action, cycling lower growth in the prior year, a collectibles program and ongoing e-commerce growth. While we continue to optimise our promotional activity, cost of living pressures for customers persist, with value-seeking behaviours and cross-shopping expected to continue. Mind-stop costs in red meat are also expected to impact gross margins in the half. We expect e-commerce to continue to grow as a proportion of the sales mix, and while simplification and other initiatives will gather momentum, they won't have a material impact on costs in H2. While still early in the half, we expect Australian Foods EBIT in H2, including supply chain commissioning and dual running costs, to reflect a mid-single digit decline on the prior year. In New Zealand, total sales growth for the first seven weeks was approximately 4%, with some benefit from the timing of New Year's Day in the current quarter. We expect to see continued progress from our transformation with EBIT in H2 expected to be above H2 last year. Total sales growth for Big W in the first seven weeks was approximately 1%. While we expect to see further progress in Big W's clothing range reset, improved item growth is being tempered by lower average selling prices. At this stage, we expect Big W's H2 loss before interest and tax to be broadly in line with the prior year. Now on slide 25. We have clear priorities for the remainder of 2025 and are focused on three key areas. We need to get it right for customers by excelling as a retail funder in areas like value, range and availability. This starts with improving price perception and rebuilding trust with customers and the broader community. We've worked hard to deliver value to customers in H1, but we know we have more opportunities to help customers find value when they shop with us, including clearer promotions, improved ticketing and online resources to explain pricing. We'll also look to optimise our range to reflect changing customer behaviours whilst also reducing complexity. We're committed to delivering on our fresh food people promise and elevating our own brands. We also will continue to improve availability, particularly on key lines. We must also simplify the way we work to allow our team to focus on the areas that will have the greatest impact for customers. We announced new leadership for our Woolworths retail food business in February and a new organisational structure in Australia with supermarkets, metro, green stock and our own brand business moving under Annette's leadership. At the same time, we announced Sally Copeland's appointment as Managing Director, Woolworth New Zealand, following Spencer's decision to take up a new opportunity in his home country of South Africa. Both appointments reflect the strong internal talent we have within the group, following an extensive recruitment process both domestically and internationally. Across the group, we will continue to review our operating model to make it easier for our team as well as asking our team to return to the office to improve collaboration. We have also begun to simplify our above-store support office, which is expected to lead to annualised growth savings of approximately $400 million by the end of calendar 2025. This is in addition to our ongoing operational productivity program. We have very strong foundations and many growth options across the group. Adjacent businesses like rewards, cartology, insurance, mobile and our third party supply chain business are performing well and we expect them to continue to deliver incremental growth for the group. However, we have more to do to unlock our full potential. Continuing to transform Big W and Woolworths New Zealand remains critical and investments like PFD and Petstock are progressing well but have much more potential. Our multi-year supply chain transformation is the group's single biggest investment to date and ensuring a smooth transition and realisation of benefits is a priority. Finally, we will assess the shape of the group's portfolio to ensure that all parts of the group can contribute to growth and return within a reasonable timeframe. Finally, on slide 26. While it has been a challenging period for the business, and our stakeholders over the last 12 months, I remain excited about the opportunities we have ahead of ourselves. We have a passionate and talented team, a leading store network and e-commerce business, a modern supply chain, a leading rewards program and analytics capability, many growth options and a solid financial position. This gives me confidence that we can get it right for our customers and team and create shareholder value. I will now turn the call over to the operator for questions. To give everyone a chance, can I please ask that you limit it to one question per person and then rejoin the queue with any follow-up questions. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you're using a speakerphone, please pick up the handset to ask your question. The first question comes from Sean Cousins from UBS. Please go ahead.

Thanks. Good morning, Amanda. Maybe just a question regarding the $400 million cost saving. That's a pleasing announcement. I'm just noting that Woolworths is about 1.6 times the size of Coles on a sales and EBIT basis, but you're twice the headcount above the store level. Is this enough cost saving? I guess my question is based on The lack of form the company has had with head office cost savings, the last one was 2016, so it's a question around execution. And further to this, should we assume that these cost savings, this 400 from calendar 26, will they be reinvested to offset inflation and I guess the pressure from promotions, private label and online mix shift that weighed on fiscal 25? Or are you looking to retain some of these cost savings that they'll actually go down to boost EBIT, please?

Thank you, Sean. I'm pretty sure that's at least three questions there, but I'll do my best to answer them. So let's start with the $400 million. You know, what we've announced today is to say that when we look at our apartment store costs, and that's including our costs like goods for not resale, so all of our key expense lines, and having a look at our support office, that's a number that we think is appropriate when we look at what's required to run the business on the go forward and what we think is appropriate for running a sustainable business. I couldn't comment on the size of our competitors' relative offices, so I'll leave that one to you. In terms of your additional questions, I just would reflect that what we're talking about at Woolworths is to say that simplification is not a one-off program. This is about recognising that we run a low margin business and it is incredibly important that we are prudent with our costs on an ongoing basis. So simplification for us is, yes, about recognising the opportunity to capture some savings but it's also about recognising that we can simplify the way that we work, that we can speed up decision making and that we can find better ways to collaborate and achieve better outcomes for the business overall. It's an incredibly important part I think of any retailer's culture and we're certainly talking about it at Woolworths about this being a sustainable way for us to lead in the future. Thanks.

Retention?

Sorry, just repeat that, Sean.

Sorry, the question there was around, do you expect to retain these cost savings or will these be redeployed to customers and or to manage the challenges of promotions, own label and online, which have weighed on your fiscal 25 AusFood EBIT, please?

Yeah, the focus first and foremost is to say, how can we be more efficient? That's the first question that we're looking at. It's not a question that we've considered whether or not we would use that to reinvest. It's a case of saying, how can we be more efficient? And then we'll reflect as the market starts to move whether or not there's anything else we need to do on that front.

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

Good morning, Amanda. Just following on from that question, I'm trying to reconcile the numbers in my head. When you look at your first half EBIT, you were down $204 million. Industrial action, you call out at $95 million and supply chain, $41 million, which means that you were down $68 million, excluding industrial action and supply chain. And then in the second half, you're calling out that supply chain, I think, is going to hit you. What is it, $50 million? And I think if you're calling down mid-single digits, that's probably around $80 million down second half on second half. So you're down probably another $30 million. My concern, Amanda, and I know it's tough and all the rest of it, but you are talking, you are the leading supermarket in Australia. It is a wonderful place, et cetera, et cetera. But underlining, excluding supply chain and industrial action, even with sales at around that 3%, 3.5%, 4%, whatever, your EBIT's down. You're going backwards. So my question is, you know, I do understand challenging conditions, but for a company the quality of Woolworths, we just can't see the company going backwards on a like-for-like basis. So other than pulling out costs, head office and heads and whatnot, what are you going to do to improve the underlying performance so this becomes an investable company because unless you can grow your profits on an underlying basis for your best business and arguably the number one business in Australia, then it's not investable. So can you tell us what you're going to do to turn this around please because following on from Sean's question, other than just pulling $400 million above the stores, Your business, excluding one-offs, and arguably whether they're one-off or not, that's another point for another day, your business is going backwards. So can you explain what you're going to do to turn that around, please?

Thank you, David, for that question. And let me start by saying I absolutely agree. It's a very disappointing result, and it's not a result that any of us would want to be delivering. So let me answer your question directly, and I've certainly spoken to this already this morning, but just to recap, this starts for me and for our team with customers. We need to continue to see a healthy top line sales growth, and when we look at our customer scores, whilst it's been pleasing to see a gradual improvement in our customer scores, certainly in the second half, we have got more work to do to improve our overall price perception which we've called out and of course we've talked about on these calls previously. We also have the opportunity to continue to improve availability and that is an absolute focus for our team and underpinning that is a focus on key line availability which has again improved across the half but could be better. And then we're also focused on continuing to elevate our fresh proposition. It is one of the great points of difference for the Woolworths brand and own brand for us can play a bigger role as well. Aligned with that is continuing to look at our range. Range also differentiates Woolworths as you know when we talk to customers but there is an opportunity for us to be more targeted in some of our optimisation of key categories and therefore drive a greater level of both performance in terms of efficiency through the supply chain but actually a better outcome for customers in terms of availability as well. So that's the first thing we're focused on and of course all of that you could just wrap up and say we need to continue to get better every single day at delivering on the retail fundamentals and within the result that we've delivered today, what is pleasing is to see customer traffic still steady and growing in our food business. Incredibly important and you're right, it all starts with food at Woolworths and so to see that is the opportunity that we have. We need, with those retail fundamentals right, to be having a couple more items go in the basket than what we're seeing at the moment in our stores. So that's the key focus. The second area that we've called out is on simplification and I touched on that in Sean's question already but again just to recap, we have a very large productivity program that runs across our operations and our supply chain areas and in fact in the half just completed, again we were pleased with the progress that we saw on productivity but of course cost growth running at 4.5% is very high and so I wouldn't want to create an impression that we do not have a strong productivity program across stores and supply chain. What we've introduced is a focus in our above store costs. I think that's appropriate for a retailer and appropriate certainly for the context in which we find ourselves. We've recognised that we can be better in terms of the way that we make decisions and operate the business more holistically and so that's a key focus. And then I've also called out today, thirdly, we need to unlock the full potential of the group and so as I'm sure we'll talk about further on this call, we know we need to do better in Big W in terms of the transformation. It's a very tough market. We've made some progress but not enough and so that is a key focus for us. New Zealand, as you say, has been challenging as well. In that business we're starting to see some early signs of some progress there but again a big focus. And then we're very focused on realising the returns from our investments. We have made a large number of investments across the last couple of years. It gives us a lot of optionality within the group but we need to deliver the benefits and the returns on those investments and our team are very focused on that. And then I've also called out today that each business within Woolworths needs to stand on its own and show a pathway in the mid-term to appropriate returns and so we will be assessing all of our businesses with that lens on the go forward. I agree it's a disappointing result. I agree that Woolworths is a fantastic franchise and I am very confident that in the mid-term we will be back to seeing the returns that our shareholders would like to see. Thank you.

The next question comes from Tom Kirath from Baron Joey. Please go ahead.

Morning, guys. Just a question on the food gross margins. I think they fell 32 basis points, about 50x tobacco. I think, Stephen, you provided some buckets of what the drivers are there before, just around media, if there's any of the industrial action, price investment, just be helpful to maybe understand some of the buckets that are driving the gross margins in food.

Yeah, sure, Tom. I think you've hit on the key numbers, 32 basis points per day of diffuser power for cigarettes impacted more like 50. I think the big bucket is the combination of price investment and promotions including these. and that's probably about 40 collectively of that impact. I think if I just talk to meat to start with, we have actually seen quite an increase in livestock prices, particularly in areas like lamb where The retail prices haven't reflected the level of livestock inflation and so there is a degree of which we're absorbing that cost just given the importance of protein to the customer into the centre of place and how they build their shopping mission around it. We did talk a lot in the first quarter sales around the impact of Customers seeking value and looking to buy more product on promotion, we've seen customers really buying those specials, particularly at deeper levels of discount. We're actually seeing good progress. in the second quarter on the margin structure of promotions but we do make a lower marginal promotion than off promo and so there's also some mixed impact in this sort of general bucket as some of our higher margin categories have grown slower than other parts of the store. So that's the vast majority of it. We did see some deterioration in our stock loss performance. Some of that is impacted but not all of it by the industrial action and we've called out obviously the DC cost sit in gross margin. So there's the dual running costs and commissioning of the Moorbank NDC and the Auburn CFC is worth about 10 basis points. On the positive side though, we have had a positive contribution from the adjacency. So cartology grew strongly both in revenue and margin, was a very positive contributor to the half. Rewards grew and actually our services businesses, insurance and mobile under the Everyday brand you know, offering great value and they were a positive offset. So hopefully that gives you a sense of colour of really what the main drivers are and some of the puts and takes. That's great. Thanks, David. Appreciate it.

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

Morning, Tim. Just, Amanda, just interested in just how... Just obviously you've talked a lot around the quality of the business and obviously you're also the biggest... in Australia. I'm just thinking around or interested in your thinking around how you leverage the benefits of scale that you bring because, correct me if I'm wrong, my understanding is you've got an ongoing continuous improvement program that's designed to mitigate costs. So presumably this $400 million is incremental over and above that. You've obviously got a superior loyalty program and scale. Do you look to leverage a bit of that clout that you've come in? And I suppose specifically to Sean's point, would you look to invest a chunk of that $400 million back into pricing and because it does feel like things like share of main shops, you're not winning at the moment. It's probably more so going to Aldi and others. So I'm just interested in, so I suppose the question is, how are you going to leverage your scale in a bigger way and will you look to put some of that $400 million back into price in your competitive position in the market?

Yeah, thanks for that question, Ben. I mean, just to pick up on scale, as you say, we have an incredible asset in our stores and I've called out the fact that we have 83% coverage across the country where customers are within 10 minutes of a store and so for us when we're thinking about our scale, it starts with our reach to the vast majority of Australians and we've leveraged that scale to actually grow services that we think our customers are looking for. So yes, a great in-store shopping experience but also a great e-commerce and on-demand experience and we are operating both of those at scale and continuing to optimise within that. So I think that's incredibly important. We have a huge loyalty program, a large amount as we've called out in terms of digital traffic, our apps in terms of volume of traffic and connections. All of those things are incredible strengths that we can leverage alongside the volumes moving through our supply chain in an efficient way. From an asset perspective, Woolworths has an immense number of assets and what we need to see is a more consistent utilisation of those on the go forward. That's what we're focused on. When it comes to price, importantly I just call out on price as we look as you know on the guardrails for each of our key competitors, we're certainly satisfied that from that perspective We're operating within the right guidelines that we've set ourselves on price. On perception, of course, with a large amount of scrutiny that's occurred in the supermarket sector, that is a factor and we would consider as we move forward whether or not there's further action that we need to take. But on price, you know, we've certainly looked to tackle one of the key elements of feedback that we've received from customers, which is actually just the ease of finding prices within our stores, the number of specials that are available and all of those things. In fact, today we've launched, yet again, much larger price ticketing, for example. We've simplified our promotional program between our red program, so our everyday low prices, and our lower summer prices programs alongside our specials. And so I really do think that all of the assets that we have and the scaled benefits that we should see enable us to provide great low prices for customers but also enables us from an adjacency perspective to be able to leverage that to grow the businesses that are contributing strongly. I think that's one of the pleasing parts of the results is to see that businesses like Cartology, our services business, Everyday Rewards, as an extension from B2C into B2B contributing, that's a key part of our strategy is to leverage that scale to deliver even more growth than we could have otherwise delivered. So more to do, no doubt, but absolutely on the price question, we'll continue to monitor that. We're satisfied at the moment with where we're at.

So does that mean that you can make a decent chunk of that $400 million if it's over and above your ongoing continuous improvement programs?

We'll consider what's important and again I'll just come back to this point. For us it's about saying we need to simplify our business and run in a more efficient way on the go forward. That's our first priority. We'll assess as the market continues to move and we know it's moved certainly rapidly last year as to whether or not there's anything else that we need to be doing. Thank you.

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

Hi, Amanda. My question is to try and interpret better the mid-single-digit decline in the second half Aussie foods EBIT. So just to confirm, that is not including the one less week that we're expecting this year versus last year. And then secondly, if I... you know, take the delta of the 50 million, then on a normalised basis, we're looking for a low single-digit decline, which means that I think I quickly calculated still a 50-bit EBIT margin, I guess, erosion in the second half on a normalised basis. Do I kind of have that thinking the right way? And if so, where is that margin erosion largely coming from? GP or a split? Thanks.

Yeah, thanks Lisa for that. It's a split between both GP and cost, but I'll let Steve talk to it because I know, Steve, you've already covered part of this question already this morning. So we'll just go back to the first question, which was, is it one week or two weeks?

So Lisa, we tried to footnote this just for clarity for everybody that the outlook or guidance for Aussie food is on a like-for-like or 25-week versus 25-week basis. So conscious last year, the second half had 26 weeks so that guidance is based on a like-for-like and is also inclusive of the incremental supply chain cost in there. I think... To your broader question though, what we are anticipating is some of the customer trends that we've seen in the first half continuing. That customer value-seeking behaviour, we do expect to continue and that is going to put pressure on our customers. Really that mix between promotions and full price sales. We are also seeing further livestock cost inflation headwinds as we look out. Now in part this will be to do with what happens with the market and how that inflation flows through the market including the customer's reaction to that. The protein is an important part of the centre of play. Now we are obviously taking actions to improve the outlook and I think Amanda has spoken Both our ongoing productivity program, which we would expect to ramp up, activity ramps up over the course of the period, but we are in a period of elevated inflation with that 4.25% wage inflation including super and a number of our other costs which have, I guess, people related costs. If you think about our trolley collectors or our cleaning or our repairs and maintenance, they're very much people based on the same inflationary pressures. So there is likely to be a reasonable offset of some of the inflation but still a deleverage component. E-commerce mix continues to be strong and so that does come with a higher cost to serve and so we are taking... A series though of actions, obviously our simplification initiative, we'll be implementing that over the course of the half. We think there'll be some minor benefits, nothing material. We think that's much more likely to manifest in the second half and then if you dig into some of the other initiatives around continue to look on how we optimise promotions, the range targeted range optimisation looking at areas where we can get better end-to-end economics and efficiencies throughout business. They'll be working hard on those in the half but they're more likely to yield benefits in X26. It's really a continuation of some of the trends that we're seeing but we're not satisfied with that outlook. We continue to work to improve it but we thought it was appropriate to just keep that line of sight based on where we see the business today.

And just to be sure, the 400 assume negligible impact, positive impact in the second half, right? As you have, I think, said somewhere.

I think there will be minimal impact in the second half.

Thank you. The next question comes from Adrian Lemme from Citi. Please go ahead.

Hi, Amanda. It's Steve and team. Just to follow on from Lisa's question, We saw a restatement of earnings in the PCP also in the first quarter result. So I think it was a $25 million lift in EBIT for first half 24 on the restatement. Do we have to do the same thing for the second half 24 to get the right pace, please?

Yeah, Adrian, we tried to provide in, I think it's Appendix 4, just the comparison of how we reported earnings in the F24 year period. with and without the change in segments. So essentially, yeah, with the creation of the W2B segment, which really reflects our overall focus on bringing our everyday needs, our businesses together, you do see the lift and shift, for want of a better way to describe it, of healthy life and everyday market out of Australian food and into W living. We've tried to explain that in the appendix, but also if you look at the changes in the You should be able to do the back solve. Okay.

Thank you, Steve. Sorry. Could I just sneak in one extra question, please? I'm trying to work out pet stock, what's going on there. Has there been a material deterioration in earnings in that since acquisition? Because I'm looking at when it was announced, there was $158 million EBITDA for the last 12 months in 22. and the EBIT this half is only $22 million. So I'm just trying to understand, obviously, maybe it was elevated in COVID, but what's happened there, please? Is there any risk of an impairment, please?

We don't see any impairment risk and actually we remain very positive and optimistic about the prospects of pet stocks. One thing to just note is that we, as part of the ACCC approval, had a forced divestiture process where a series of stores were divested and so I think it was 40, 41 stores and so that has had some impact on those earnings. But no, we're positive on the potential and trajectory of the business and I think the other thing that you need to bear in mind is that whilst we would have called out standalone earnings, there was effectively a combination of goodwill or purchase consideration allocated to intangibles and so we'll have amortisation of intangibles sitting in our cost base that wouldn't have been there on a standalone basis.

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

Hi, everyone. Can I ask another question on the second half outlook for Australian food? Based on the numbers that you've given us, it implies an improved year-on-year run rate in the second half versus the first half. even though most of the customer and market factors sound like they are going to continue and there's not a lot of cost out realised in the half, What do you need to see to deliver that underlying improvement? Is it contingent on sales running at about the same rate and some of the optimisation exercises you're doing internally will get you there? Or do you need to see a modest improvement in the market backdrop?

Thanks, Michael. So obviously we announced the sales growth at 3.3% for the first seven weeks. We're mindful when we're looking at that number that again we're cycling a softer period last year. We've got the collectible that we didn't have in last year's result. Also very conscious that there's still some work to do for us in Victoria in terms of sales. And so as we look forward and the changing customer behaviour that has continued to evolve, We're just mindful of the growth outlook there. And so that's us just really trying to provide the best possible clarity we can with a lot of moving parts right now in the top line number. When we look at our performance underlying all of that, there are a number of things, as we've called out already, that we're very positive about in terms of our adjacency businesses, the opportunity to continue to optimise our promotions However, there is the offsets to that, which is, again, the mixed impact that Steve's already called out in terms of our non-food categories just not performing at the levels that we would like to see. Headwinds in terms of meat in particular and certainly input prices going up, not necessarily seeing that movement in the competitive set. And for us, meat is such an important category for customers. You know, it's the centre of place It's often a key item within the basket early on and so we're just very mindful of the impacts on that because what we want to be doing is obviously building and growing ongoing sales and customer momentum as we go through H2 and into S16 and beyond. From a cost line perspective again as we've talked to, certainly work is well underway in terms of our simplification activities but as Steve's called out that we will not realising that in this half. And then our productivity programs, again, when we look at what we've targeted and hundreds of millions that sits there, it's performing well but it's not adequate enough to offset the cost increases that we're seeing. So what we're providing today is really our best estimate as to what we'll see, knowing that market conditions are continuing to evolve.

Okay, thanks for the call. I still don't really see what actually improves in the second half, though, to take the operating profit decline from down five underlying in the first half to if you adjust for the supply chain costs, it's more like down two in the second half.

I mean, Michael, we're not giving a specific number. We're giving you a broad range of single digits.

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

Please go ahead. Thanks for taking the question. Just a bit of a continuation of some of the other ones around the in-store offer and trading performance you've had recently. I'm just quite surprised you haven't accelerated a lot further in January and February, given what you're cycling with Australia Day, collectibles, a long list of things. My question is, do you have the right in-store execution, promotional mix, et cetera? How focused are you on driving the customer and driving share as opposed to protecting margin? There seems to be a lot of focus on the customer from a lot of comments that are being made at a high level, but it seems like a lot of the focus from the team is on margin outlook and the cost-out program, et cetera. Do you need to be reinvesting a lot more here given – Coles tomorrow will probably print a similar number to you guys if they give us one despite cycling a big number. And then Aldi is obviously gaining a lot of share at the moment. So just interested in how you feel about the balance between margin and sales and where the customer is with you guys right now.

Yeah, thanks, Brian. So look, I think just to start, we are always going to start with the customer and we are absolutely focused on the most important thing for us is to have the top line sales So that is always first and foremost important when you're looking at the numbers for the first seven weeks that whilst I've been really pleased and the team's done an incredible job across supply chain and operations to recover from the industrial action in December, there is still some customer recovery that we're fighting for in Victoria in particular. And so that's a factor in these numbers. and I can absolutely assure you that we are hyper-focused on that. In terms of customer behaviour overall, and I called this out as we talked through the results earlier, we are seeing a shift in customer behaviour. So the good news is customers are continuing to shop in our stores. That's absolutely happening. They're increasingly shopping in e-commerce as well. But what we're focused on, particularly in our stores, is we have customers, we're wanting to have that extra item in the basket And that's what we're particularly first and foremost on. And so you'll see in terms of our promotional activity that we have continued to run, I think, a very strong promotional activity outside of collectibles and the like. And customers are responding well to that. So that is first and foremost what we're focused on. It's sales first and then we're optimising our margins and our levers around that. If we're talking to Marginal on this call is in an attempt to help everyone just understand that there's a lot of obviously moving parts that sit underneath this as we're seeing that shift towards specials, own brand. We're also seeing that impact of the non-food categories which we've called out a number of times and probably over the last 12 months in particular. They are high margin categories for us and they're the ones that we would like to see more of those sorts of items in our baskets than what we're seeing at the moment. And so you'll also see a lot of activity and activation around that. But it's absolutely customer first. We want to continue to grow and build share, absolutely. But it's a very competitive market right now.

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

Just a follow-up on this promotion of investment in price. I note that you mentioned earlier and gave the example of cost inflation in meat and if it's being worn by itself, not necessarily passed through to the end customer, but more broadly, is voice contributing more than perhaps it has in the past towards pricing across the store and how should we think about this as we go through the remainder of calendar 25?

Thanks for that question. You know, as I've called out, we are seeing customers looking for deeper specials. And as we go through and look for deeper specials from a customer perspective, we work with supplier partners in terms of the contributions that we each make towards those special programs. And so that is a consideration. I have Paul Harker who's our Chief Commercial Officer for Food with me and I might just ask Paul, do you want to just add a little bit of colour to that question?

Yes, absolutely Amanda. Everyone's right. Meat is such a central part of our basket and we're seeing a cycle where livestock prices are going up so we're just very mindfully managing that category because of its critical importance. When it comes to promotions, it's obviously something we work with suppliers a reasonable period of time out. We have a slotting process. that we'll be planning six months in advance in terms of the promotional losses that are in our market and of course conversations about the co-contribution in terms of funding. I think both from a Woolworths' perspective and a supplier's perspective, that funding shift is a consequence of where customers are choosing to purchase those. They choose to buy deeper discount promotions. Clearly both suppliers and the retailer are funding those promotions more. And we're seeing significant changes in categories around how customers are purchasing those behaviours and even pack size architecture. So if you take something like dishwashing tablets, customers are buying the same amount, number of doses of dishwashing tablets, but clearly they're doing it at a lower price per dose by buying larger pack sizes on promotions or trading their own brand. And so these are considerable mixed changes that we're seeing in our business. Clearly what we'd be looking to do both from a range architecture point of view as customers have changed to become less loyal to some of the brands that they've traditionally bought in some categories, there's opportunities to look at what's happening with range and therefore what's the pricing architecture and promotional plan that falls off that and what's the space allocation from both a macro and a micro point of view to make sure that we're improving availability for customers. These are all things that are in play and things we're working through but I think as everyone would know where we work collaboratively with suppliers that has lead time associated in terms of the structured process around range reviews and the structured process we have around planning promotions well in advance. with suppliers, and so we've made significant improvements there. There will be some improvements in the second half that will be contributing to an improvement in our underlying performance in that area, but of course, you know, Steve's spoken to the outlook for the half more broadly with a number of factors coming to play.

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

Hi, Amanda and team. I guess I've got a bit of a question that follows on from again talking about the pricing and promotion. It seems like this shift by the shopper to specials, lower prices and own brand, perhaps the impact on earnings, it appears it's caught you out a little bit. You're talking about optimising promotional activity. You've talked to some of those things. but you've also talked to improving price perception and trust. So I'd just be keen to understand exactly what you're hoping to achieve here because by optimising the promotional activity, do you think there's an angle here to actually improve the margins you're making or is this about just trying to improve revenue or none of that, it's actually just about improving shopper perceptions?

Yeah, thank you. Thank you, Richard, for that question. I'll hand to Paul in a moment. I'll just share a couple of thoughts on that question before I do. So firstly, we're very focused, as I've talked about already, in terms of we want customers to feel that they get good value when they're shopping at Woolworths. And so that's first and foremost our focus when it comes to pricing in terms of shelf pricing but also promotion. So that's critically important first and foremost. We are seeing customers want more... at those opening price points and so some of the perception is also about where that product sits on the shelf, how much of it is available and if it's available when I want it and so that's a factor for us as well and that's the first consideration is really about it's important that customers feel that they can get great value at Woolworths. As I've already said today, customers are shopping with us. We would just like them to put more items in the baskets. In terms of improving price perceptions, across the year obviously there's been various events and high profile media events alongside customers experiencing genuine cost of living pressures which has an impact in terms of the way that customers think about price. What we're pleased about is to see that whilst that has had some moments across calendar 2024, it's actually been improving post-Christmas in terms of that value for money perception. But that is an important sentiment and lead indicator for us that we look to manage. And then after all of that, we look to optimise our promotional mix. And so, Paul, I might just hand to you again, if you don't mind, maybe just to talk a little bit about how we think about optimising our promotional mix, next-gen promotions and those sort of activities that I know you and the team are very focused on.

Absolutely Amanda and this really comes back to as customers have changed and we've also come out of a period of record high inflation driven by supplier cost increases, there's effectively a number of areas in our store where there'd be a category reset. So we have to take into account what's actually happened with inflation, what's happened with shelf prices and also how customers have responded and changed how they shop categories. With our trade partners, the instant response that you have to manage impacts to volume as customers shift is obviously with promotions. Although our customers love promotions, they have a bit of a love-hate relationship in the sense they love to see them but they actually hate seeing a lot of them because they actually call into question sort of the standard pricing in the store. So the work that we'll be doing with our trade partners As all of these things start to normalise in terms of their cost pressures, how that's been reflected in market, we'll be looking to strike the right balance between what are the right prices to have on their shelf for our customers more often than not and then what's the role of promotions and as we reshape categories and look at that mix, I'm sure we'll get a better outcome for customers, our trade partners and also ourselves and that's the key focus of the team on the go forward but as I sort of mentioned before, these things are working collaboratively with trade partners in things that are quite disciplined in terms of range review processes and promotional slotting and therefore They're not instantaneous and they take some time to work through to mutual advantage.

Thanks, Paul.

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

Good morning, Amanda and Stephen and team. Can I just clarify on the $400 million cost-saving initiative? Is this a result of those organisational changes that were announced with Annette's appointment but is there anything else involved in terms of businesses that might be consolidated or shut down or exited? And do we see it, like, is this a one-off in terms of the... Yeah, thank you.

Thanks, Craig. Let me just add some colour to this. So in terms of the $400 million, that is representing a cost saving across our above store. So our support office areas, and that includes our key cost lines across the business as well. So it is across all of our support areas including, yes, Annette's new portfolio but well beyond that. So it's very much an element of each one of our businesses needing to undertake that review. Again, just for clarity, it includes our key cost lines and regrettably some support office roles as well. There is a separate stream of work underway which is to say let's assess the shape of our portfolio overall and have a look at each individual business and how it stands now and its potential to deliver the returns that we all expect to see in that three to five year time horizon. So that is another separate stream of work. It's early days in those work streams and so that's why we're not talking today to any specific outcomes or forecasting any outcomes there.

I think probably, Amanda, why just one build is, and I think just to clarify, it's not exclusive to Australian food. It will include any group-specific cost base as well as the above-store costs of each of the business units across the group.

Yes, 100%. Thanks, Steve.

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

Hi, guys. I just wanted to explore – you talked about the customer retention in particular in Victoria, and I assume what you're referring to is customers that switched during the industrial dispute haven't come back. I just wanted to get a sense – I'm surprised two months later – That's still the case, you know, and for maybe what was, I don't know, however many shops, four to eight shops that they've moved and they're not coming back. But then your ability to combat that at a sort of targeted regional level, and I guess I'm specifically referring there to pricing. I thought you ran by and large. Australia-wide pricing. So I know you've got other levers in the price, but I just wanted to confirm that and then just understand a bit better why you think those customers didn't come straight back after the industrial dispute supply issues were solved.

Yeah, thank you. Thanks, Phil, for that question. So I'll just start by saying outside of industrial action, we're already seeing across Australia... that increasing cross-shop from customers and so we're already in a pattern of behaviour from customers where we're seeing increasing cross-shopping. Unfortunately, as we had the industrial action underway in December, it did mean that in many of our stores, customers did need to go to competitors to be able to get products that they may have wanted or to be able to complete a full shop. And so in many ways those two events have come together. So that is absolutely a factor. Pleasingly, as I said, I think the recovery in terms of stock once we've reached an agreement was very rapid and we did provide I think a good service over that Christmas period for customers in those impacted areas. However, as I say, we're seeing increasing numbers of cross-shopping happening and so Yes, we do still have some work to do with some customer cohorts. We have our everyday rewards loyalty program which of course plays a key role in sharing with customers value and offers and encouraging customers to come back and shop with us and as you would expect we've been activating that. We also have a very strong e-commerce business and of course we're able to track if we had customers who may have not shopped with us recently to be encouraging them back to shop with us as well. So we have a whole series of activities that have been underway. What we want to be able to see is we're now well into back to school, back to office and we certainly want those customers to choose us first and there's a little bit more work to do on that front. I don't want to overstate this too much. say the vast majority of customers have returned. But back to the earlier point in conversation on winning back share and competing for every customer, we're competing for every customer and so we want to see those customers return fully to Woolworths. Thanks.

Thank you. The next question comes from Nicole Penny from Rimmer Equity Research. Please go ahead.

G'day. Thank you very much. Could we please focus on the food availability, the food supply chain, and that it was mentioned it requires improvement. Just to confirm, the medium-term strategy is to have the stores availability as principal, essentially, and an online business to run mostly out of the stores with overflow from DCs. Would you please provide more granular detail as to what specifically is not functioning optimally, outside the industrial action, of course? And are there any amendments to the near-medium term supply chain strategy in food, please?

Thank you, Nicole, for that question. So let me just start by saying that a really important part of our strategy is to draw on the assets of the group. So from a stores perspective, we do use our stores to provide both in-store services to customers but also for our e-commerce services, whether that's direct food or delivery services. And we do that because it's an important way of us efficiently utilising those assets but also providing that speed of service that customers are looking for from an e-commerce perspective. So it's a really important part of our strategy overall. When it comes to product availability, that is very much about just recognising as we're seeing these shifts in customer behaviour, so whether that is more customers seeking more specials and so therefore a higher demand in some of our key promotional lines or whether it's about our own brand products, making sure as they become increasingly popular that they're available, just recognising that our supply chain needs to be able to adjust accordingly and ensure that that availability is there. And what we're seeing is really actually across the year an improvement in our availability overall, so availability from our warehouses to our stores. We also have an opportunity, though, to increase our availability on shelf. And this comes back to a little bit as to, Paul, your point in terms of have we got the right shelf facings and capacity for some of these key lines on the go forward. That's a factor. And then, of course, across the year, We've had some events that have caused specific product availability challenges like eggs and the avian flu challenge that we've experienced where some of our suppliers haven't been able to provide the egg volume that we would like. Almost recently as we have a look at unfortunately the floods up in far north Queensland whilst actually banana plantations weren't directly impacted by the floods it was incredibly difficult for us to be able to get bananas out of far north Queensland and shipped across the country and so bananas is of course one of our big lines, number one line and so that is a challenge for us when those sorts of things happen. Customers want to be able to rely on a banana being available for school lunches and when we have those sorts of weather events that impacts availability as well. So it's all of those factors but for us the ultimate measure of availability is is it on the shelf? when a customer is shopping the store and is looking for it or when they're ordering online that we're able to provide exactly what it is that they've asked for. Thank you.

Thank you. The next question is a follow-up from Lisa Deng from Goldman Sachs. Please go ahead.

Hi. Thanks for taking a follow-up. I wanted to talk a little bit about execution strategies or back to basics. One is I think on the page on the – There's a blue line that talks about outbound service levels from the DCs. It doesn't look like they've recovered back to pre the industrial action even in January. point of it, but why hasn't the outbound service levels improved? And the second, I guess, prong to the strategy, the execution strategy is own brand. It seems like we're really stepping up there. So can you remind us what portion of sales they amounted to in the first half and what's the aspiration there?

Thanks. Thanks. Again, I think that we're pleased with the overall recovery of availability. When we're looking at service levels, particularly in January, we need to keep in mind that many of our supply partners will close their facilities for a period of time, which can have an impact on flow. So I think that might be what you're seeing there. And then, Lisa, your second question. Can you just repeat that for me?

The own brand, it seems like we're talking a lot more about a step up there or an elevation there. We folded it under Annette. It grew 5.2 in the first half. We're stocking up on inventory. How much of a percentage of sales was it in first half and what's the aspiration in terms of percentage of sales? Thanks.

Thanks, Lisa. I have Guy Brent here. And so, Guy, I think what we're really pleased about is to see that strong growth well above the overall sales growth that we're seeing in the food business, so 5.2%. But did you just want to add a little bit of colour in terms of penetration and what we're seeing in own brand at the moment?

Yeah, so penetration is around about nearly 36% now. We're seeing strong growth in long life in particular, so long life in H1 was up 7.1% in categories that we've talked about, pantry, frozen, snacks, and household care. We're seeing strong growth in e-com, so e-com sales of our own brand were up 24% because our customers find it easy to manage their budgets through e-com. But it's not just value where we're seeing good growth in our own brand. I mean, our Woolworths Essentials portfolio was up 10% and some of our category brands like Clean and Armada were up strongly as well, but Macro grew by 12% in the half and Thomas Dux grew by double digit as well. So we're also seeing a really good opportunity with Own Brand with more premium customers and from a value added and differentiation point of view.

Guys, probably worth noting, we don't set own brand targets. We're very customer-driven in making sure the offer meets what customers need. So, you know, Lisa, we're not out there chasing a particular penetration target.

No, and I think I would also add, you know, we are excited about the own brand portfolio coming in closer to the supermarket's business so that, you know, we can align category and own brand strategies and deliver for the customer. Great.

Thanks, guys.

Thank you. That does conclude the Q&A session for today. I'd like to hand the conference back to Amanda Bardwell for closing remarks.

Thank you for joining us this morning and appreciate all of the questions that have been asked. We have delivered today a result where we know we need to do better and we will. We're very committed to getting this right for customers as we've talked about all throughout this session and I look forward to connecting with you all in the coming weeks. Thank you.