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Earnings call: Woolworths Group Limited reports steady growth amid challenges

EditorEmilio Ghigini
Published 08/29/2024, 03:59 AM
© Reuters.
WOW
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Woolworths Group Limited (WOW) has announced its full-year earnings for FY '24, revealing a 3.7% increase in group normalized sales and a 1.1% rise in EBIT before significant items.

Despite a challenging operating environment marked by increased living costs and intense competition, the company has shown growth, particularly in its eCommerce sector, which surged by 18.5%. Woolworths also announced a final dividend of $0.57 per share and a special dividend of $0.40 per share.

The company's future plans include acquiring the remaining shares of PFD and focusing on sales momentum, productivity, and cost management in FY '25.

Key Takeaways

  • Group normalized sales rose by 3.7%, with eCommerce sales up 18.5%.
  • Group EBIT margin stood at 4.7%, with a slight 1.1% increase in EBIT before significant items.
  • The final dividend was announced at $0.57 per share, with a special dividend of $0.40.
  • Woolworths plans to acquire the remaining 35% of PFD in the first half of FY '25.
  • Sales in Australian Food increased by 3% in the first 8 weeks of FY '25.
  • Amanda Bardwell will become CEO on September 2nd.

Company Outlook

  • Woolworths expects sales momentum to continue improving in FY '25, with a focus on productivity and cost management.
  • The company is committed to maintaining solid investment-grade credit ratings.
  • Woolworths plans to focus on price competitiveness and enhance reporting to measure profitability accurately.

Bearish Highlights

  • New Zealand Food and BIG W faced challenges, with BIG W's sales remaining flat.
  • The company expects cost delivery pressures to persist due to wage inflation and trading down.
  • Sales growth has been below historical averages.

Bullish Highlights

  • Australian Food and B2B segments showed growth in sales and EBIT.
  • Woolworths' digital loyalty and eCommerce achievements, including the growth of Everyday Rewards members and online services expansion.
  • The company is optimistic about improving on-shelf availability and sales in the long term.

Misses

  • Woolworths acknowledged some challenges and frustrating events in the second half of FY '24.
  • The company is working on addressing supply issues, particularly in owned brands.

Q&A Highlights

  • Woolworths is undergoing a transition to SAP S/4HANA, expected to be completed by the end of 2026 within the existing budget.
  • CapEx is increasing due to supply chain upgrades and warehouse projects.
  • The company emphasized leveraging stores for eCommerce and improving pick efficiency.
  • Woolworths discussed labor allocation and in-store execution to improve on-shelf availability.

In conclusion, Woolworths Group Limited has navigated a tough financial year with modest growth and strategic plans for future improvements. The company's focus on digital expansion, customer value, and cost management, coupled with a forthcoming leadership change, sets the stage for its ambitions in FY '25 and beyond.

Full transcript - None (WOLWF) Q4 2024:

Operator: Thank you for standing by, and welcome to the Woolworths Group Limited FY '24 Full Year Earnings Announcement. [Operator Instructions] I would now like to hand the conference over to Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.

Bradford Banducci: Good morning, everyone, and welcome to Woolworths Group's full year results for the 2024 financial year. Joining me for today's presentation are Stephen Harrison, our CFO, who will present our financial results a little later. And the CEO-elect Amanda Bardwell, who will be presenting with me on today's call. Also joining us in the room are Spencer Sonn, Managing Director of Woolworths New Zealand; Von Ingram Managing Director of W Living; Dan Hake, a new father, congratulations, Dan, on the weekend, Managing Director of BIG W, and thank you for coming in; Guy Brent, Managing Director of Woolworths Food Company; and Paul Harker, our Chief Commercial Officer for Australia Food. In the spirit of always pushing forward, I'm going to try a new thing and actually talk to the slides at the right sequence. So I'll call out the slide and then give you the highlight on it as we go through our investor presentation. Starting on Page 2, I would like to acknowledge the traditional custodians of the land on which meet today, the Gadigal people of the Eora Nation, and I'd like to pay my respects to elders past and present. And then moving on to talking about the performance. I'll start with an overview of the group's performance and our progress on our strategic agenda. Amanda will then provide an update on our digital loyalty and eCommerce achievements as part of her WooliesX portfolio. As part -- and then Steve will talk to the financial and he'll come back to me to cover current trading, followed by Amanda to finish with some of her observations and priorities moving forward. On Slide 4 is, really, a summary of the year that was. And I think as you all know, the group's full year financial performance reflects a very challenging operating environment impacted by elevated cost of living pressures in a highly competitive market. After a strong H1, we experienced a rapid change in customer expectations in Q3, which led to a loss of sales momentum and a decline in customer scores. We worked hard in Q4 to address the areas most important to our customers with value for money and shelf availability a particular focus. Pleasingly, our customers' underlying momentum improved in Q4, and this has continued into F '25. Group normalized sales increased 3.7% per year with around half of the group sales growth driven by eCommerce sales, which increased by 18.5%. Group normalized EBIT before significant items increased 1.1% with a group EBIT margin of 4.7%. In Australian Food, normalized sales increased 3.7% and EBIT increased 6% with about 3/4 of Australian EBIT growth attributable to the profit improvements in WooliesX. New Zealand Food and BIG W both had a challenging year, impacted by value-conscious customers in a highly competitive market. Importantly, both businesses made good progress on their transformation plan, but there remains more to do. On Slide 5, we've just given a recap on how we see the customer at the moment. And as, again, you would all know the persistent cost of living pressures came to head for our customers during the year. With customers' behaviors catching up with customers' sentiments, which have been prevalent for some time, we've sort of seen the customer talking about stress, but not acting on it, and that certainly changed in particular in the second half. Customers tell us they have been finding more ways to save such as cutting back on non-essential items, cross-shopping retailers and reducing each in non-occasion. Buying more in special has also seen a significant increase on last year. This is this ongoing mortgage and rent-related financial stress continues to put real pressure on household budgets, especially for younger singles, couples and families. Just going into a little bit more into the detail on that on Slide 6. While cost of living pressures persist, customer spend on groceries, as a percentage of household spend is declining. This is in part due to the significant moderation in grocery inflation with our average prices declining on the prior year in both Q3 and Q4. And then we've also began to track a typical Woolies trolley, which includes 32 key items, which is around -- down around 1% compared to a year ago. Coming back from the customer to how they score in us. Our Voice of Customer scores reflect the customer experience during the year with group book NPS of 47, down 1% on the prior year and reflecting the particularly challenging environment in late Q2 and Q3. However, thanks to the efforts of our team store controllable VOC scores were resilient with customer care scores remaining above 80% across the group and largely unchanged from prior periods. In addition, our strong focus on improving shelf availability and addressing value-for-money perceptions led to improvements in Q4 relative to Q3, but as always, with more to do. Slide 8, it shows -- it really break down different profile by half and even by quarter for Australian Food in F '24. We often talk to things being a story of 2 halves. It was really, for us, was the story of 4 quarters. Sales growth slowed significantly in H2, as you can see, from lower inflation item growth, and that was particularly true in Q3. However, we worked hard to focus and get things right for our customers, and pleasingly saw a modest, but very importantly, consistent recovery in Q4, led by autumn growth, which we have seen continuing to F '25 in which, of course, we need to continue to build on. Moving to Slide 9, just gives you a sense of your thinking about helping our customers find value, feel valued and connect value. We need to do a better job of communicating the great prices and specials to our customers across the shop, and we have made a number of adjustments in that regard, including making our price tickets and unit prices easier to read, continuing to improve our own brand range and tailor our range in each one of our stores. This week's launch of lower shelf price includes a price reduction on many household essentials by as much as 20%, providing customers with yet another way to get more from the Woolies shop. Consistently good shopping experiences means getting the fundamentals right, and we have made good progress in addressing shelf availability in the second half through a combination of increasing stock weight on key lines and improving fresh service levels. Finally, we made it easier for -- we are making it or have made it easy for our customers connect value across the group by improving our online and digital experiences. And I won't steal Amanda's thunder. I'll let her talk to that a little later. I am actually tempted to steal her thunder, but -- I'm sorry. But on Slide 10, I wanted to provide a brief update on Woolworths New Zealand and BIG W. We made good progress on the transformation plans across the year in both of these businesses, but there remains more to do with financial performance well below potential for both businesses. In Woolworths New Zealand, improved value communication has resonated with customers, and this is reflected in the strong improvement we made from our new scores, up 5 points from last year. We also rebranded 72 stores to Woolworths New Zealand by the end of the year. In fact, I think we set on 77 as I talk with another 60 planned for F '25. Importantly, the rebranding we see -- we get a sales of lift of just over 1% as we rebrand, which is an incredibly important positive for the future. Following its official relaunch in February, Everyday Rewards in New Zealand has grown to 1.6 million active members at the end of the year. I think we had another 460,000 customers joined our Everyday Rewards membership program in New Zealand during the year. And we extended our lead in eCommerce as we rolled out more convenient services for customers like direct to boot and launched MILKRUN to really strong residents in New Zealand. Our Christchurch Fresh DC had an immediate impact on availability and fruit and veg customer scores on the South Island. Our overall focus on fresh has led to strong growth in fruit and veg and meat in Q4 on both islands. Turning to BIG W. The rollout of our health and beauty shop-in-shops has proved popular with customers with over 100 plans for F '25. We also launched the BIG W market before Black Friday last year, which has materially increased the online range we have to over 1 million products for our customers to choose from. And this additional choice, not only building the basket, but also driving more traffic to the BIG W digital platform. The reset of our spring and summer clothing range, some of which you can see in stores now, has been another important step during the year with the new simplified range focused on more entry price points, improve quality and fit. I think 80% of our products in the new range are under $20 in price. And I think that's really important that's really focused on delivering real value at opening price points in those key categories. Finally, leveraging group capabilities and new technology to improve processes in BIG W remains an opportunity with this work to continue into F '25 including the enormous potential of RFID for us in getting the right color/size combinations available for our customers in-store. I will cover the outlook for both businesses a little later in the presentation. On Slide 11 is a reminder, of how we think about our group and the businesses and platforms within it that work to get to enforce each other to deliver on our Everyday Retail strategy. I will now hand over to Amanda. A very similar slide, by the way, you've seen before. It's just been fine-tuned as we continue to evolve the group and the strategy and the progress we've made there in. But I'm now going to turn it over to Amanda to talk about our progress across digital, rewards and eCommerce in F '24. Over to you, Amanda.

Amanda Bardwell: Thank you, Brad. Turning to Slide 12. The Customers are increasingly connected, and it's important that we continue to enhance our digital experiences, make engaging with us easier and seamless. Growing digital engagement is also driving more sales both in our store and online and more opportunities for our supply partners through Cartology to connect with customers in a personalized way. Since the start of the year, weekly visits to our digital assets across the group have surpassed a number of transactions in physical stores, which reinforces the importance of digital experiences as part of the customer journey. In F '27, average traffic to group digital platforms reached 27.2 million visits per week, up 19.7% on the prior year. Digital tools such as in-store shopping mode, shopping lists and the best unit price filter and special filters continue to enhance shopping experiences and increasingly are helping customers manage their shopping budgets. Turning to Slide 13. Active Everyday Rewards members in Australia reached 9.8 million with more than 770,000 new members joining the program in F '24. Our members are also finding more value with boosting members accessing personalized offers, up 9% on last year, and who, on average, earned their $10 off 5x faster than non-boosting members. Everyday Extra also continues to grow strongly with paid subscribers more than doubling on the prior year. One of the ways we are continuing to grow the benefits for our members is through new partners. And during the year, we welcomed Accor (EPA:ACCP), MILKRUN and Petstock to the program. Finally, as Brad mentioned, Everyday Rewards is now a trans-Tasman program following its launch in February in New Zealand. Turning to Slide 14. Group eCom sales for F '27 were a little under $8 billion with normalized growth of 18.5%, led by WooliesX eCommerce sales growth of 20.2%, which remained strong throughout the year. Including MILKRUN, Australian Food eCom sales increased by 21.3% for F '24. Strong sales growth, higher pickup mix and productivity programs across fulfillment operations and last-mile deliveries led to material improvement in profitability. With eComX-normalized that up 119%. eCom growth is being supported by the expansion of our convenience propositions with 86% of our B2C eCom orders now fulfilled within 24 hours, an increase of 6 points compared to the prior year. During the year, we launched a new sub-60-minute collection service, direct to boot now in 307 sites in addition to our 727 direct to boot sites across the country. We also established HomeRun as the group's last-mile delivery service provider with 20 million orders delivered since launch. I'll now hand back to Brad to cover the progress within our retail platforms and adjacencies in the year.

Bradford Banducci: Thanks, Amanda. And just while you were talking, the team corrected me, we will have 1 million products on the BIG W market. It's 100,000 as of -- I speak today, so apologies I've got ahead of myself. On Slide 15, I wanted to provide some examples of how our platforms, our retail platforms are strengthening our overall capabilities and growing their contribution to our group. I'll talk in a bit more detail on later slides on Cartology, in which I'll just focus and share on Primary Connect or PC+ and Woolworths 360 and property. Our Primary Connect grew through a third-party business, PC+, over the year, and it was terrific. We got some leases assigned us from Scott and we now have got those crossed off PCs really working to potential. And we're serving over 1,300 supplier relationships, and this is both value for us in a monetary sense, but even as importantly, it really helps us with answering availability for our customers and these partners. If I just talk to Woolies 360 and property, Woolies 360 comprises our format and development team, and they delivered 14 net new stores for the group during the year, alongside 60 renewals. And while our new and renewal stores are delivering growth, the platform has also delivered and is continuing to deliver material cost savings as it houses our smart operations set of initiatives, including the continued rollout of electronic shelf labels, Scan Assist, double welcome gates in front of store upgrades, and I'm sure I'll get questions on those later. So I'll come back to Cartology in which -- in detail in subsequent slides. Turning to Slide 16, really, just on the supply chain for a moment, and this is -- David, there is a slide, and I'm sure you'll have additional questions on this, David, if you're online. This is just as we had committed to, just give a little bit of progress on how we're progressing on our plans in the space. And we are, of course -- the headline is we're on track with our Moorebank National DC and regional DCs on track for their commissioning. In that context, our Melbourne, South Regional DC, which is our first automated DC has provided a blueprint for what we are setting out to achieve in New South Wales. And I'm pleased to be able to say that MSRDC had a throughput of 2.5 million cartons per week in F '24, with the cost per carton approximately 30% below what it would have been if we were still operating in our previous Melbourne warehouse. It has also improved to peak accuracy, achieve better safety outcomes and is currently delivering returns in excess of 10%. As the co-located DCs Moorebank come online over the next 2 years, we expect them to drive material benefits for our New South Wales customers and, of course, the wider group. As disclosed in Q3, we expect to incur approximately $90 million to $100 million of incremental costs associated with the commissioning ramp-up and dual running costs in F '25. On the same topic, construction of our Auburn CFC, in partnership with Knapp, is also progressing well, reaching completion of automation installation in FY '24 and on track to go live in the second half of F '25. Coming to Cartology. On Slide 17, you see the growth over the last 5 years, about a 34% CAGR, since its formal launch in F '20. F '24 revenue increased by 9%, relatively low by our standards in Cartology. We delivered over 5,000 campaigns while also providing, very importantly, a valuable media inventory for the group. Hopefully, everyone is aware in the media inside -- the inventory side, Cartology, we reserve 50% for the group and 50% is then monetized through, generally, endemic, but increasingly also, in some instances, nonendemic advertisers. And so the value for the group is as important as the value is, like, monetized through the -- through our clients. Cartology screen network continues to grow both on and off network with around 400 health and beauty screens added across supermarkets in the half in the year and our facility centers partnership adding around sound screens in over 50 shopping centers and that is in the process of being rolled out as I speak. Digital revenue is an increasing contributor to growth in Cartology with products growing strongly in the year, and we have just launched a new on-site brand video on woolworths.com.au in June, which is already seeing strong demand. In fact, it's already sold out in terms of the capacity we have for that particular product. If I then just move to the group's analytical platform, wiq, which is continuing to deliver high-value use cases across the group, including what was our first real delivery product, our Next Gen Promo, but we also now have smart clearance Quick Assist and many others and that continues on. Importantly, during the year, we also relaunched what used to be called Quantium FMCG as wiq consumer, and we are leaning in with -- by 500 suppliers to give them the right date-led consumer insights to help them make better decisions, including in their relationship with Woolworths. Finally, and very importantly, wiq has also taken the lead in AI adoption across the group with 10 use cases that I'll talk in pilot rolled out that leverage Gen AI to drive better customer and team experiences as well as, of course, deliver incremental productivity benefits. An example of this is Team Coach, which leverages AI to support our customer service agents and our customer -- handle customer's success to resolve issues faster and more effectively for our customers. We expect to accelerate our Gen AI adoption and capability across the group in the year ahead, as you might expect. And moving to Slide 19 and the Woolworths Food Company and the changing shape of it, we know that our owned and exclusive brands provide exceptional value and quality and are continuing to grow and improve these ranges. It's a critical part of our value proposition for our customers and securing the client environment. But our main goal is to provide a key role in making healthy items more accessible despite the challenging -- and affordable despite the challenging economic environment with, interestingly, macro growing by 12% compared to the prior year. On its way -- in fact, it's annualized, and I think it lands at about $1 billion, Macro's brand and really resonating where customers are needed to trade down in those more health-related categories. Importantly, and you'll see in the announcement, we're also moving to 100% ownership of the business of PFP in F '25, part of the agreement, acquire the remaining 35% of the business from the Smith family, and this is on the back of really strong growth in the business over the last couple of years, including 9% in F '24. And with the business now on a run rate of around $3 billion, if you just, again, normalized this going forward. And I just should recognize the material contribution of the Smith family to the business and what a terrific and constructive partner they have been to us in the last couple of years. Finally, within -- with the Woolworths Food Company, we also had our sourcing initiatives that are secondary processing. That includes GreenStock, which is our end-to-end meat business, and that's continuing to help us deliver lower prices for customers across the meat category. And actually, GreenStock has now supplied meat to our PFD customers as well by the auto brand, with PFD actually turns on to provide value-added fish processing back into supermarkets. So a nice real "better together" moment between those two. Changing gears and turning to sustainability. And you will, of course, see that we're also launching our sustainability report today and modern slavery statement. And you can look for a lot more detail in those documents. But just some of the highlights that we just wanted to call out, in some cases, with proper highlight. So let me just go through those. While severity rates improved in F '24 due to fewer severe injuries and improved to 14, our TRIFR performance was disappointing due to an increase in medical treatment and restricted work cases driven by manual handling injuries. As you might expect, we have a whole range of initiatives underway to help reduce these injuries, including the introduction of improved material handling equipment, task redesign and upskilling of our team. Also then just moving on to scopes 1, 2 and 3 emissions. In F '24, our Scope 1 and 2 emissions were 42% below our 2015 base year with the current year improvement supported by the installation of an additional 53 solar systems across the group and a new energy partnership with CleanCo in Queensland as we transition to 100% renewable energy. And another one that I just wanted to call one that I'm personally immensely proud of is our mini woolies program, and we've continued to grow this program with 86 stores -- 66 stores at the end of F '24, including a store in every state in territory in Australia and our first 2 new stores in New Zealand. The program provides hands-on learning experience for students and job candidates living with disabilities. More than 6,000 students now having completed the program since its launch. And as I speak, I think we actually have 73 woolies, mini woolie, with an aspiration to get to 100 at the end of this year. I'll now turn it over to Steve to discuss our financial results, and then we'll come back to our outlook. Over to you, Steve.

Stephen Harrison: Thanks, Brad, and good morning, everyone. I'll start today on Slide 23 with the F '24 full year results summary for the group. F '24 included a 53rd trading week, so unless otherwise stated, all growth rates mentioned will be on a normalized basis for the removal of the 53rd week. Group sales for the year of $67.9 billion increased by 3.7% with all businesses other than BIG W growing sales on the prior year, excluding Petstock Group sales increased by 3.1%. The group EBIT before significant items was $3.2 billion, an increase of 1.1% on the prior year or 0.3% increase, excluding Petstock. Half 2 EBIT declined 1.3% on the prior year as growth in Australian Food and Australian B2B was offset by lower earnings in New Zealand Food and BW. The group EBIT margin for F '24 was 4.7%, down 12 basis points on the prior year. Group NPAT before significant items was $1.711 billion, a reported decrease of 0.6% with EBIT growth offset by higher interest and tax in the year. Basic EPS on the same basis declined by 1%, broadly in line with NPAT and I'll discuss our final and special dividend later in the capital management section. Turning to Slide 24, our group trading performance. In Australian Food. Total sales for F '24 were $50.7 billion, an increase of 3.7%, with sales growth slowing to 1.8% in the second half due to moderating inflation and lower item growth despite continued strong growth in eCommerce. Australian Food EBIT increased 6% to F '24 and 2.2% in half 2 with around 3/4 of the Australian Food EBIT growth for the year driven by WooliesX. In Woolworths Food Retail, which is the combination of our stores and eCom businesses, EBIT increased by 3.5%. WooliesX profitability increased 94%, reflecting strong sales growth, improved eCom profitability and an increased contribution from the other WooliesX businesses, including Cartology in our everyday services businesses. The DAP and EBIT margin of 4.4% increased by 154 basis points compared to the prior year. Australian B2B sales for the year increased 4.3% in F '24 and 5.9% in half 2. PFD's trading performance remained strong with sales growth of 9%, driven by growth across all its key segments. Australian B2B EBIT was up materially in F '24, benefiting from the exit of the Summergate and international businesses announced in the prior year, and EBIT growth in PC+, our third-party transport business. New Zealand Food sales increased by 1.3% for F 24 and 0.3% in half 2. EBIT of New Zealand $108 million declined by 57% versus F '23, impacted by value-conscious customers in a highly competitive trading environment and materially higher wage costs. As announced in half 1, we recognized a New Zealand $1.6 billion impairment during the year, which has been treated as a significant item. BIG W also had a challenging year in F '24, with sales declining 3.9% and EBIT down by 90%, reflecting a challenging trading environment with customers cutting back in trading down into discretionary categories, which led to lower sales, elevated markdown and clearance activity & deleverage despite good cost control. Our other segment includes group functions such as property, group overheads and the Woolworths Group's investments in Petstock, Quantium, MyDeal and Endeavour Group. The segment recorded a loss before interest in tax of $123 million which was a reduction of 37% on the prior year. This was due to the EBIT contribution from Petstock from January and lower advanced analytics and M&A costs, partially offset by a lower contribution from our shareholding in Endeavour Group. The group reported significant items of $1.6 billion related to the previously announced impairment of New Zealand Food and a mark-to-market loss of $209 million on our investment in Endeavour Group, following the loss of significant influence, both reported in half 1. This was partially offset by a net revaluation gain of $107 million in relation to put option liabilities over noncontrolling interest with the minority shareholders of PFD having communicated their intention to exercise the put option effective 30 June 2024. We, moving on to Slide 25. F '24 has been a significant year of wage inflation across the group. We've worked hard to partially offset some of this inflation in F '24 through a focus on productivity and end-to-end efficiency and delivered a solid increase in productivity in F '24. We have a strong productivity pipeline for F '25. And on this slide, we've laid out some of our major productivity initiatives. The biggest opportunities are in our stores and eCom business, where the majority of our costs reside. Some specific initiatives include the ongoing rollout of electronic shelf labels, stock blocks initiatives, including full year benefit of the Scan Assist welcome gate rollout as well as peak and last-mile-optimization opportunities in eCom. Part of the benefit in F '25 will come from the annualization of initiatives landed in F '24, which gives us confidence we can deliver good savings in F '25. Moving to Slide 26 and our balance sheet metrics. Average inventory days were up marginally 0.3 days on the prior year, reflecting a conscious increase in inventory holdings in the second half to improve in-store availability for customers as well as an increase the imported stock holdings impacted by increased shipping delays and transit times. However, this was offset by average payable days, which increased by 2.3 days F '24. BW's closing inventory was marginally higher than F '23, but this was driven by an earlier receipt of seasonal inventory. Closing inventory helped improve versus F '23 with the proportion of inventory considered aged and quick stock below the prior year. ROFE increased by 78 basis points compared to F '23, largely due to high group EBIT and the reduction in average funds employed driven by the $1.5 billion impairment of goodwill in New Zealand in half 1. Excluding the New Zealand goodwill impairment, ROFE was largely flat, up 4 basis points on the prior year. On Slide 29, it's just a reminder of our capital management framework. And during the year, we continued to generate strong cash flow, which were reinvested into sustaining our business, growth initiatives and maintaining strong dividends for shareholders, and I'll provide further color over the following slides. Moving to the cash flow on Page 28. Group generated operating cash flows of $5.9 billion for the year, driven by solid EBITDA growth, offset by net working capital outflows. The movement in working capital in the year reflects higher year-end inventory holdings, offset somewhat by higher payables. While payables increased on the prior year, a noncomparable supplier payment in the 53rd week in New Zealand impacted the closing balance of payables. Cash interest costs increased 8.1%, largely driven by higher floating interest rates on bank debt in the year and tax paid increased 31.9% compared to the prior year, driven by higher taxable income for F '23 paid in F '24 and cycling a tax refund received in the second half of F '23. Cash flows on investing activities increased 23.5% to $2.3 billion. The increase compared to the prior year was mainly due to the group's acquisition of a 55% interest in Petstock for $476 million. I'll cover CapEx on the next slide. And finally, our normalized cash realization ratio was 97% due to higher net investment in inventory. On to CapEx on Slide 29. Operating CapEx for the year was $2 billion, in line with our guidance. The sustaining CapEx accounting for around 3/4 of our total spend with an increase driven by high spend in renewals and supply chain. Growth CapEx was marginally down on the prior year, while investments in productivity increased in the year, including the ongoing rollout of electronic shelf labels as well as Scan Assist and the implementation of double welcome gates and front-of-store upgrades. CapEx also included $117 million on projects with strong sustainability benefits in areas such as refrigeration, transport decarbonization initiatives and solar. In F '25, we expect operating CapEx to be in the range of $2 billion to $2.2 billion, reflecting ongoing investment in our supply chain network and increased store renewal numbers planned for F '25. Moving on to Slide 30. The Board today approved a final dividend of $0.57 per share, bringing the total ordinary dividend for the year to $0.14, in line with the prior year, with the full year dividend payout ratio of 74.3%, in line with our typical 70% to 75% payout ratio. The Board also approved a special dividend of $0.40 per share to return to shareholders of the proceeds from the sale of 5% of Endeavour Group in May. The final and special dividends will release over $500 million of franking credits to our shareholders. Turning to the balance sheet. Our net-debt-to-EBITDA ratio was 2.6x at the end of the financial year, in line with F '23. It's important to note that this is before the payment of the special dividend as well as approximately $400 million to acquire the remaining 35% of PFD, which will be paid in the first half of F '25. We remain committed to solid investment-grade credit ratings and has significant headroom under our current ratings of BBB from S&P and Baa2 from Moody's (NYSE:MCO). In October 23, the group issued $450 million of domestic term notes with a tenor of 7.5 years. The proceeds were used to refinance $400 million of domestic medium-term notes that were insured in April 2024. And finally, I would just like to say a huge congratulations in thanks to Brad for an outstanding contribution as CEO and to thank you for your leadership over the last 8.5 years. And with that, I will turn back to you.

Bradford Banducci: Thanks, Steve. That wasn't scripted but much appreciated. Thank you. Going on, just talking about our trading and outlook on Slide 32. Our sales momentum in F '25 to date has continued to improve across the group, in line with our improving customer scores and the momentum we started to see in the context of Q4. In Australian Food, sales for the first 8 weeks of F '25 have increased by 3%, driven by item growth and modest inflation with eCommerce to continuing to contribute strongly to our growth. As Steve talked about, we have strong end-to-end productivity plans in place for the year ahead, which are important to delivering our results in F '25, given elevated wage inflation and mix pressure on our cost base. And hopefully, as everybody is aware, with our enterprise agreement, it's a 3.75% increase in our wage base plus 0.5% of super on top of that, which is much needed in our team, I should add. We remain focused on delivering on our customers' shopping baskets, but expect cost delivery pressures to persist with cross-shopping and trading down continuing. Australian food sales have increased by 1.5% in the first 8 weeks, also driven by item growth, and we expect F '25 EBIT to be above F '24 with stronger growth in H2, but it will take a few years for the business to achieve, to return to full earnings potential. And I would look at same wage pressure in New Zealand, actually, slightly more pronounced than Australia. BIG W sales were broadly flat for the first 8 weeks, but with material item growth, but this has been offset by a material reduction, in turn, in average selling price. For F '25, we also expect BW's EBIT to be above F '24 However, the outlook is contingent to -- on successful trading during the key holiday and Christmas period and, of course, an improved trading performance in H2. I will now hand over to Amanda to provide some observations as she prepares to step into the CEO role effective Monday, the second of September. And from the last couple of weeks of August, Amanda, we will be trading places, and there's -- I look forward to working with you for the last couple of weeks.

Amanda Bardwell: Oh, me too, Brad.

Bradford Banducci: Please be kind to me in that process. Over to you.

Amanda Bardwell: Thank you. Thanks, Brad. The last few months have been really energizing as I've spent time with our customers, travelled to our stores and DCs, listening to our team in connecting with our suppliers and partners. It has been an incredibly valuable experience and a privilege to do this ahead stepping into the role on the 2nd of September. It is only reconfirmed to my view that we have a strong, talented in hard-working teams and so many great opportunities to grow in the years ahead. I also worked closely with Brad, the wider leadership team in the Board to shape our group plan for the next few years. Looking ahead, my excitement that coming into the role is based on a strong conviction that it is our people, our commitment to building better experiences for our customers together for a better tomorrow that will be critical to our success in the years ahead. As Brad mentioned, while sales momentum so far in F '25 has improved, cost of living pressures for our customers are expected to continue. And as we are operating in an environment that can rapidly change, our Everyday Retail strategy positions us well for the future that can't be achieved without consistently great experiences for our customers and members. Delivering against our trade plans and getting the basics right every day on value, availability, range, service and convenience will be key to doing this. We will also continue to create the future of Everyday Retail, leveraging technology and AI to transform how we work in how our customers and members shop our brands. Finally, we need to continue to look for ways to simplify how our teams work and make it easier for them to have an impact and care for customers. Brad, I would also like to take this opportunity to thank you as our longest serving CEO since our founders for the remarkable job that you have done in transforming Woolworths and firmly putting customer and team first. Thank you, Brad.

Bradford Banducci: Thank you, Amanda. I'll now turn the call over to the operator for questions. [Operator Instructions]

Operator: [Operator Instructions] The first question today comes from Shaun Cousins from UBS.

Shaun Cousins: A question maybe just in Aus Food in execution in store. When we talk to Woolworths shareholders they're somewhat cranky at times just in that the stores are in very good shape. They're refurbished, and you've got advantages across data insight, loyalty, supply chain. But were you sort of getting consistent feedback from suppliers about weaker in-store execution? And could you touch specifically whether electronic shelf labels are weighing on weaker promotional participation as they don't screen value like bright yellow paper tickets and whether or not there's enough inventory in store stock-out seem to be an issue when we walk stores?

Bradford Banducci: Thank you, Shaun. And let me just follow up by saying that promo pen has really lifted in the last quarter, so it's up over 200 basis points [indiscernible] exact number. But we don't have an issue with customers actually responding to our promos. And so a very good response right there. Shaun, we were very averted that coming out of H1 into H2, we had some availability issues, in particular, as we installed a new SAP UDF system and some of the fair share mechanics, some ways in which we did that meant we had some stock challenges there. And they were exacerbated by some of the other challenges we had in the year. So shelf availability is an enormous opportunity for us. I think, it's more like, we. That said, it's continuing to improve week and week and actually, as we stand on average, we're looking in good shape. Our biggest issue right now is though it's not whether on average, we're good. It's just with the promo pen that we're getting, we just need to make sure that we are building enough stock based on forecasts, not based on history. And so a lot of work again on that issue. On the ESL itself, we also asked ourselves the same question. We do not see a material difference across our network between an ESL store to non-ESL store in promo pen. That said, one of our big initiatives shored is to use digital to help our customers better find value in our stores. And I don't want to overplay it. As I speak, we've got probably somewhere in just over 0.5 million customers in the in-store shopping mode using our app in-store to make decisions, and we expect that to, Amanda correct me if I'm wrong, double in the year ahead. It got far more than that. And when they are using it, things like all of -- Shaun, you can actually ask where a product is and we'll give you the product in the price becomes important. The best unit fall to the watch list and so on. So we have a great value proposition in store, but we can always do more to help our customers fund that. Finally, as I speak, if you look at the number of products on promotion, materially higher right now, Coles and our price index against Coles and against LD in particular, is as good as it's ever been. So there's no issue on us being robust in terms of making sure that we've got the right pricing in our business. And finally, this week, if you go into our stores, and I know you will be in there, Shaun. And I hope you had a good trip to Lane Cove a few weeks ago, and I hope you entered a Woolworths and you checked out the competitors. You'll see our new ticketing solutions in there, particularly with our new lower shelf price. And there's been a lot of consumer research we've done about residents on those tickets, and of course in a whole series of evolutions you'll see in the next couple of months.

Shaun Cousins: Got you. But it doesn't seem as though there's anything fundamentally wrong but you're not executing as well. So that's what we're trying to square in terms of what's going on.

Bradford Banducci: Yes. Okay. I'm sorry. If you look at our unit growth, we're feeling pretty good about things. We always want more, let me just say. I'm looking at Paul, as I speak. But when we see the unit growth and we see how we resonate with our customers, we are not in a bad place. But is shelf availability and opportunity and upside sales opportunity in F '25 better, in particular, as we get into the second half and in particular, say we get in to primary lines, well, our power lines are installed. You'll see changes in the way we think about the 250 lines that are so material to our business in the order of 20% of our sales, so rest assured of our focus on availability. But I wouldn't like anyone to confuse our off-location displays or anything like that with fundamentals of trading, because it's not true. And certainly, that's also the case with yourself, although we can do a better job with the shrouds with the new colors coming out, with the new font size being launched if you look at the DSL and, of course, the install navigation through digital for the customer.

Operator: The next question comes from Adrian Let me from Citi.

Adrian Lee: My question is actually longer term, if I may, and it may be for Steve. Look, I understand SAP's requiring all companies globally to upgrade their ERP systems to their S/4HANA system by 2028. I heard this is a very complex project and will take a number of years. I'm just interested if you can talk to where you are in that. I understand you're on the SAP systems now expected costs and whether you can manage that through other savings, please.

Bradford Banducci: Adrian, did he pay you to ask those questions. I feel like he did actually. We actually just talked about it in some detail at the Board yesterday. So Steve, I know you can talk about it at length. I'll let you give a brief answer in that context.

Stephen Harrison: Yes. Thanks for the question, Adrian. So we've been on, go through very stage upgrade of our subsystems. So we're on a cloud version of the previous version, ECC 6, and we're working through the transition to SAP S/4HANA. It's important to note, we've actually previously upgraded our retail and store systems. And so we see this actually as a less complex upgrade than other organizations where we feel like the changes are very manageable, and we should be able to manage that change with our existing CapEx envelopes. And we would anticipate the changes happening over the course of calendar 2026.

Adrian Lee: Thanks, Steve. And can I understand -- what I understand is that with this project, a lot of, maybe more than half of the cost would have to be expensed. So would that expense be up would be managed within budgets? Could you reduce discretionary IT spending to offset, please?

Stephen Harrison: They're currently -- we would expect to be able to manage them within our envelope, both CapEx and OpEx. Bear in mind, it is an upgrade, not a brand-new implementation for us.

Operator: The next question comes from Tom Kierath from Barrenjoey.

Tom Kierath: Just one on the CapEx. I was a bit, I suppose, surprised and disappointed that it's going up again in '25. It looks like sustaining CapEx is kind of continuing to step up. And I guess it begs the question. Is the business a lot more capital intensive now and you have to do a lot more to stand still? Because we're not really seeing it come through with faster growth. I don't know, maybe Amanda is probably the best place given that she was involved in the planning to answer that one. But I don't know, Brad, if you have any thoughts on that as well?

Bradford Banducci: Look, I'll hold my comments and push them to Steve if that's okay, Tom and we hope the Kierath family is all very loyal online shoppers and the family is doing well. It's one of our most important eCommerce shoppers. But Tom, you're looking at a peak right now, really, on -- with supply chain upgrades that we've got, really. And so you've seen the supply chain upgrade laid on top of our renewal program, which is actually delivering what we need it to be. And so it is that peak in investor supply chain is our first automated CFC outside of Moorebank and then the warehouse upgrades that we're doing in New Zealand. So it is really driven by that combination of factors more than by anything else. Intellectually, as you go forward and have proposed to comments on IT, as more of our systems become SaaS-based, actually they become more OpEx-based and less CapEx-based, which is a different issue and focus area for us. But I'll let Steve give some of the specifics on that.

Stephen Harrison: Yes. I mean, just building on your point, one of the issues from how you manage these is they are long-dated projects. So we announced the Moorebank precinct over 4 years ago, close to -- I think, close to 4 years ago now. And so we'll be opening the national distribution center in the first half of F '25. We'll open the regional distribution center so, essentially, the replication of MSRDC, the New South Wales RBS (LON:NWG) market in F '26. They're long-dated projects where you take the CapEx up-front and you see the benefits once you get to scale. And so we're confident we're going to get the returns from these projects. Part of the reason we included an update on MSRDC in the analyst slide is to just demonstrate actually, the investment is paying back for us, it is a sustaining investment. As in we've got -- we're out of capacity in our existing shares. And so this is about unlocking growth for the future, but getting efficiency benefits from it and store benefits in customer benefits from better availability. So your point is noted on the timing of the CapEx versus the realization of benefits, and we're very focused on making sure we realize those benefits. But we are in the peak of that supply chain transition right now. And to Brad's point, we haven't done enough renewals or as many as we would like in the last 2 years, and we consciously want to get that renewal number up in the next 12 months.

Bradford Banducci: And just on the renewal process, as with the changes, we started to get even more excited by the potential of what could do, not only in sales, but in the cost rates forward, putting a good drive attached to the store and in the way we flow products, in the way our new front end works as well as all the other things we do up and down the aisle means that, actually, it's a good time to go again and just look to the number of it.

Operator: The next question comes from David Errington from Bank of America.

David Errington: Brad, if I could ask you this question because Steve won't answer it, you won't. But if you could answer, that would be great. Brad, what really struck me was how much the stores went backwards in terms of EBIT in that second half. So if I draw your attention to Slide 39, and then you compare that to what you did in the first half, I mean the stores in the first half, their EBIT was up 3.8%, on a normalized basis, the story EBIT fell by 0.2%. Now that means that the store EBIT fell in that second half by -- I got about 4.5%. So the stores really went backwards in terms of EBIT. Now that's, you just talked about renewals and that, but you guys spend at least $0.5 billion, at least, on renewals and upgrades in new stores, and you've been doing that for 4 years, and yet the stores are going back. Now what I'm trying to work out is going forward. Now eCommerce is hitting the cover off the ball. I mean there's no doubt about that, but your stores are really languishing big time in terms of profit performance. Now wherever it's deleverage, I don't know. But I'm trying to build myself a little bridge in terms of what your earnings are going to look like in '25, Hence, the question to you and not to Steve because I think I'll get more out of you than what I will, Steve. And that's all due respect to Steve, of course. But when you look at what your sales growth could be, what your gross profit is likely to be, you have to absorb another $90 million to $100 million of implementation costs and your depreciation costs are growing by $100 million a year because of all this CapEx you've been spending, I noticed Australian Food EBIT in D&A, D&A went up by over $100 million. And I'm assuming if you could clarify that, that's going to continue rising by about $100 million. And you called out that labor costs are going to be rising by about 4.5%. Now if I do a little bridge earnings, I don't think you can grow EBIT in '25 in Food unless these productivity initiatives that you called out in '25 really, really bring your home. I think you're struggling to grow EBIT next year, Brad. So can you go through a little bit of that bridge? Because question is why are stores EBIT going backwards so bad? Is it because of the depreciation you have to carry? How much is that depreciation going to keep growing? How much this drag on the implementation costs and these productivity initiatives, can that bring your home so that you can actually grow profit in supermarkets, excluding eCommerce in '25?

Bradford Banducci: Thanks, David. And I don't know if that was a compliment or not, but I'll take it as a positive. So obviously, we're not going to talk to the F '25 forecast, but let me give you the right color to F '24 so that you can look, of course, and you work through your own modeling. Q3 was just challenging for us. And I think everyone, we don't know and understand this whether it was the fact we were slightly collectible last year, not having one this year, but the issues we had on on-shelf availability, the challenges we had around Australia Day, the rest of the negative media around supermarket. So it was just an incredibly challenging quarter for us in every possible way. And you see that reflected in the results as well as our commitment to actually invest in our customers and really do the right thing for our customers. And so it is really, as I mentioned in my intro, it was a year of 4 quarters. As you get to Easter, you start seeing very different momentum come back into the business. And of course, our goal is to build on that in F '25. And the nice thing in retail, as we all know, is you get to cycle things. And so you cycle high performance at times and you cycle opportunities at other end there are opportunities, of course, as recycling the year ahead. including, as I talked now, we're sort of 2 weeks later into our [trans] collectible program, and you don't really see that in our first 8 weeks, which is something that we hope are very excited about as a group collectible. So first point is that's the issue, David. It's incredibly challenging Q3 in possibly every respect. Including earlier in the quarter, I've been very diligent on price establishment to make sure that we were following what we had tightly guidelines for ourselves on making sure we have efficacy on prices before we promote all those and so it took us a few weeks as we come out of the key to really do price establishment. And as I say, that we've moved the index very quickly into where we are now. Second point, David, and I know we break it into 2 ways, but we do combine it for a reason between eCommerce and stores, and that is that 89% of our eCommerce business is priced to the store. It is really a change in shape of the store even though we will report both channels. And so you do need to look at the numbers to [indiscernible]. And one of our big initiatives in our format is redesigning the store to make it more and more eCommerce friendly. We split the docs now. So we don't use the same doc for an inbound for us and the docs are split. We are trying to advise wherever we can. The whole [indiscernible] spacing between -- you name it, [indiscernible] by the way, is a critical enabler for eCommerce amongst many other things. So you've got to look at both of those when you look at the leverage of the store and one of our biggest opportunities that we delivered a lot of it in Q4, but there's going to be still another opportunity in Q5 is how we continue to improve our pick efficiency in our stores. And how we sequence things, whether we pick for customer by batch and all the other tools that we are that Amanda can talk to and how we build the market. So I think you've got to look at them together. And I wouldn't underestimate, and we've had to do this before when you commission and we need to build the right volume for when we commission our CFC in Auburn. But actually, the real deleverage is when you move the eCommerce volume of the store. Our plan is not to move it out. Our plan is to grow it. And as I say, it's becoming much more, much more, much more same day. So I think that gives you some context. Now when we get to F '25, we have to be a averse, David, which we are, that we are sitting on a cost base that it's gone up by 3.7% plus 0.5% of [Super]. And therefore, we simply do need to execute in the right way on our end-to-end productivity plans. Those do include to Shaun's point, yourself, and continuing to grow selling our business question the bigger font, easier to see a new color pallet and so on. So we do need to execute against our plan in order to achieve the right outcome for our shareholders, right? And we're not saying that, that is a walk in the park, quite the opposite. But as I say, there are other things that are going our way. Last but not least, and this -- I know -- hopefully, you are very aware why we do it, and we do need to change it going forward. In Australian Food -- are also really important adjacency profit generators for us in particular, Cartology, and we will be considering how we report it going forward. So we do need adjacencies to deliver to help us deliver the overall results for Australian Food. They did deliver for us actually in F '24, but we really do need them to continue to grow and deliver for us in F '25 and that is certainly our plan. Major want to call out this media, but it's not the only one [indiscernible]. Steve, anything you wanted to add since I'm tempted for you to add something since -- no, you don't want to add anything.

Operator: The next question comes from Lisa Deng from Goldman Sachs.

Lisa Deng: Congratulations again both Brad and Amanda. My question is on the Food GP margin. It's seen a very strong growth. I think even in second half, it was up 54 point or bps. Removing tobacco, that was 37, and then that's due to a range of, I think, structural and cyclical factors like you guys called out next-gen promotion, Cartology, cycling collectibles program. Can you kind of maybe to the extent you can give us a little bit of a build in terms of what's structural and what's cyclical and kind of then we can gauge what we can potentially bring into next year. One extension of that is Cartology, Brad, you just mentioned, it actually was softer than, I guess, run rate at 9%. What was driving that? And how do we think about that going forward?

Bradford Banducci: Let me answer a few pieces, and I'm going to turn to Steve who's going to talked about previous questions, so we're making things for launch in a moment, Lisa. Cartology really with a reduction in the number of collectibles we ran during the year. So that materially impacted because you really do use them as great sales, so that was the real issue why it puts a bit more muted. Actually, our growth decently, which is where we've won Cartology to grow was very strong. As I said, we already sold out on video and just the whole way we're thinking about monetizing digital in particularly, given the material growth in the number of our customers -- are using our apps. And we don't actually monetize it all now, by the way, Everyday Rewards app, which is an incredibly strong growth for us as well as opportunity. So that's the Cartology story. In terms of the GP bridge, the only thing I'd add by I've been throwing one of my pet topic, Steve, is we always look at GP relative to net sales value. We don't give you the GSV to look at it. And if you look at it on the GSV, you don't actually see it going up. And that's because between our GSV and our NSV are investments in Everyday Rewards, both in the points, but increasingly material Everyday Extra the 10% or so. We don't show that to you, but that is quite an important component when we look at it. We -- by the way, believe it is driving value for us, and we can talk about that separately. With plus 0.5 million people now using Everyday Extra, but that's one of the issues sitting in the background. But in terms of the rest of the bride, Steve?

Stephen Harrison: Thank you. And Lisa, hopefully, you're happy to talk to me and David, I'm looking forward to seeing you later in the roadshow. We'll talk then. But in terms of the bridge, about -- yes, so as you rightly pointed out, we get this 20 basis point. How we did a basis point sense from tobacco declining, but actually, we make less GP dollars so tobacco going backward by 21% in the second half, doesn't actually help our earnings. It just inflates the GP percentage calculation. So the 37 basis points, what I'd call out is a couple of them cycling. So we cycled some collectibles, that's probably worth about 8 to 10 basis points, actually strong growth in our adjacencies both Cartology but equally, our Rewards, our Everyday Mobile, Everyday Insurance businesses, Wpay, all actually had quite strong growth, a similar type of basis point improvement to that cycling benefit. And balance is a range of things, and they're consistent with what we've talked about in the past. We continue to leverage our analytics tools developed by week to optimize our promotions. We're working hard on commodity sourcing our own brand teams, trying to get actually the best value for our customers. So improvements in sourcing. And then some mix benefits a long life to higher-margin part of the store for us in Fresh, long life through faster than Fresh. And so I think the combination of those makes up the balance, but I think it's important to always reference back to our price settings. We very competitive on price versus both Coles and ALDI. Our indexes are in good shape, and I'm repeating what Brad said earlier, but we always start with making sure that the price settings are right. We've got compelling value offers for our customers. And so yes, growing margin with things that we can control that don't impact the customer is really what we're focusing on. And so those would be the sort of key components. Probably the only other thing to talk about would be stock-wise. We've obviously spent, a lot of time and energy on rolling out things like scans and our welcome gates. we think it was well managed. It went back marginally but not material to talk about. But actually, in the current macro environment, we actually think that's not a bad outcome. So those would be the key points Lisa.

Operator: The next question comes from Bryan Raymond from JPMorgan.

Bryan Raymond: Mine's on the -- maybe a bit of a follow-on from Shaun actually. Just on the in-store execution piece. I've been getting similar feedback around maybe a little bit of a drop off from a very high store standards in terms of on-shelf availability, promotional compliance, et cetera. And I just sort of I'm picking the numbers before the disclosure changes potentially next year around cash CODB growth. And it was a good cost control for you guys, adjusting for the 53rd week, it looks like about a 4.5% growth rate on cash there in the second half. But I just want to understand a little bit of the drivers around that in terms of labor in store, in particular, because supply feedback has been more that [indiscernible] back to normal. It's really about in-store labor. I just want to understand where you're at on in-store labor. Are you happy with the execution you've got at the, moment? Or is that part of the solution is getting a bit more people in store to get products themselves?

Bradford Banducci: Bryan, I will report from the call phase in 3 weeks to win work in stores, so you can expect another visit from me. But on a more serious note, we are very committed to our labor forecast in our allocation to our T3. And we give the right hours to the store based on the number of items that we sell and we expect to move in the store. And that's key to us and not compromising that is essential so that our team gets the right hours and therefore, we try to [indiscernible] with the team. And our Voice of Team scores actually went up during the year, which is just a testament to the hard work the team has done. We've also, in that context, launched a new routine my customer first availability, which just does tailor how we move our product from the back of that to the shelf in the store, so we get the right processes into the store. One of the -- so it certainly hasn't been through our shortcutting. That's not the way we do things. It doesn't mean we don't have material productivity plans, but what happened. As I said, there have been a series of frustrating events during the second half, in particular, starting with the said UDF roll-out and then CrowdStrike (NASDAQ:CRWD) and we had an Azure issue and so on. So there have been a series of quite frustrating events, never mind the weather issues we've had with the rollout in 3 week in WA and so on. So there's no question. What we've now started to do though, as we go forward, Bryan, is we are very focused on making sure that we have a new reporting suite. So we don't have in our full service level at the back, whether the product is in the store, but we're actually now using Wick to redo all of our shelf tools. So we actually do on-shelf forecasting as well. So we can see the gap between the 2 stores and spot on the shelf, and we're working very hard to close that gap, which will be a major opportunity for us going forward. And then we've also had a few longer term on supplies, particularly in owned brands, and we really are very focused on making sure we address. So there's not a good reason for it to be honest. And everything we've seen from our team is they're really very focused and pumped up on taking advantage of this opportunity quite frankly. It's is not a negative shift of opportunity for us as a collective and as I say. If you believe, which I do, that our power lines, our top 250 lines are running on-shelf availability of 89% right now, improving by the reach. But if you believe that we could close that to 95%, you could get very positive on sales, depending on what assumptions you place on cannibalization, you'll certainly knock the ball out of the park on a customer experience. Now Paul, if there's anything you wanted to add in the commercial.

Unidentified Company Representative: I don't say that the work that's happening between the commercial team and the ops team and replenishment around, just the prior planning as we go into each trading cycle and backing ourselves on pushing extra stock of the right things into a store in a very manageable way. It's a good opportunity for teams working together to actually lift the matter as well.

Bradford Banducci: One other thing I should add, actually is, and I have forgot as I was talking is the issue that we really need to pick in use to, as I said to David, it is great virtue for us to use eCommerce off the store because they were really good to leverage the asset in very powerful ways in particular. So when you do same day or up to our deliveries. But by the nature of it, we now have our peak trading period on a Sunday afternoon, which is quite challenging in because we need to really manage that. And so we're getting much more thoughtful Sunday based eCommerce growth is, I think it's 17% of our eCommerce business is a Sunday afternoon. And so we're trying to really rebalance the load on Sunday afternoons for eCommerce so that we can take some pressure off the shelf on a Sunday, which is a hard day. And the problem is if you're out of stock on a Sunday, it really does impact your Monday just by the nature of the change of it for the week. So that's another area that we are working and that is called our success in the same day, in particular Sundays, this caused us an unintended consequence on shelf availability.

Operator: The next question comes from Craig Woolford from mesa. MST Marquee.

Craig Woolford: Great to see the small improvement in sales in a continuation of that momentum. But I am intrigued with the nexus between what's happening on price versus volume. If I looked at the disclosure you have on comparable items growth, it was only 0.4% in the fourth quarter. And your deflation is 0.6% overall or 1.4%, excluding tobacco and fruit and veg. So it just feels like you're getting some volume uplift, but you're seeing a bigger price decline the net of that is negative. And I just wonder, we also see bricks and mortar going backwards versus online going forward. It just doesn't feel like the balance is necessarily net additive for the overall food division sales.

Bradford Banducci: Thanks, Craig. I mean, you look at average numbers for the quarter, if you don't mind me saying. We're looking at daily, weekly, monthly trend line, so it's just quite an important distinction. But to your point, we are very focused on basket size because our issue is not visitation from customers whether digitally or physically. Our visitation is up. We just need to make sure that our customers build a great value basket every time they shop with us, and we maximize that basket. Where we are losing a few items in basket is in the physical store. So it's a huge area of focus. Paul and Amanda can certainly talk to all that. That said, our focus as we see performance on the basket. And when you look at our volume share, our volume share is not looking too bad as we track it, and there's a lot of noise in all of these, and that is key to us. We need to hold the basket with the customer. And if we need to invest a little bit more in price, which you see in the deflation, that's money well spent in particular, as we see customers trading down create in our business. And they're trading down in side. We said they traded down in slightly different ways, whether it's Double Bay or an East Gardens, which or so on. But so we are very focused on that, and we are seeing volume share look pretty good and to be grown, and that is the basis on which we want to build our business. And if we have to invest in price through promo or trading down for a customer in the category, that is investments well made for the future.

Operator: Thank you. The next question comes from Ben Gilbert from Jarden.

Ben Gilbert: [indiscernible] congratulations. But maybe sort of just looking to your legacy as you move on and maybe one for Amanda. Just you talked to how Brad, great for customers and for Star. Just interested in terms of your focus to some of the earlier questions as well, just around trying to work the asset base harder as you come in because one of the criticisms around always, Lisa, 12, 18 months, as you probably haven't worked the business as hard as maybe your friends down south, and it feels to me that on the call today, you're talking about progressively improving trends through the month and which are the collectibles a little bit better. But are you going to be taking a bit more approach on sort of work in a bit hard to be a bit clear around the message and maybe trade the business either on the shorter-term lens as well as trying to get some of the benefits of the significant CapEx to put into the business? Just kind of any thoughts around that.

Bradford Banducci: Let me start and give it to Amanda. I don't think we not avert that we've had all these distractions in the last year. So let me just agree with that. Secondly, on the legacy of anyone that will always defined what happens after you go and not what happens while you're there. And so to me, I should be judged as -- we all should be those for what happens in the next couple of years, not by what's happened in the last couple of years, but I'll let Amanda talk very specifically to your plan for F '25.

Amanda Bardwell: Yes, great. Thanks, Brad. And then, we're very focused, as I said in the presentation on continuing to follow on that legacy, as you say, and put customers first and continue to get it right for customers, and we recognize that there's been opportunities over the last 6 months where we could have improved. As we've looked at the go-forward plans, we're incredibly excited about the strength of our trade plans, the sales plans and our teams are really actually excited about the next couple of months that lead into Christmas, the opportunity to trade the business, and we're very focused on how do we continue to help our customers find more value, improve availability, as we've talked about, and Brad has already talked to a number of the initiatives that we've already had underway and that we're seeing improving momentum around, particularly on those power lines on those big lines and own brands that we know our customers are looking for. And then really continuing to improve service as well as we look at our eCommerce business, such great opportunities to continue to grow there. When we're looking at then the broader business outside of our retail group, there is this still immense opportunity to continue to grow our adjacencies in our platform businesses. And so I think there's already a lot in play there. And what we're focused on is how do we unleash the full potential that already sits within the business. We sort of talk about it here as a leadership team. We've got all of the building blocks already in play. And so it's about us really focusing on that delivery. And then we are a very large business, as you know. And so how can we continue to seek ways to just make it simpler for our team to have more impact. So I feel really positive about the future of Woolies, we are going to be very focused though and bring us very much back to what is the right thing to be doing for customers, how do we really get into our trade plan to get excited about them, and we are and how do we continue to make sure that we're there for our team as well.

Operator: The next question comes from Richard Barwick from CLSA.

Richard Barwick: I'm going to talk about New Zealand. I think a disappointing result through this year certainly relative to market expectations as well. I think, Brad, you made a comment that it would take a few years for the New Zealand business to be able to achieve its potential. I'd love to hear your thoughts or Amanda probably more importantly. So as to what do you see as the potential like, how do we define that? Because if we use history as a guide, then would be looking at sort of low 300s millions of dollars in NZ dollars for the business. Or are you more optimistic than that? Just would love to just try in scope that out a little bit, please?

Bradford Banducci: Richard, let me talk to the transformation, and we don't do profit forecast anyway, as Mr. Harrison announced -- as we speak. Amanda won't made in the -- one of the first tough questions on that issue. But clearly, we need to, and our whole strategy as a group is to bolt platforms that we use and we leverage across the group. And none more obvious places between Woolworths Supermarkets in New Zealand, the suprmarkets in Australia. And one of the reasons for rebranding [indiscernible] was our ability to start doing the leverage in 1 card to every day awards. And we've actually collapsed the franchise business in New Zealand into 1 franchise business called FreshChoice. Leverage in the platform are not at the same Basically, everything we're doing is now being replicated in they're good learnings both ways in doing that. And that's the key for us to succeed in New Zealand and early stages are very promising. When you just look at the simple math of what happened to the profit results, it was a 12% wage increase and then another 7% and it was 19%, and we didn't get that back in pricing in a market with an incredibly challenged consumer in the market and a very robust competitor, particularly in the form of back and safe. So in a very simplistic sense, that's what you saw happened, and there's very good reasons for it. As I say, the rebranding does give us the ability to access and leverage the full group across that. And as I said, we are starting to see some really, really pleasing activations on that. If you look at [indiscernible], for example, [indiscernible] 550,000 people who've joined the program, which is material in the context of a small country like New Zealand. But [indiscernible] publicly, they intend to pull out. We've signed 4 really good new partners to the program, 2 new exciting ones coming in November, December. And you can see how we started to get that leverage, and we're running everyday in Woolworths on both sides and same app on both sides of the Tasman, 1 app spend. If you look at New Zealand, one of the biggest opportunity is our lack of digital traction. In Australia, we have a material digital traction. Digital traction is ahead of our store traction. It's way the opposite in New Zealand. And so the way we do that is through leveraging say these platforms. You will get the same Woolworths app on both sides of the Tasman, and there'll be good ideas for both sides of the Tasman as well as the same everyday Woolworths app, which is now there and so on. That is the key. It's 1 business. It's a trans-Tasman business. That's treated as such, albeit a slightly different pricing algorithms in the context of the market conditions we operate in New Zealand given the franchises price differently. And that's how you get the leverage. And there's no question in doing that, that we will see an improved sales results. How much we see will depend on the economy as much as anything else. And it really is the plan in a nutshell, early days. As I said, we are finding it very pleasing. Woolworths was a brand in New Zealand in 1929. And guess what can we put the word Woolworths back on a store. We get an extra 1% of sales. Hardly surprising relative to a no-name brand that had no resonance for us in New Zealand. So those factors are starting to pull through. And I'd encourage you when you go your next trip to New Zealand, maybe you're going to Queenstown, go to our store in [indiscernible] you'll get the points that you can redeem in Australia. So that's really the plan. We are now about 15 months in, and what's that is you can see all the green shoots in the plan to be back in item growth is valuable. The basket opportunity is more material there, not only do we have the independents, but we've also had warehouse group, Chemist Warehouse and many others competing for the grocery basket. But actually, we're starting to see the -- still very robust, but we sort of put the deflation we start to see come through. We're starting to see a more stable operating environment. So we remain positive in some of the costs that we incurred in F '24, we will be taking out as we annualize in F '25. So that will give us a little bit of a hit stat as well. Steve, I feel pretty bad. I mean I don't, we don't really want to get into our forecast, but there's reason for optimism in the midterm.

Stephen Harrison: Yes. I mean, ultimately, getting our price settings right, our competitiveness in the eyes of the customers so that we get more sales is the key, right? And so actually, we've got a strong productivity program in New Zealand, a reasonable dollar productivity in '24, they got a strong pipeline in '25. But ultimately, we continue to build that momentum. So seeing those better sales results in when we rebrand from Countdown to Woolworths, seeing the improvement in items actually getting eCommerce back into growth, which we've seen particularly over the second half are all reasons for optimism.

Bradford Banducci: The only negative I would add, Richard, is I know you got a positive in terms of what it means for our team. Underlying wage growth is, of course, the same challenge we have in New Zealand despite the 19% I've talked to that we have in Australia. So we really need to engage constructively with the unions over there on that and just get the right trade-off in terms of some of the constraints in actually delivering productivity given the enterprise agreements we're having.

Operator: The next question comes from Phil Kimber from E&P Capital.

Phil Kimber: My question is just that sentence in the release where you're considering the removal of gross profit in CODB at the segment level. I mean, I guess there's a long-term observer, Woolies, you've been an industry leader in terms of financial disclosure. And this seems like going a step backwards. So I just wanted to explore that from your point of view, more get that it's more complicated now with the way the business is evolving. But I would argue, it's still very important to understand the differences between sort of how the operations of the business, the store, the rent is growing versus how the trading part of the business, the buying, the merchandising is performing. So I'd just be interested in your thoughts.

Bradford Banducci: Yes, Phil, we'd like you to challenge our competitors to provide some of the conspiracy we provide. So keep the questions up for all. The issue we've got is just the efficacy of really what is GP versus CODB. And now really the efficacy goes down into where you put your media money, and so to speak, in which line do you put it into cost would you put into GP. And so there's issues there. And then very importantly, for us, really, we're trying to be a lot more forensic on the end-to-end cost of running the different broad businesses, same side of a supermarket. And there's been a lot of conversation on meat and do we make money or not make money on meat and you start looking at GPs and so on. When you actually look at the contribution margin, which is just a sign of my costs all the way through, essentially, you find a business that at breakeven or modestly profitable in the last year, but June with a very emotive conversation around the wrong data and there's a risk in client inside our business, and we use that data to make also suboptimal decisions. So we really want to enhance reporting and Steve can talk to what we want to do there with some of the segments or retail media we want to show, but we also want to move to a more accurate measure of the underlying profitability of our business, which the characteristics we have is going to be looking at contribution margin, which is a variance of what we've done with that. But I'll, Steve, let you go through the detail. The only other point I'd make is we're not going to lose CODB or GP at the group level. So you're always going to have that, but we're not trying to judge an issue. We're just trying to get the right mechanics as we look at our individual business.

Stephen Harrison: Yes, Brad, I mean, I'll just take some sort of additional comments. What we're trying to do is make sure decision making at Woolworths has end-to-end lens. And so when you just focus on the margin or just focus on the cost to ignore relationships that exist. And so actually, we want our focus to be on the sales, the cost of goods, the cost through the supply chain and the cost in our stores. And when we actually look at the category dynamics with our business, the economics remarkably different depending on which part of the store or which of the products. So some of our production or service areas might have a very high gross margin, but actually got a high cost to produce at a high cost to serve in the store. And so just focusing on one area and not the other, we don't think gives the full end-to-end view. And so increasingly, what we want to do is provide commentary around the category economics into the color on the performance of each of the parts of the businesses. So that's what's behind it. And I think it's actually how we're managing the business internally. We're really focusing on how do we look at contribution end-to-end and profitability end-to-end and one of our external disclosures to match how we run the business.

Bradford Banducci: It was -- we just this month in our Board report actually reported contribution margin by a broad area in all of our businesses, and it was a very powerful conversation at the Board on decisions and how to make the right decision. So, it is [indiscernible] making going forward.

Operator: The next question comes from Michael Simotas from Jefferies.

Michael Simotas: And good luck with the future, Brad, I've always enjoyed our interactions. My question, I guess, is a little bit more of a philosophic one. It's good to see improving sales momentum in the business, but sales growth is still well below historical long run average. And it's partly because you've been lagging competitors, but partly because the supermarket industry is quite subdued. How much of that you think is cyclical consumption versus perhaps more structural leakage into other channels and retailers? Because I appreciate the consumer is under pressure, but some of the more discretionary retailers continue to do quite well, and I would have thought population growth as well as some trading into the store should be providing some of an offset. So just interested in any comments on that, please.

Bradford Banducci: I think and I'll make some comments on as Amanda likewise, Michael. I'm sorry, I'm not going to be there when we open the new store in [indiscernible], and I'm hoping that all of you'll enjoy it and shop [indiscernible] you build in a very large basket, including those everyday needs categories, which is where we've seen the unit loss. And what we've, essentially, seen particularly in everyday needs is a lot of other retailers, even discretionary retailers coming into the space so that they can build their own traffic to their stores. And therefore, you're seeing very high levels of discount in these categories across a whole range of retailers depending on the nature of the item. And I'm sitting at [indiscernible] Big W business, and I would include BIG W as one of these, who of course, is aggressively, naturally competing in this everyday needs space. So you are seeing that part of the basket to get shared between many retailers, and that's good for competition. It's green. It's good for consumers. And that's even more productive in New Zealand, Michael, and that's one of the challenges you see in our deal results. So our challenge comes back to how do we get those items back forward, and we simply need to work hard to get the right price, the right cost per unit. And to do that, if we do what we know in our history is there's a lot of convenience doing shopping in 1 place and no splitting your basket. But it's all based on getting right price and getting that clearly communicated and then convenience, but, the first 2 are disproportionately important to us now. I think you can [indiscernible] the basket. Perhaps over-egged in COVID where some people deliberately 1 place over many places. But there's no reason why through convenience, you can't build it going forward.

Amanda Bardwell: Yes. Thanks, Brad. I'll just build on that by saying that, yes, there is that change in customer behavior that we've seen, particularly over the last 6 months quite acutely in going forward when we're thinking about cost of living pressures. What, I think, is a real positive for Woolworths is the fact that when you look at our convenience offers like online shopping in Direct to Boot, you're really seeing the basket size increase over time. And as we know and as we've talked about before, you really have that customer who increases their overall spend with us. So they're shopping and, I think, for Direct to Boot or delivery, and overall, they end up connecting with us more frequently. It enables us to be able to connect our supply partners to them as well as they're connecting on our digital assets. We're also able to then continue to better understand what they're looking for. And of course, through that, we are able to also grow that basket over time. So I think that's how we're thinking about the future. So certainly, Everyday Rewards plays a really important part of that, as does our real approach in terms of thinking about being where the customer is. So I think we're well placed, but we're certainly seeing some shifts.

Bradford Banducci: Your point on the basket size of eCommerce is very comfortable. Thanks, Michael.

Operator: The next question comes from Nicole Penny from Rimor Equity Research.

Nicole Penny: Just following on the previous question on Australian groceries. F '24 was a year where many of the Woolworths grocery key supply chain, advanced data analytics investment and loyalty investments and initiatives were meant to come together. And understanding the plans are there. But some of the initiatives, the response to digital data analytics and store initiatives are taking longer to roll out relatively. With the benefit of hindsight, Amanda, are there any critical gaps in competitive response times or reporting structures, execution and implementation plans that you've noted? And could you please comment if there are any areas for improvement in the coming years, please?

Amanda Bardwell: Yes. Thank you. Thanks for the question, Nicole. Look, I would just say echo what we've talked about before, which is at the beginning of the first, second half, we did see a real shift in customer behavior. And I think we've talked about the fact that we could have improve in terms of our response early on in the second half. What I would say in terms of what we're seeing from customers are those customers really engage with us across our stores, online and digital and our loyalty program. They continue to actually connect with us more frequently, show their loyalty and spending more with the opportunity that we've got on this go forward is to have broader appeal across our customers who perhaps aren't as digitally engaged with us as some of the cohort I just talked to before, a real opportunity for us is to continue to grow where we see customers engaged in digital, in eCommerce and in loyalty. We see real upside both in terms of their experience that they have with us, so the NPS and the efficacy, but also to spend that ultimately comes back to us as a group. The opportunity is for those who perhaps have a Everyday Rewards card that aren't boosting, for example, are shopping our stores but not scanning, and that's what we're very focused on the go forward.

Operator: The next question comes from Ross Curran from Macquarie.

Ross Curran: It's Ross. I guess just to run it to Richard's question before, BIG W is another division that's sort of well below peak levels of earnings. Earnings down 9% this year. This division consistently lost money pre-COVID. How should we think about BIG W going forward? Is it a breakeven business at best going forward? Or can it get back to being a meaningful contributor to the group?

Bradford Banducci: Thanks, Ross, and that's lucky last question, actually, and I'm sitting next to Dan who can talk to the business. Obviously, at a high level, our plan is not to be breakeven. Our plan is to be profit accretive and contribute to the broader group as we are doing through rewards, as Amanda talked to or digital engagement or in fact, we won in our first group collectibles program right now. In fact, Big W, Woolworths supermarkets in Australia, Woolworths supermarkets in New Zealand and early days, but it does appear to be giving traction. Dan, I'll let you talk to some of the things that are underway right now in the group. I think very importantly for us is we actually finished the year in June with actually making money, right, so it's not like we, and normally, we already make it at the end of the year. So I take it as a very positive time in the year ahead. But maybe just some of the specific versus the guidance. Dan?

Daniel Hake: Thanks, Brad. And I do think we need to take the BIG W's performance this year in context of the wider market as well and just the pain that a lot of our customers have gone through in context of cost of living. And a lot of what you've seen in the results is that change in behavior playing out. Now the 2 priorities we had as a team in F '24 was really making sure we responded on value, and we were there on pricing and competitiveness overall, which meant prices dropped in over 3,000 lines, making sure we had the right promotional and event calendar in place. We worked on covering any opening price plan gaps and that we might have that are incredibly important for our budget families in particular. So really, what you've seen in F '24 is that discretionary pullback in our core customer -- cohort. Now the second priority was keeping track our transformation priorities and making sure we build a sustainable profitable business for the medium term. And maybe a few colors there, one, working on product and in each of our core businesses, we've made significant headway. So I talk about our Everyday segment, our bulk rent extensions and our beauty offer in particular, have worked incredibly well, including our shop-in-shops in our Play business, which is our strongest market share business, and we've got hard on launching own brand offers through our brand, Summers and Toys, stationery are off to an incredible start, and we have just gone live. And I think it's important to note that in clothing at home, those are longer lead time businesses. It takes a good 12 to 18 months to reset the ranges there, and F '24 has not benefited yet from that reset. So we just launched a spring/summer clothing with 25% option reduction, a significant part of the range is sub-$20, all of which should lead to volume growth and improved performance and lower clearance investments. So closing at home are really in that market. So I think just a lot of work underway. If you want to talk about green shoots actually from those changes that we've made, one, units and transactions are back in growth through the end of Q4 and the first 8 weeks of trade. Our eCom GMV, which is the total dollars through the TIL on our online site is up 6% for the year, but that's only been in place in November. So we're seeing double-digit growth through the back end of the year there. And then just -- the whole system transition that we've been through, both on space management, smart clearance and the like only just launched right, so we're going to see the benefit of those going forward. So we're quite, I think, quietly optimistic about BIG W's potential. And yes, we have an experienced executive team who is working incredibly hard to build a sustainable customer franchise. So we think positive overall.

Bradford Banducci: Thanks, Dan. And I think that was our last question. As I said in the media call, the truth is always in our stores, so get into our stores. I think hopefully, Shaun, if you go down travel later in [indiscernible], you will see must availability on the new sort safety and urge you to go there, see our new price ticketing, see our [indiscernible] availability, should see the way we tied up our promotional ends, including activity promoting some of our everyday needs categories. And hopefully, you will feel as positive as we do. And in fact, new trolleys in [indiscernible]. Thank you, Amanda. So you can also get to use our [indiscernible] trolley. And bye -- thank you, everyone. Speak to you soon.

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