Woolworths Group (ASX:WOW) Q1 2027 Earnings Call

0:00 Thank you for standing by and welcome to the Woolworths Group FY27 Q1 sales announcement. All participants are in a listening mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Amanda Bardwell, Managing Director and CEO of Woolworths Group. Please go ahead.

0:27 Good morning, everyone. Thank you for joining us today for Woolworths Group's first quarter sales results for the 2027 financial year. I'd like to acknowledge the traditional custodians of the land on which we meet today, Dharong Country, and pay my respects to elders past, present, and emerging. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Annette Carantone, Managing Director of Woolworths Retail, Sally Copeland, Managing Director of Woolworths New Zealand, Amitabh Maul, Managing Director of Group Ecom X, and Dan Haig, Managing Director of Big W. Turning now to our quarter one sales results. It has been a strong start to the year with a continuation of our trading momentum into F27. Group sales grew 4.7% in the quarter, led by Australian food.

1:24 customers continue to respond to the progress we have made to improve value, enhance range and provide more convenience. This has seen more customers choose Woolworths first and shop with us more frequently. We know household budgets are under pressure and we have remained focused on doing more to help our customers. For an Australian budget family with a mortgage, we estimate groceries make up around 10% of household spending. to provide dependable low prices. We've added more items to lower shelf price with over 1,000 products now part of the range. We've also seen increased boosting of everyday rewards offers during the quarter and customers continuing to shop specials as they look for value.

2:14 In the context of broader cost of living pressures and low consumer confidence, customer scores have remained resilient. However, we know we have more work to do so that customers continue to choose Woolworths first, particularly as we head into the key Christmas and holiday trading period. Now turning to performance by business. In Australian food, total sales increased by 6.9% driven by strong item growth. In Woolworths food retail, sales also increased by 6.9%. Sales growth in the early part of quarter one benefited from the success of our Disney issues collectible program which drove strong customer engagement.

2:59 Importantly, growth remained strong throughout the quarter with solid item growth driven primarily by customers responding to value in our stores and an increase in customer transactions compared to the prior year. All categories grew sales in the quarter with fresh and grocery food sales growth particularly strong. We've added more items to lower shelf price to provide customers with affordable and dependable prices. The range is resonating with customers and continues to perform well with increased sales and strong item growth. Fresh, meat and chilled were the highlights with double digit sales growth. We saw strong customer demand in meat for family essentials like beef mince and value added proteins as well as yogurt and cheese in chilled.

3:52 reflecting investment in price through lower shelf price and a reset of the category. In grocery food, we saw solid growth across all categories with health and international foods growing in the double digits and drinks, freezer and snacking all growing in the high single digits. Everyday needs growth rates improved in the quarter and benefited from strong supplier engagement in the Ushies campaign and key promotional events in the period. within everyday needs, wellness and baby, and personal care and beauty showed the strongest growth supported by key promotional events in baby and oral care, which drove solid unit growth. Own and exclusive brand sales grew 8.5%, driven by strong growth in fresh and neat.

4:44 Some notable new products launched in the quarter include our first ever gluten-free chocolate mud cake, new premium flavor-versed apples as well as market-leading value sausages and new side salad options. Average prices excluding tobacco in quarter one declined 0.7 with lower prices supported by the expansion of lower shelf price and price reductions, particularly in everyday needs categories and deflation in fruit. This was partially offset by higher meat prices reflecting higher livestock costs. In e-commerce, sales increased 20.2% compared to the prior year, with on-demand continuing to be the fastest-growing delivery proposition as we expanded our on-demand capabilities to provide our customers with even more convenience.

5:41 We continue to invest in our network, and during the quarter, we opened two new supermarkets and renewed a further 14 stores. Weekly traffic to group digital platforms was up 14.2% on the prior year, supported by strong growth to the Woolworths app due to the success of Ooshies, as well as the launch of Olive and our new Smart Basket feature. Cartology revenue was largely unchanged on the prior year, with strong digital media growth, led by sponsored search and off-network, offset by in-store and publishing channels. Supplier uptake of major events remained strong during the quarter, including Ooshies and Fisla.

6:28 In everyday rewards and services, we saw continued member engagement with strong boosting numbers, supported by promotional campaigns in the period, including Ooshies and Fisla storage containers. Mobile was also a highlight with strong double-digit growth. In New Zealand, sales increased 2.9% in the quarter, with growth benefiting from ushies early in the quarter. Sales growth has moderated following the conclusion of the campaign, reflecting a weakening macroeconomic environment and a highly competitive market. While customer metrics softened in the quarter, value for money, voice of customer, increased two points compared to the prior year, as customers responded positively to significant value investments.

7:19 e-commerce sales increased 4.6% with a more subdued growth rate in the quarter, reflecting some operational disruption and strong competitor activity. While we expect the challenging trading environment to continue in New Zealand, we are focused on building sales momentum and making further progress on our strategy. In Australian B2B, sales increased by 4.4%, driven by solid growth in PFD, QSR sales remained strong in the quarter and food service sales improved relative to quarter four. However, we saw softer sales in the key accounts channel reflecting the known exit of some customers with new customers expected to come on board in the second quarter.

8:08 More recently, we are starting to see some renewed pressure on out-of-home spend following rising fuel prices and the recent interest rate increase. B2B supply chain sales increased compared to the prior year, largely driven by double-digit revenue growth in PC+, third-party supply chain sales with higher volumes in domestic freight and rail. In Big W, total sales declined modestly in the quarter, reflecting a more challenging discretionary retail environment and ongoing cost-of-living pressures on households. While overall sales growth remained below our expectations, clothing, play and home grew items in the quarter.

8:56 While performance in every day continues to be more challenged as we undertake a strategic recess in this category. Big W's e-commerce, GTV, increased by 7.7% and we continue to grow our same day delivery proposition. In October, we launched the Big W range on DoorDash, offering 35,000 items to customers in over three quarters of the network. PetStock total sales increased by 6.1%, benefiting from the opening of new stores in the quarter and solid comparable sales growth, which was supported by strong e-commerce growth of 24.7%. The rollout of PetStock brands into Woolworths supermarkets is progressing well, and we've seen strong performance from Billy's Bottle and Tilly's.

9:49 Own and exclusive brand sales grew strongly compared to the prior year, reflecting the strong value proposition and continued range expansion of pet stock brands into Woolworths supermarkets. In October to date, sales in Woolworths food retail is broadly in line with the Q1 post-Oshiz trading. in New Zealand Food and Big W, our focus remains on building sales momentum in challenging trading environments. With only eight weeks until Christmas, we are well positioned for the key trading quarter ahead. We're determined to give our customers every reason to choose Woolworths first this Christmas, including our new festive range of over 500 products.

10:36 We recognize household budgets remain under significant pressure and we're committed to helping our customers celebrate the festive season with quality and value they can count on. I look forward to sharing more on our strategy at our upcoming Investor Day next month. I will now turn the call over to the operator for questions. To give everyone a chance, can I please ask that you limit it to one question per person and then rejoin the queue with any follow-up questions. Thank you. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Adrian Lemme from Stiddy.

11:25 Please go ahead.

11:27 Good morning, Amanda. Yeah, a pleasing sales result for Australian food. As you move through November and December in Australian food, you're obviously lapping that growth acceleration you had last year as you cycled the 2024 industrial disruption and you improved execution. Should investors think about that creating any kind of headwind to growth for the rest of the December quarter or has the underlying customer and transaction momentum improved enough to largely offset any tougher comps, please? Hmm.

12:00 Morning, thanks Adrian for the question. Yeah, so if we look at the underlying momentum in Australian food, it's certainly been a very strong start right across the quarter, and as we called out in the announcements today, the trading momentum overall in Australian food reflects really the post-Ushish trading period. That's what we've seen in these early, very short number of weeks since the close of the quarter. And as we move forward towards Christmas, Yes, we will be cycling the improved performance in terms of execution that we delivered last year, which really started in October and continuing to improve progressively across November and December. When we look at how we're positioned for the quarter, we feel like we've got a really great plan.

12:51 We're very clear how important value is to customers. We've seen improved availability, so in terms of our underlying retail execution on the fundamentals, that's continued to get better. And it's really going to come down to consumer sentiment. We're very confident in the plan that we have. We're pleased to see the momentum. We've continued to grow above market growth rates. it really now all comes down to how customers respond and what happens in terms of interest rates and fuel.

13:27 Appreciate that, Amanda.

13:29 Thank you. Thank you. The next question comes from Sean Cousins from UBS. Please go ahead.

13:37 Thank you. Good morning, Amanda and Steve. Maybe just a question on fuel costs. This is a comment that you've made during the sales release. It is impacting consumers and you've also increased the levies on primary connect to the customers. Can you talk about if fuel costs were a pressure for Woolworths? I assume it was and how you're managing it because your price your prices are actually falling in Australian food so in the absence of mitigation I assume it'll be a headwind and I know you've called this out in the third quarter sales there so just comment around fuel costs please and how you're managing that Yeah thanks Sean for the question I'll hand that over to Steve just to talk about how we've been looking at fuel we do have hedging across certainly the majority of this first half and it is a

14:26 a moving target in terms of the fuel prices. But I'll give Steve the opportunity to answer that question. Thanks.

14:34 Yeah, thanks, Amanda and Sean. What we saw in the first quarter was a modest impact, but we have had fuel hedging in place which mitigated some of that impact. And there's also, just with our fuel price mechanisms, delays in terms of when prices go up and how they flow into the fuel costs that we incur in the business. We are anticipating, based on where fuel prices are today, an elevated level of cost in the second quarter. It's probably not dissimilar to the range we provided in the Q3 sales, the Q4 impact last year. But as you rightly point out, there are many levers in our business and we're trying to offset those.

15:22 any of those headwinds through our productivity initiatives and obviously driving strong sales growth delivers cost leverage through the P&L as well. But it is something that we're sensitive to and we would expect some of the hedge benefits to drop off in the second quarter and into the second half, but it's probably premature to be predicting what we think second half fuel prices are going to be. There's just been so much volatility in fuel prices. A lot depends on what is happening in the Middle East, which I'm not in a position to predict.

15:58 Nor am I. Fantastic. Thank you, Steve. Thanks, Amanda. Thank you. The next question comes from Michael Toner from RBC. Please go ahead.

16:09 Thanks, Tim, for taking my question. I was just asking about progress on customer offer reset. Could you talk to how many additional categories have completed their range reviews? And are you seeing consistent outcomes in terms of availability and volumes sort of consistent with what you called out in the 4Q? I think Annette, for example, said that pasta had a 13% improvement in availability following range reviews. Thank you.

16:31 Thanks Michael for the question and yes we're continuing to roll out Customer Offer Reset which is really focused on how do we create the opportunity to improve the offer for our customers both in terms of the shoppability of categories, improved availability as you called out just now and importantly improved value on the shelf and so that program has been rolling out progressively across categories and across the year and we've continued to work with our supply partners as we've done that to take learnings from each and every one of the progressive waves as we've moved through. Overall I'd say Annette just looking at you across the table we are very pleased with the early results from some of those categories that have rolled out but I'll hand over to you to just add a little more colour.

17:25 Yes, thanks Amanda. As you say, the customer offer reset was really about resetting the approach to range reviews which is of course a process that most retailers would do and it tends to be a process where our supplier partners can bring to us range for each category around about once a year and so it's a great opportunity to bring in innovation but also to reset the category across a number of attributes, products of course and range, a simplification and making it easier for customers to shop. No doubt, particularly in this environment, making sure we've got the right value and so price and investing with our supplier partners to continue to bring affordable and dependable prices to customers and of course the right location so we simplify the range and make sure that it's a great flow through our supply chain which of course, to your point, helps with availability We're now well into about our third wave of the program, though engagement with those suppliers in that third wave is now underway.

18:26 I'll probably talk a little bit to the pilot and the first wave categories because, as Amanda you've mentioned, it's a bit soon to call anything long term. But we have seen, even with the range reduction in the example of laundry, we've had a 7% range reduction are quite a strong investment into price in those large bulk packs with our four litre and four kilo products on average decreasing in price to customers by 5% as they moved on to lower shelf prices and pleading both units and sales dollars are actually improving on run rate. So yes, the categories we've moved through have gone well and in that instance, actually, we've also seen, of course, a reduction in reliance on high-low, which is a part of our core strategy moving forward. So, yes, early days, we are pleased with the results and we continue to work on the process itself and make sure that we get right as we move forward, as we get through each wave with our supplier partners.

19:30 Great. Thank you very much. Thank you. The next question comes from Michael Samotis from Jefferies. Please go ahead.

19:40 Good morning, everyone. I've just got a question on some of the sales metrics. So if I look at your comp sales growth, it was 2% higher, 2 percentage points higher than your comparable items growth despite the headline inflation. Now, there has been a little bit of a tailwind there for a while, but that's really stepped up. which makes it look like you've had quite a nice positive mix benefit. Could you just talk through what you're seeing there please?

20:13 Yeah, thanks Michael for the question. I don't think as we look at it there's a lot in that, certainly in terms of mix. We are seeing, if we want to go to a category level and look at mix, we are seeing certainly very strong meat sales as we've called out. already this morning in lines like meat. For example, we're seeing a shift in the everyday needs categories towards more bulk lines and buying as well, which is at a slightly higher ASP as a result, better value for customers, but the ASP sits a little higher. And so, yeah, there's a little bit of mix in there, but there's nothing that we would sort of be calling out specifically there as it relates to mix.

21:04 No, I mean, my only view would be, obviously, we measure our deflation on a life-like product, you know, period on period, whereas ASP is essentially a blended measure of the mix of the categories we've sold. And as you said, as people trade into meat which is a higher ASP or more into bulk items you'll see it in an ASP outcome I think it's about 2%, 2.1% versus 1.5% in the fourth quarter so it's a modest increase there but it's very much mix driven and category driven. Thanks Steve. Okay, thank you. Thank you. The next question comes from Tom Kirath from Baron Joey. Please go ahead.

21:48 Morning, guys. I realize this is a sales update, but when I look at maybe some of the drivers of margin, it looks like there's quite a lot of headwinds. So cartology growth isn't really there. You've got fuel, which we touched on. Meat is really strong, which is low margin. You've got a downtrading consumer and tobacco sales are about the same now as the ex-tobacco side. Is the way to infer that the core program is kind of offsetting a bunch of these other pressures in the business. Could you maybe just provide, not numbers, but just some commentary around how we should think about the impacts that I've kind of discussed there?

22:28 Yeah, thanks. Thanks, Tom, for the question. And as you say, it is a sales call, but just to recap, we're very much managing all of the commercial levers across the business. We're focused on driving unit volume across the business and then being very mindful of both the commercial category mix of products that we're selling, but also, frankly, as we've talked before, running a lower-cost business. And so we've been very focused across our store network, our distribution network, and across our support areas of continuing to look for ways to be efficient. We knew going into this year that that was going to be important, and as you're calling out, it absolutely is, and we're comfortable that we've got the right plan there. If we just focus on your specific questions there around cartology, it has been a softer trading period for cartology in the first half of the year.

23:32 As we called out, there's some really strong, in fact, great growth that we're seeing across digital in all platform and sponsored search. Fantastic participation from our supplier partners in events, particularly the Ushies event at the beginning of the year. There has been some softness in everyday needs categories and the key clients there that traditionally would have very large budgets to spend. As we look forward into the second half of cartology, we continue to see strong opportunities for growth going forward there. On fuel, I think Steve's already talked to that on this call. Steve, just anything you'd call out above what you've already shared.

24:17 And so, no, we're continuing to get the balance right, which is to be focused on we know customers need value right now. That's the investments that we've been making. We therefore need to continue to be more efficient as a business, and that's what we've continued to do across the year, and we'll focus on that going forward. Thanks, Tom. Thanks. Thank you. The next question comes from Peter Marks from Goldman Sachs. Please go ahead.

24:47 Morning, Amanda. Just a follow-up from Tom's on cartology. That was obviously flat in the quarter. I just wanted to delve into that more if we could. I think you've answered part of it. But I guess, is there any correlation between the softness in cartology with I guess, suppliers that are participating in the customer offer research program? Is there something going on with what you're doing with suppliers that maybe is leading them to invest less in that cartology side of the business?

25:16 Yeah, thanks, Peter, for the question. No, I don't think so. It's really more a case of everyday needs, as we've called out over the last 18 months, has been a category that has been under pressure, not performing as strongly as we would have liked. And so there's no doubt a broad connection there in terms of the performance of everyday needs, which as we've called out in the announcement today, actually we have started to see some pleasing unit growth and sales growth in those categories. So that's been very good to see both for Woolies and for our supply partners in that space. I think it's also more to do, to be frank, around the media industry and market itself, it too is under real pressure.

26:04 So as we go forward, we're very clear we've got a good plan with our partners. Food is continuing to perform very, very well for us in cartology. And as we look forward to the second half, there's some strong plans that the team have got in place. Thank you. Great, thank you. Thank you. The next question comes from Brian Raymond from JP Morgan. Please go ahead.

26:30 Thanks. I'm just back on diesel costs. I just want to be clear on the potential impacts here in 2Q that were called out before. I'm just going back to the 3Q last year just to get a feel for the magnitude. You were talking, I think, at the time of 15 to 25 mil of impact, which was 6 to 10 basis points of gross margin impact. Is that I think, Steve, you said before it's going to be similar to what we called out previously. Is that the right sort of magnitude to be thinking after the hedging impact? Or how should we think about it in terms of year-on-year impact from diesel into 2Q or maybe even just the first half of 27? Thanks.

27:11 Yeah, so, I mean, a lot depends on what the fuel price was in the comparative period that you're cycling. As I said to Sean, in the first quarter, you know, a modest but sort of less than 10 cent a litre type of increase, you know, we'd expect it to be, you know, at least 20 cents a litre more expensive in the second quarter. You know, I think it's in that range broadly, but that's a gross impact and we're obviously trying to find other offsets across the business to try to mitigate that as much as possible. That's the broad range.

27:44 Right. And sorry, that's inclusive of any hedging benefit that you've got? Yes, that's right. Okay. All right. Thanks. Thank you. The next question comes from Craig Woodford from MST Marquis. Please go ahead.

27:59 Morning, Amanda.

28:00 The results on inflation remain quite good.

28:05 There are some builds or risks on the horizon around inflation in certain categories. What are you seeing in terms of the supplier price rise requests in both breadth and the number of requests coming through?

28:21 Yeah, morning Craig. Yeah, we continue to see in terms of supplier cost asks, in terms of the volume of them, they're relatively consistent with what we've seen over the 12 months. So there's not a a substantial increase that we've seen. As you know, when we connected earlier in April, we were talking about the fact that we were expecting to see a large number of increases come through. We did see a spike at that time, but then it really came back to the average levels that we've seen previously, and that's continued on across the first quarter. What we are seeing is certainly from the percentage ask that's coming through. That is also continuing to sit in that sort of mid-single digit range, there or thereabouts. Obviously, each and every supplier ask is different by nature. And so as we look forward with a view on inflation, look, it's really hard to predict because of exactly as everyone's made the point on this call, the fuel costs and input costs.

29:31 but we would expect to see it still running in broadly, the low single digits going forward on the basis of that. It's really gonna come down to, I think, fuel and input costs. We're just not seeing an increase in asks right now. I'm just looking across at Annette. Anything else you'd add, Annette, on that?

29:49 Only the outside of market conditions in things like fruit and veg and meat, yes. We're not seeing material increases come through from grocery packaged or any other category that's supplier that's why I led, other than, as you said, it's in line with trend and the same quarter last year. Thanks, Amanda. Thanks, Greg. Thank you. The next question comes from Caleb Wheatley from Macquarie. Please go ahead.

30:19 Morning, Amanda and team. Just wanted to come back to value and value perception in Aussie food, and I've been a big focus for a while and appreciate the comments you made. in a couple of the prior answers. But, yeah, just wanted to sort of firm up how you're seeing kind of relative pricing now post the lower shelf price and other investments, how you're sort of seeing perception, and then, yeah, thinking about, especially into Christmas, but over the kind of next six to 12 months, how you're thinking about sort of continuing to drive that value perception outcome for customers, please.

30:52 Yeah, thanks, Caleb, for the question. I'd start by just acknowledging that there is... a resilient voice of customer score that we've delivered across the quarter, taking into account really where consumer sentiment is at. So we're very mindful of that going forward. And so we really look at this in two ways. One is, what's the direct experience that customers are having with us when they're shopping? And how do they reflect that experience back to us in terms of advocacy? And I would say that it's resilient knowing that customers are under real pressure. and so we're gonna have to work even harder as we go forward to see those voice of customer scores improve. Then if we take it from a broader market perspective and look at it in terms of brand perception on value, we're very pleased with the progress that we've been making there and so that's a relative performance to others and in that score we've continued to see a modest steady improvement in terms of particularly value perception total basket cost and as you know we've been investing very heavily in making sure that customers can get easy access to value whether that is through the investments we've made in lower shelf price, continuing to run strong specials and promotional programs and of course strong engagement that we've been seeing through everyday rewards. So it is that combination of the different ways in which you can get

32:22 value and that we believe has been certainly recognised in a relative sense to competitors, but we're going to have to work increasingly hard just given where customers are at right now. And so if we go forward into the first trading periods for Christmas and summer, value is very much front and centre and part of our plan. You'll have seen our half-leg ham, for example, $8 a kilo, same price that we've had for four years and additional factors if you needed it, but it's the same price as 2014 as well. And so you're really conscious of getting that right balance for families. We've got a great range, but it also needs to provide great value.

33:09 Great, thank you. Thank you. The next question comes from Ben Gilbert from Jarden. Please go ahead.

33:19 Morning, Amanda and team. Just sort of following on from that one around the voice of customer scores, I'm just surprised that they're not moving. And I look at Roy Morgan Brand Trust, you sort of come off the last bottom of spots, but you're still only sort of in that bottom 10. It's arguably probably the strongest position you've been in for some time around top line. And similarly, you've obviously got some margin opportunity around some of the work you're doing with CLR. I'm just wondering, do you need to lean in harder at the moment to really sort of lock these customers in, really drive that poised customer up and start to set a bit of a gap versus your competition? Do you think you're leaning in hard enough at the moment around some of the things like price and below the line marketing, those sorts of areas?

34:02 Yeah, thanks Ben for the question. We are absolutely focused on value and we understand how important that is for customers. We continue to look for ways to make sure that customers get great value at Woolies. So I absolutely agree that's increasingly important. We've been pleased with really the performance that we've seen in a relative sense, as I said before. We can always do more and we'll continue to challenge ourselves on that front. But if you look at the investments that we've made across lower shelf prices, we're really pleased with the traction that we're seeing there in terms of the sales that that's building. Our promotional program has continued to work well for us in conjunction with that. We have good sales momentum continuing to grow above market rates and transactions are very strong. What we're mindful of as we go forward now is item growth is critical and so we're looking to see items continue to grow in the baskets.

35:08 Certainly transactions are strong. And for that to happen, we're going to need to provide great value across the quarter. So no, we're comfortable with the settings that we have at the moment. And we've got a very strong plan as we move into now the critical trading season for us.

35:26 Should we expect BSC to start going up? Now, I know it's just a measure and I appreciate you had some really strong metrics around transaction growth, et cetera, but it just surprises me the voice to customers not lifting up given, and I agree, it's much more visible in store. The LSP is performing really well. The below the line seems much stronger, much more targeted. Just surprised we're not improving. Maybe I'm too focused on one number.

35:47 Yeah, no, and it's a really important number. And as you know, we continue to focus on it. I'm going to show you every single day. It's, Look, when you look at the voice of customer across the quarter in Australian food, you have the Ooshies period where we did see very high transactions across that trading period. And there were opportunities for us to improve the experience there overall as much as customers loved the experience of collecting Ooshies. And so that's continued to be an opportunity for us. if we think about where the customer is at right now, the amount of pressure that is on young families particularly and families more broadly is increasing. And so if you're shopping in a store two or three times a week, you're trying to balance your budget.

36:41 It's a very ever-present focus for our customers and Woolworths would be front and centre in that. And so that's why I think it's important that We continue to do everything we can to invest in value. We truly understand how important that is and are deeply committed to it. But we also want to make sure we're looking at our performance relative to consumer sentiment and relative to competitors in the market. And on that front, we continue to be pleased actually with the progress that we're making. Thank you. The next question comes from Phil Kimber from E&P Capital. Please go ahead.

37:22 Hi Amanda, I just had a question. You referred to Q1 postal she's trading but didn't quantify it. I mean we can try and do a week's basis sort of and you'll get around 6% total sales growth for the exit run rate but I just wanted to check whether if that was broadly correct or whether there was something else in there that we're not picking up and whether you could sort of provide that broadly post one USHI's trading momentum number.

37:58 Thanks Phil for the question. So yes, we are trading broadly in line with that post USHI's sales number that we've already shared. and to answer your question quite specifically, that is broadly correct. What I would say is that transactions have continued to be very strong. We are seeing a little slight softening in items and so important as we go forward, we've got really strong transaction growth, mindful very much of where the customer is at right now and that focus on value that we've just been talking about is incredibly important. But we're pleased with the momentum that we have, and it is broadly within that zone.

38:48 I think, Amanda, my add would be we know that we got an uplift in items per basket through the OSHIS program. That is an important program, and we know that customers come and shop us and buy more items. And so some of that drop-off that we've seen post, that is natural just given the exit of that event.

39:08 All right, thank you. Thank you. The next question comes from Richard Barwick from CLSA. Please go ahead.

39:17 Hi, Amanda. I've got a question on New Zealand. It looked like a fairly dramatic slowdown in sales momentum there, certainly for the back half of the quarter post-Ooshies. And I know you've flagged a competitive trading environment, but when is it not in New Zealand? Weak consumer sentiment, which I think you could mount the case to say that should be a or could be at least a tailwind for supermarkets. So I guess my question is, what can you tell us in terms of your market share within New Zealand? So how's your sales momentum compared to industry growth rates?

39:55 Yeah, thank you for the question. And New Zealand is an incredibly tough market. And as you know, to recap on the market itself, the macro environment there is very, very difficult. There's record unemployment. fuel costs are rising at a faster rate than what you see in Australia. We've got an election underway in New Zealand as well. And it is a highly competitive market and with some incredibly strong competitors, particularly in the discount space. And you have a consumer that is just under immense pressure in that market and the flight to value has been even more acute. than what we've seen in Australia. And so with that backdrop, sales in the New Zealand business has been softer than what we would like to see and is running under market growth rates right now. And there is a real opportunity as we go forward to be improving the performance of Woolworths New Zealand. There are a couple of things that Sally and the team are very focused on and I'll hand over to Sal to just talk about those in a moment.

41:07 but in particular value continues to be incredibly important. The team has released new ranges across important categories like meat and fruit and vegetables with greater value. The Everyday Rewards Program resonates there and the team has had a strong plan and program there. And then in the quarter I'd also just draw attention to the fact that we did update the Woolworths app in New Zealand and there was some disruption there to the experience. It is actually a better experience overall but as we all know change is difficult and the app in New Zealand has been in place for a very long period of time and so that did cause some disruption in the first quarter overall. But I would say it's a very tough environment and we've got a lot of work to do to improve the performance in New Zealand as we go forward.

42:03 We've called out previously that we are expecting improvement in the New Zealand business to be more weighted towards the second half, and that continues to be the case. But I think it'd be great to hear from Sally, perhaps just sharing, Sal, if you could, any other reflections on what's happened across the quarter, and then importantly, the plan that we've got as we head into the Christmas trading period. Thanks, Sal.

42:29 Yeah, thank you, Amanda, and hopefully you can hear me all. yeah I guess reiterating what you just shared on the growth rate at 2.9% we did see that slow once Aussies ended and that macro context is very real right now for us so unemployment at record highs interest rates really remaining elevated and actually a weakening New Zealand dollar and those fuel costs rising even more significantly than we're seeing in the Australian market it does mean that customers are consolidating their spend and making very I would say very very big value-driven choices around how they shop and and what they buy and that you know leads us to a competitive environment that is highly competitive and particularly around value so you know some very strong pricing from pack and save new world ran their continuity program and so you know that competitive context remains we did remain focused on delivering greater value to customers and so you can see our value for money scores despite that I guess volatility from a macro setting and real pressure on cost of living for customers that our value for money score has actually improved two points year on year. And so we do expect that condition to remain.

43:43 I think what we are really focused on, Amanda, to your point, is driving sales momentum in the second half. And that needs to be about better execution across availability, value and range. We have seen our brand perceptions lift in the market across those three key areas. year on year. And there are some important things that we're really focused on. So value for money, invested in price, really making sure our own brand offer is strong. That has improved on perceptions around good value for customers. Everyday rewards, it is number one loyalty program and continues to grow. So 2.3 million members and up 7.5% with record scan rates and actually boosting ahead of plan, so really driving that stickiness through our everyday rewards customer. Ecom growth was softer, and you can see that there in our results, and so that's much softer than we want. The new app created some friction, but actually pleasingly, last week we saw record levels of app downloads and stabilisation in those digital experience scores as customers adjust to that. yes I agree Amanda improved experience that we're now going to offer and you know it is a much more highly competitive market and really everyone investing in on-demand as you've seen in the Australian market so we're actually pleased to see despite softer growth rates overall our express pickup and express delivery and milk run propositions continue to be really strong in market and high growth for us so you know we we do

45:17 remain really focused on giving our customers great value this Christmas in particular and actually also remain really excited about the high growth in our Fresh Choice business so our franchise stores and our 82 stores we continue to convert more and we've actually strengthened our property network plan which I think is important so really a new store pipeline

45:39 we launched one in this quarter Hornswell down in Christchurch to a much awaited community and we really want to continue to invest in our network and footprint to drive that growth agenda on the go forward Great, thanks for that Sal and look it all comes down to sales momentum we're really clear that to improve the financial performance in Woolworths New Zealand we need to see an improved sales momentum and so that's exactly what Sal and the team are focused on Thank you

46:08 Thanks Amanda and Sally. Thank you. The next question comes from Michael Simotas from Jefferies. Please go ahead.

46:17 Thanks for taking another one. Back to Australian food, one thing that really stands out in this quarter is a very strong performance in fresh and some of the industry data shows to a pretty significant market share gain for Woolworths in fresh during the quarter. How big a factor was Wooshie's promotional campaign in Fresh? And can you just maybe talk a little bit more to what's driving that strength in those categories, please?

46:46 Yeah, thanks, Michael. And we wouldn't say that Wooshie's was doing anything really particularly different in the Fresh departments at all. And it certainly drove increased transactions to Woolies customers shopped right across the store, so there's nothing particular that I'd call out on fresh. I will throw to Annette, though, just to give us some colour in terms of what is happening across the fresh department. So we've already talked to Annette a little about meat, but chilled is also performing very, very strongly for us. So perhaps do you want to add a little bit more in terms of the fresh?

47:25 Yes, I agree. I mean, I don't think there's any different behaviour that we saw through the fresh departments coming out of or going into or coming out of Ushies, I think. we've had a very strong focus just as always in our fresh business but I think we've had some real lifts in things like availability with a very big focus in categories like meat that availability has been consistently high and consistently improved on previous performance and held well through Q1 in fruit and veg there's a little bit of inflation in a couple of categories like avocados and those categories have very high penetration also so strong growth in fruit and veg and great customer scores actually in the quality of fruit and veg. So a real focus there on making sure we get quality right.

48:10 And then in the chilled category, which as you know has been growing for quite some time, particularly in categories like yogurts and some of the high protein products, we're now at over 90% penetration of basket out of chilled into customers in our stores. And so that category is incredibly important to us in trading very well. some recent investments in our own brand categories like cheese have performed really well, double digit growth. And so I just think it's a culmination of a very strong focus and then a lot of good work by the teams to just make sure we're putting the right offers in front of our customers.

48:45 Thank you. Thank you. The next question comes from Tom Kirath from Baron Joey. Please go ahead.

48:53 Oh, thanks. Just a question on inflation and the outlook in food. Are you seeing more requests come through just as a result of broader inflation across the economy and obviously fuel as well? And how are you kind of thinking about, I guess, that inflation outlook on that side? Thanks.

49:11 Yeah, thanks, Tom, for that question. That question did come up earlier in the call. So just to recap briefly, certainly in terms of the number of asks we're seeing from suppliers broadly consistent with what we've seen in previous previous year, so we're not seeing an elevation in terms of the number of asks. When we look at the quantum of the ask itself, again, sitting broadly in line with what we've talked about in the last couple of calls, so in the mid-single digits, as we look forward to inflation across the quarters, it's really hard to pick because of that fuel volatility that we've talked to and the input costs that vary so substantially across each and every one of our suppliers.

49:56 At the moment, as we called out earlier, we would anticipate it sitting broadly in that very low single-digit territory, but it's a hard one to be precise on.

50:10 Got it. Thank you. Thank you. The next question comes from Brian Raymond from JP Morgan. Please go ahead.

50:18 Thanks for taking the follow-up. Just back on New Zealand, the grocery industry there has been highly politicised. The election's coming up next week. I guess a couple of questions around it is there's some radical plans proposed by a number of the parties leading to that election. It puts Australian politicisation of the industry in the shade, to be honest. But how is it impacting... the Woolworths business in New Zealand directly in terms of sentiment and so on. Is it benefiting pack and save at the expense of Woolies, for example? But then also, how do you think about investment ongoing in New Zealand given the lack of certainty around the structure of the industry and the market? Thanks.

51:00 Yeah, thanks for that commentary, Brian. Look, it's a tough market, as we've said, and it's always been a market where there is a lot of scrutiny on supermarkets. and particularly as customers come under increasing levels of pressure. And so look, our focus right now has been to make sure that we're doing everything that we possibly can to provide great value to customers. That's where we think we should be putting our attention. And then to support our team because it is really difficult when there are a lot of headlines and media coverage and people are turning up working really hard to serve customers in their local communities. We're very mindful of the team experience.

51:45 Their experience in terms of safety in our stores as well is absolutely front and centre and our first priority. But I'm not going to comment on the political landscape or some of the suggestions that have come forward from some of the parties. We look forward to the election coming to a conclusion and for there to be more certainty as we go forward following that. Okay, thanks. Thank you. The next question comes from Ben Gilbert from Jarden. Please go ahead.

52:19 Morning, man. Thanks for the follow-up. Just another one on CLR. There's obviously been a lot of negative press out there and then there's been claims around legalities, et cetera. And just in terms of your confidence and comfort around the ability to continue sort of pushing forward with CLR based on some of the claims that have been made in the press, particularly with respect to the code?

52:39 Thanks, Ben, for the questions. We're very confident that we are operating within the appropriate regulatory and legal guidelines, including the food and grocery code. It's incredibly important and we're deeply committed to making sure that that continues. I mean, as we've talked about, whenever you change something within a business, there's always going to be opportunities for us to do things better. And we said from the very beginning as we launched this program that there would be a proof of concept and we would have multiple waves where we would look to continue to improve, listen to the feedback of our supply partners, and that's exactly what we have continued to do. What we're really focused on in this is making sure that customers get more value at release. We've talked already so many times in this call how important that is. We want to be able to drive volume growth for our business and for our supply partners. And value and prices that customers can trust is critical for the go forward. And so we're pleased with the progress as Annette's already called out on this call that we've made so far.

53:51 We'll continue to look for ways to improve and optimize the process. But we're first and foremost focused on how do we improve value for our customers? How do we improve the shoppability of the category? How do we, together with our supply partners, be more efficient? And this is an important way of us being able to reset those categories across the store with the customer in mind first.

54:16 Okay. Thanks, Amanda. Thanks. Thank you. At this time, we're showing no further questions. I'll hand the conference back to Amanda Bardwell for any closing remarks.

54:26 Thank you for joining the call this morning. We're very much focused on Christmas as we go forward, the needs of the families and customers that are shopping with us, which is very much about value. We've got a great Christmas offer and we appreciate you joining. Thank you.