Woolworths Group Ltd
ASX:WOW
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Woolworths Group Ltd
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Thank you for standing by, and welcome to the Woolworths Group Limited F '22 Q1 Sales Results Call. [Operator Instructions] I would now like to hand the conference over to Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.
Good morning, everyone. Thank you for joining us today for Woolworths Group's First Quarter Sales Results for the 2022 Financial Year. Joining me today are Stephen Harrison, our Chief Financial Officer; Amanda Bardwell, Managing Director of WooliesX; Natalie Davis, Managing Director of Woolworths Supermarkets; Spencer Sonn on the phone, Managing Director of Woolworths New Zealand; and Claire Peters, Managing Director of B2B and Everyday Needs. This has arguably been one of the most challenging quarters for our business since the onset of COVID, with the Delta variant causing a number of disruptions to our stores and supply chain, especially in New South Wales and Victoria. Before we turn to our results, I would like to take this opportunity to highlight some numbers which bring to life the challenges felt by our team during the quarter as a result of the Delta outbreak. Since the Delta outbreak began earlier this year, over 22,000 of our team have had to isolate. And you can just imagine the second, third order of impacts of that as we've had to move our team around to make sure we keep our stores and DCs open. We've also had over 1,500 exposure sites in our network as a result of positive COVID cases and have had to shut some of these sites down temporarily. And of course, they had the same target on the back end of that, in particular, in our DCs. And trading restrictions have impacted 91 BIG W stores, with 8 BIG W stores closed completely. Our ability to continue to operate through this period despite these challenges is a testament to the resilience and agility of our team, and I want to thank our extended team for their contributions and continuing to serve our customers in [Audio Gap] during this most challenging of times. I also would like to thank our suppliers, government and other stakeholders that have contributed to us truly being better together. Turning to our results in the first quarter of F '22. As a result of the extended restrictions in New South Wales, Victoria and also in Greater Auckland during the quarter, we saw customers continued to consume more at home. This benefited our food businesses with strong sales growth in Australian Food and New Zealand Food. On the other hand, BIG W has been negatively impacted due to government-mandated store closures and trading restrictions, primarily in New South Wales and Victoria as well as cycling strong growth from Q1 in F '21. Group sales for the quarter totaled just over $16 billion, which is an increase of 7.8% on the prior year on a continuing operations basis. However, it is worth noting that the total sales result includes the first-time inclusion of PFD Food Services and reporting of Endeavour Group services in the quarter following the completion of the PFD acquisition and separation of Endeavour Group on the first day of F '22. At a group level, the strength of our e-commerce businesses was again a highlight in the quarter with growth of 53.5% as we were able to continue to provide convenient and safe shopping experiences for our customers. e-commerce penetration was 12.4%, and it was supported by increased capacity, especially direct to boot, and the continued scaling of our various online services. Turning to the highlights by business and starting with Australian Food. Australian Food sales grew by 3.9% to 8.7% on a 2-year average basis and [Audio Gap] higher in-home consumption driven by extended lockdowns in New South Wales and Victoria and increased e-commerce capacity, the successful Woolworths Bricks campaign and the launch of Today's Fresh Food People. Q1 saw a return of COVID-related shopping behaviors with customers shopping less frequently, but it was materially larger [Audio Gap] Growth was led by New South Wales and Victoria, although Victoria's 1-year growth rate was muted, reflecting the lockdown in the prior year in the state. Average prices decreased by 0.9% or 1.8% excluding Tobacco with deflation across all major categories, except Tobacco and Meat, due to the temporary reduction in promotional activity in the prior year as a result of COVID and price deflation in key fruit lines such as avocados. [Audio Gap] increased the prior year, equivalent to 11.4% of Woolworths Retail sales. In New South Wales and Victoria, WooliesX was able to meet the increased demand for online services, driven by extended lockdowns through continued capacity expansions. The increased demand for online services is reflected in the significant increase in the weekly traffic to our Woolworths and Everyday digital platforms during the quarter, up 36.8% on Q1 F '21 and 28.4% on Q4 '21. Our Everyday Rewards app has continued to grow in popularity with our customers with weekly app users doubling from Q1 of F '21 and scan rates increasing to 54.7% of all transactions. WooliesX also launched Everyday Market during the quarter, allowing customers to shop a number of other Woolworths Group and partner brands adjacent to their grocery needs. Moving on to Australian B2B. During the quarter, we made some changes to our reporting segments and split out our Australian B2B businesses, reflecting portfolio changes and the different drivers of these businesses. Our new Australian B2B segment comprise [Audio Gap] and B2B Supply Chain. B2B Food includes PFD Food Services [Audio Gap] Woolworths at Work and Australian Grocery Wholesalers. B2B Supply Chain includes external Primary Connect revenue and external Statewide Independent Wholesaler revenue in Tasmania. B2B Food sales -- Australian B2B total sales for the quarter were $952 million compared to $321 million in the prior year [Audio Gap] reported higher sales than the prior year, dollar growth in comparison to Q1 F '21 was largely as a result of the acquisition of PFD Food Services on the 28th of June 2021 and the recognition of Endeavour Group's supply chain revenue under our partnership agreement. B2B Food sales were $656 million, of which over 2/3 related to PFD. While PFD sales were not included in our numbers in the prior year, its sales were broadly in the line with the prior year and have, of course, been impacted by lockdowns in New South Wales and Victoria, restricting many of its customers' ability to trade. Excluding New South Wales and Victoria, sales in the other states and territories increased in the mid-single digits. Moving on to New Zealand. New Zealand Food sales growth in the quarter was up 9.7% on the prior year and up 8.7% on a 2-year average basis, driven by new COVID restrictions across the country from mid-August as well as improving underlying customer demand and higher inflation. e-commerce continued to improve strongly with penetration of 13.1% in the quarter. On -- moving to BIG W. BIG W was materially impacted by trading restrictions, particularly in New South Wales and Victoria, which impacted 91 stores in the fleet during the quarter. Total sales were down 17.5% on the prior year but flat on a 2-year average basis. All categories declined. We saw a modest shift back to leisure and toys. We continued to see slower sell-through on apparel with higher levels of clearance activity on winter lines and slower sell-through of apparel spring and summer ranges. e-commerce sales increased by 124% during the quarter with customers unable to shop in store in some states. BIG W's e-commerce penetration reached a record 25.4% in the quarter. With restrictions now easing in New South Wales and Victoria, we're delighted that all BIG W stores in Greater Sydney have reopened to customers, and we look forward to opening our Melbourne stores this Friday on the 29th of October. As we indicated in August, COVID costs increased again during the quarter to $102 million or 0.6% of sales. This largely reflected increases in team and supply chain costs. In recognition of the fantastic team -- job our team have done, we have also announced a Christmas Thank You bonus for our team members, which is expected to cost $35 million to $40 million in Q2. I'll now turn to current trading and outlook. With restrictions easing in New South Wales and Victoria, we're starting to see Australian Food sales slow, although in the media call, I said really, taper off very, very high levels of elevated sales. We're also seeing BIG W sales trends improving as we reopen our stores. However, given the closure in Q1, BIG W's results will be even more dependent this year on the Christmas trading period. As we enter the next phase of the pandemic, we recognize the importance of vaccination to workplace safety. And after careful consideration and much consultation, last week, we announced that we will be requiring our team members in Australia to be fully vaccinated against COVID. We want to provide the safest possible workplace for our team to work as well as for our customers to shop as we continue to provide an essential service for our customers. As we look ahead to the Christmas trading period, while the outlook remains uncertain, we are excited about helping our customers celebrate a much-needed festive season in a safe, inspirational and enjoyable way. I will now turn the call over to the operator for questions.
[Operator Instructions] The first question today comes from Michael Simotas from Jefferies.
The first question for me is on the Australian Food business and in particular, Tobacco. It looks like Tobacco was a very large drag on sales because your comp sales were 4.8% ex Tobacco. It looks like Tobacco sales must have fallen in something in the order of 20% year-on-year. Can you just talk us through what's happening there, whether it's a market effect or something specific to Woolworths and what we should expect going forward?
Michael, good to hear from you. And yes, that is the number. So it's primarily really a result of continued material declines in volume but without the offset of the excise base price increase. So volumes are down. If sales are down 20%, volumes are down somewhere in the order, I think, of 27% or, Steve, feel free to correct me or Natalie. So it's just the volume decline that we've seen, and that's just manifesting itself in sales decline. The number is a little bit bigger than you might expect because we are cycling a quarter last year in Victoria where tobacconists were shut in August and September. So we had a bit of a bump last year, but the overall structure of the tobacco industry shows continued decline in consumption and, therefore, in sales. I think it's probably broadly consistent with where everyone has been in the market, although we've been relatively vigilant to not getting caught up in any bulk tobacco sales. And we're quite confident we've flushed those -- that out of our business and trying to really drive our responsibility agenda. And that trend line, by the way, hasn't stopped on the go forward. And we don't expect it to stop anytime soon.
Okay. No, that makes a lot of sense. And then second question for me is on food pricing. If we look at what happened in the quarter, pricing is still negative in Australia, and base effect is part of that. But on a 2-year basis, it actually -- the price trend deteriorated a little bit further. You're seeing signs of inflation in New Zealand, and you've called out labor and input costs. What do you expect in Australia going forward? I mean, clearly, there's a lot of pressure on pricing from a freight and input cost perspective. Presumably, prices will have to increase through the value chain at some point. How do you think about passing those on to consumers? And what does that mean for your business?
Thanks, Michael. I mean, this is the key question. We don't, as you know, get caught up in forecasts. So let me talk to you where we're at today in week 4 of Q2. And as you know, the way we calculate price is the Fisher method. So you are volume adjusting and making sure you get a very balanced view[Audio Gap] inflation is. And we've got more immediate numbers that we can look at if we're looking at any one period to give us indicators. And pardon me if I take a while in this question. But I think it's quite an important one to land holistically for everyone on the call because it is so -- such an important question. Now historically, I should add, we've seen quite material price inflation in Tobacco, which has sort of propped up the numbers as Tobacco reduces in its meaningfulness as a percentage of our sales. That overall number is less impacted by Tobacco, and we're not seeing tobacco prices increase on the back of excise increases. So I think that's firstly just really important. Then if you break our business, which we're always doing, to the long life and fresh categories, as everyone would be aware, the fresh categories, in particular fruit and vegetables, are materially driven by supply conditions in Australia. And then the meat and dairy are somewhat driven by supply but somewhat also driven by export parity of what the alternate -- the price could be achieved offshore. In the fresh categories, red meat is -- has continued to be highly inflationary, and the forecast is that, that continues. So it's material inflation when we look. And I thought -- and I sort of felt this for the last couple of years. We get into these record meat prices, and then you come back and they get to another record, all driven by different logics. And a year ago, it was the droughts and so on. And this year, it is the rain. And therefore, everyone's holding their herds, fattening the lambs and so on for export and whatever else. So red meat is still very inflationary. We're not seeing that same level of pressure in chicken, but the level of inflation in red meat overwhelms that. On fruit and veg, actually, fruit has been deflationary. Vegetables has been slightly inflationary. The deflation in fruits, we've got these huge lines. And when they go deflationary, you see it in -- the big line we've called out just because it's just such an important line is avocados and the oversupply of avocados coming out of WA and, also to some extent, New Zealand. So an avo's costing $1, $1.20 when it was costing $3 or $3.50. We've seen some other key lines be deflationary as well such as apples. And so there -- we've seen a situation there. We think probably fruit and veg becomes neutral over -- in the next couple of months, although, again, it's hard to tell with the conditions. But when I ask the team, it feels like we get back to neutrality there, but still lots of inflationary pressure in the red meat side. If we go to long life then, it's very hard. As you know, Mike, when you do these balances over quarters and you're balancing whole volume adjacent baskets to get a good bead on things, in particular, when you're cycling a quarter or a year ago where we still didn't have a full promotional program in place, and you sort of get the fog that sort of surrounds these things and you get the deflation we've seen. However, what we are seeing, if you just abstract from that, is we are seeing material price increases from suppliers. And we always get increases from suppliers, but there are more this year than there have been in previous years. And of course, some of the logic to it is relatively compelling with freight costs and whatever. So we work through each one on its merits. You would know, we tend to agree to about $0.50 in every dollar that it is asked for. That's probably slightly higher this year, and the overall quantum is higher. So we'll continue to work through those. And then if you look at shelf prices, you're starting to see them become modestly inflationary, and we see that in New Zealand. New Zealand is slightly ahead of Australia because we have more indent or imported lines in grocery going into New Zealand. So that's why you see the New Zealand situation being a bit ahead of Australia. But we are starting to see very modest shelf price inflation in these core long-life lines. So the setting suggests that we will go from being very deflationary to neutral, if slightly inflationary, in the next while. Our issue, of course, as always, becomes our consumer and how we think very thoughtfully on delivering value to our consumer. And we're not seeing the 2-speed economy yet emerge in Australia. But we are very worried about our value customers and delivering value for them. And so we need to think through, in particular, as we get into Q3, to what extent and where we'll let these cost increases flow into prices. And that's something we're actively working on, as you would imagine, on the go forward. And we just got to have a [ half eye ] to ensuring that shopping at Woolworths continues to be great value. So that's the situation. We're not -- the question is not whether we're going to be deflationary but to what extent there is material inflation in the market. And at this stage, we expect it will be muted based on all the factors I've talked to and our [Audio Gap] for our customers.
The next question comes from Shaun Cousins from UBS.
Brad and team, maybe just further on the inflation question around Australian Food. Can you just talk a little bit about, given we haven't really seen food inflation, gosh, maybe for a decade of any sort of way, how do you think about volumes and trading down and the like there? Just maybe just to amplify your answer previously to Mike's question. I mean, are you looking to wear more of this pressure yourselves? And how do you think this could actually see the consumer trade down within categories, particularly as the degree of food inflation -- the breadth and the quantum of food inflation on a long-life basis is quite significant coming through, please?
Yes. Shaun, thanks. It's a great question. I wish I could give you as good an answer as the question. Our mix at the moment, by the way, is relatively distorted by the fact that we've -- our ASP has been increasing as people have actually bought more bulk packs. And there is a little bit of substitution where if your -- we've had still some level of out of stocks, not where we had a year ago, there's still been some substitution where there's an out of stock. So our underlying numbers are relatively noisy. But the way we're thinking about it is we need to be much more thoughtful on the go forward of how we deliver value into different parts of Australia and into our different customer segments. Value is a very different issue in a premium segment or in one of our UP stores, and value is in one of our value stores or one of our budget customers. And so we need to be very thoughtful on how we deliver value by community. And so that's what we are actively working on. In a budget community, value means price on the overall basket that you shop that week to make it affordable. Value in a more aspirational community can be a real weighting into freshness and how freshness lasts and the trade-off of having an inspirational meal at home versus a meal out. So we're just trying to be very thoughtful on core value in UP, which is very wide into our supermarket strategy and how we deliver value by different type of store and then importantly, using our Everyday Rewards program by every type of customer and making sure that we deliver the right value to everyone. So in the past, we sort of averaged out. And so you could get very big swings. We're hoping to be just a lot more forensic of doing the right thing for every one of our customers. Because for every customer that is budget constrained right now, at the moment in Australia, there are a number of other customers who haven't traveled or spent money on a number of other discretionary items and are willing to want to spend it in our stores to create more inspiration at home. So we just need to work our way through that very thoughtfully, and that goes to the store range in promotional programs as they go across the store, what kind of aims we're going to put in different stores. And then as I say, what kind of one-to-one offers we delivered to our customers. Hope that makes sense. Sort of something we've been working on for years and, at some point, expected it to become more important. And I think that clearly is going to be the case in the next 24 months.
[Operator Instructions] The next question comes from Grant Saligari from Credit Suisse.
Brad, just a question on shopping behavior, if I could, in Australian Food. Last year, through the Melbourne lockdown period, you still had really strong growth in store originated sales. Like the first half store originated were up, I think, 7% for the first half. Through this quarter with New South Wales, Victoria, ACT lockdown, store originated sales went backwards 60 basis points, which I guess is partly a reflection of the success in your e-commerce and the growth of that. But just interested in any observations on shopping behavior and whether you think that, that drift away from stores is in some way permanent as you're seeing at the moment.
Thanks, Grant. I mean, a couple of different dimensions to it. Firstly, if you exclude Tobacco, actually, store originated sales were positive. So it really is that very distortive effect of Tobacco. And secondly, it is worth referencing, if you look at our Q1 average sales per week, the sort of -- the average number was what we normally would do in December. So we had this very elevated number. So as that sort of comes off a little bit, then you're bound to see a little bit of negative trend. However, as you look forward, your point is the right one. Essentially, we do expect to see a scenario where as the e-commerce business grows, that the store originated sales will either be neutral or go back slightly. And we're working very hard not to make that the case, but it's fair to assume over the medium term. Now what's critical in that, and you'll see the number we've put into the documents, is we strongly believe that our stores, the key to us is reimagining the stores so we can provide a great shopping experience in the store for the customer that wants to shop, but also then provide a great series of e-commerce services off that store for the customer who, on some occasions, doesn't shop but just wants to do a direct-to-boot pickup when they're on their way to soccer or back from school or whatever the case may be. Or, in some cases, do an on-demand delivery to the home if they're looking for critical items to entertain or do pick-a-day home delivery. So stores are central both to in-store sales origination and e-commerce. And so that's the reason you need to look at them both together. And how we manage that and how we really reimagine how our stores operate is one of our most important pieces of work in the next couple of years.
The next question comes from Tom Kierath from Barrenjoey.
You mentioned there that New South Wales and Victoria are doing -- going pretty strongly. Can you just give some comments on the other states around the country, how they're doing? Is it positive? Yes, just to get a sense of what things might look like when we're back to normal.
Yes. Mid-single-digit sort of numbers, Tom, actually very solid. And people across Australia seem to be doing a little bit more at home. And so we've seen -- the same trend is not quite as extreme in those states as we've seen in Victoria and New South Wales. So yes, I think -- yes, I think we've changed the way we look is our thesis, even if you're not in a lockdown. In a lockdown, obviously, it takes you to extremis. But we have changed the way we live. And even when you look over a season, we said this in the media call, to what's happening in Canada or the U.K. and just speaking with Loblaws last week and just looking at some of the information out of the U.K., we're seeing elevated home consumption even in a time post the lockdown. And I'd say that's just probably based on the changing nature of the way we live and work.
The next question comes from Craig Woolford from MST Marquee.
Yes. Congratulations on what would have been a difficult quarter to you and the entire team. I am interested in, I guess, your sense or perspective on how you see online and how it performed in the first quarter. We've got the financial numbers, but I'm interested in whether you've seen scale help online profitability given just the magnitude of the dollars of sales you would have had online in New South Wales and VIC. And a few other things that are quite interesting to me. One was that the click and collect percentage was largely unchanged in the first quarter versus the June quarter. And in your online, NPS had slipped a bit. So just interested in how your take is on online sales.
Yes. Thanks, Craig. I mean, just keeping up with the level of demand has been a challenge and just amazing jobs done between WooliesX, Woolworths Supermarkets, our format team and even our replenish team of what we send where. So it is just -- to keep up with the demand has been challenging. And that's particularly true in New South Wales, where we've got stores that have already high turnover with sales originated in store and then to clip on the e-commerce sales. And so it's just been an amazing job by the team and particularly in New South Wales, I need to call out, for opening up a material increases in e-commerce capacity. Now in doing this, it hasn't always been ideal of some of the out of stocks and some of the challenges we've had. So that's true. And actually -- and I don't think Spencer would mind me saying this, Spencer Sonn is on the line, but we actually had more issues in our out of stocks in our New Zealand business in e-commerce than we did in the Australian one. And you'll see that number have softened a bit more than in Australia, funny enough. But in both businesses, it's a good bar chart. Of course, we need to make sure that, that's a great experience. And so we need to continue to work on that. You picked up a really important issue, though, Craig, which is click and collect or what we've called pickup or direct to boot has been strong. But that has been because we have been transforming that service really, and that's been an amazing effort of how in supermarkets, we've gone to direct-to-boot solution across the country, and that's really resonated and actually led to a slight increase in that percentage in our business. And that's been really important. We do know for overall economics, direct to boot or pickup at a store is key to the overall experience. So that's been key. I'd call out then the BIG W one has been really, really quite impressive of actually just how we've pivoted from in-store to pick up at the front of the store and all the things that has taught us and we've learned on the way through, which has been good as well. So lots of learnings. The business -- e-commerce business continues to scale. But what we've learnt, I think, is we can do a lot more with our store network than we thought. And so of us being much more -- to Tom's point or was it Grant's, much more thoughtful on how we use our store network on the go forward. By the way, I should reference that some of our issues in BIG W VOC relates, and I don't think Paul Graham would mind me saying this, to some of the challenges we've had with Australia Post and obviously inside supermarkets. In WooliesX, we run our own fleet, but we're very reliant on Australian Post to BIG W.
The next question comes from Ben Gilbert from Jarden.
Brad and team, I know it's a sales call, but you've obviously given a bit of color just around your costs. Just given the restrictions and what we know at the moment, how do you think we should be thinking about the shape of these COVID costs in the next couple of quarters based on -- should they come down quite materially into Q2? As everything reopens, you probably won't have to have this level of shutdowns.
Ben, I mean, it's one we spend a lot of time on. I mean, we're pretty locked and loaded for Christmas, as you might imagine. So hopefully, we'll see a bit of a tapering of the run rate in Q1. But calling out the Thank You bonus in Q2, I think, is quite important. And then I should just log anxiety in supply chain through the impacts of COVID or any of the issues of the dislocation in supply chain mean that we've taken relatively conservative settings into bulk storage capabilities and so on. As you would imagine, we should for Q2. So we've tried to take pretty conservative settings into that part of our business, getting enough team into sheds, making sure that we've got bulk storage, if needed, just given where supply chains are at and to deal with any issues we might have in a COVID scenario. So we're pretty conservative there. At the store level, our health ambassadors will still be there, but we'll be quite thoughtful on where and how we use them, which is a material cost at a store level. So that will -- we're not going to take any shortcuts, but we'll dynamically adjust. And that's where our major spend is, the level of health ambassadors, which are for level 3-, level 4-type lockdown scenarios. So we can't give you any forecast, but it's not going to materially come off the way it did in the second half of last year.
And presumably, that Christmas Thank You bonus is around -- I obviously appreciate the staff have been working in pretty difficult times, but it probably helps a lot with retention when, as we've seen, there's a lot of staff shortages around in retail land at the moment.
Yes. I mean, it's not -- we didn't do it for retention reasons. We did it because we wanted to meaningfully recognize our team and make sure they had an affordable and inspirational Christmas as well. I mean, it's money that they get to spend for them and their extended families and friends at Christmastime. So maybe it helps a little on the retention side, but that's not the reason for it. We are, at this stage, by the way, in case we get the question, relatively well recruited for Christmas. The issue we have is not whether we're in a good place there. It's just whether we get any turnover given alternative options that appear in the next couple of months, but we feel relatively with good settings going into Christmas at this stage.
The next question comes from Ross Curran from Macquarie.
I might just ask on BIG W. You called out supply chain, and you're starting to see some issues there. But you remain confident about your Christmas inventory. Can I just get you to flesh that out maybe a bit? Just what gives you confidence that you will have enough stock for Christmas? And maybe how long do you think the supply chain issue will last for?
Thanks, Ross. There are different aspects to this one. So I can give a high-level answer and then, Claire, if you wanted to add any color. There are 2 different issues. What we require for Christmas has been shipped. So our Christmas, we're not stuck in a port somewhere offshore. We shipped -- our Christmas range is on the water. And now we're working very hard to make sure we're shipping our back-to-school at the end of January range. And these are the 2 big events -- disproportionately show in BIG W. It's important for all of our business but more important there. What we cannot easily address right now, Ross, is whether we have a huge sales surge going into Christmas that's above our forecast. So that is outside of our control. But actually, in terms of our shipping, that's all underway. And so how big Christmas is, we will all wait and see. As we've opened our stores in New South Wales, we have seen strong demand understandably and particularly even for Christmas lines. And I should do a shameless plug, our Woolworths Food Company Gold Christmas range is coming to supermarkets this week. So please go and see it, everyone, and give it a go. So that will depend on what happens. But I don't know if, Claire, if there's any color you wanted to add to that?
I think the only color I'd add is we knew this was coming. We proactively planned the flow of stock for those key customer events, mainly Christmas and summer, as Brad said. And pleasingly, they are all onshore as we speak. Clearly, when you had over 90 stores closed, there is a funnel backlog. So the team are working prioritization of the right stock at the right time. And as you quite rightly said, Brad, with 8 weeks to go, it will be getting that stock into the right store with the sentiments we've started to see, which are really encouraging already in New South Wales. And key events that Brad already touched on, Halloween and Christmas, are similar levels to where we were last year, albeit with 6 weeks less of sales. So great start. Team is doing an awesome job, but the next 8 weeks will be around shipping the right stock to the right store at the right time. And sometimes this year, we'll need a crystal ball, but we've got a great team to help us with that.
The next question comes from Scott Ryall from Rimor Equity Research.
I'd echo the comments. I'm pretty much in awe of what you guys -- what your broader team has had to go through in the last quarter, in particular. I would imagine it's been the hardest quarter out of the last 18 months, but correct me if I'm wrong on that. I'm just wondering, obviously, that has put some operational and staff-related challenges that you've called out in the release this morning, and congrats for putting out the staff Christmas bonus. I think that's a great initiative. In terms of the operational side, I was wondering if there's any strategic initiatives and priorities that you just literally couldn't get to in the last quarter that you need to probably more for calendar '22 now that we're too close to Christmas. Is it the reimagining the stores that you were talking to before? Or is there any other major initiatives that you feel you couldn't progress as much in the last 3 to 6 months as you would have liked that you need to reinvigorate going forward?
Yes. Thanks, Scott, and thanks for your kind words for the team. Look, one of the things which we started to do at Woolworths Group, and we're still early but it is working for us, is move to a quarterly agile operating rhythm, where we make a series of commitments by quarter that we're trying to execute on top of trading our business, which is always our priority. And in some of those, you're quite right, we've had to slow some of them down. We haven't stopped anything, but we have slowed some of them down and very deliberately, in particular, in this quarter, given the fatigue our team have as we go into Christmas. We want them to be energized in going into Christmas. So we, as a collective, have sat down and said some things we will defer from Q2 to Q3. But we haven't stopped anything. We've just deferred or slowed down key activities really. A lot of our productivity programs are still underway. But it's very hard to be engaging on those, say, in New South Wales or Victoria, when that's just not where the priority is. And so [Audio Gap] should be quite thoughtful of where and how we think through reimagining the store and some of the key programs that sit there. And Natalie can talk to that thing, provide a bit of color on how we've pivoted our team rather to the topic of care for a good reason. And then we've also had to do the same in WooliesX, and Amanda can talk to that, where we've had some really exciting strategic initiatives. But again, given our need to just service our existing customers, we've been quite deliberate on slowing those down. But Natalie, if you wouldn't mind, just on the store level itself to some of the focuses we've adjusted on the quarter.
Thank you, and thank you for the recognition of the team. And it truly has been a team effort with the Supermarkets team working incredibly closely with [Audio Gap] incredible demand with direct to boot and delivery services, particularly into our hotspot areas [Audio Gap] continue to make sure we do that in [Audio Gap] and therefore, the work that's been happening with Primary Connect and the replan teams around just balancing the way the stock is coming into stores and trying to make sure we can continue to deliver Christmas level volumes into stores over many weeks with quite a lot of team in isolation, both in our DCs and in stores. So fantastic team effort. I think when we look back at our plans, we actually have progressed on quite a number of initiatives. And where we have delayed, it's been largely in New South Wales and also initiatives that are dependent on our DCs. So for example, we are rolling out [ tailored ] pallets into our DCs, which are much easier for our stores to unload stock into our stores. They don't have to split pallets at the back of the store. It's much safer as well for our team, less manual handling. We had to put a pause on the rollout of that to different DCs across the country. We did manage to pivot some of our productivity initiatives out of New South Wales into other states. So for example, our Monika, which is our automatic temperature control monitoring in our stores, that system's being pivoted into Queensland for rollout from New South Wales. And we'll come back to New South Wales in the second half. So overall, I think we did manage to progress on our transformation priorities. But we made very sensible decisions around delaying the impact and the rollout of some things into New South Wales. We've also thought very carefully around how can we get off to a fast start in Q3, particularly around renewals, which were also disrupted in New South Wales and have preordered equipment for that so we can get going in Q3.
Thanks, Nat. And primarily in New South Wales but a bit of Victoria, by the way, in all of our comments as well, given that they've never really come out of the lockdown. So we've had to be very thoughtful and careful on that as well. Amanda, I don't know if there's anything you wanted to add on the WooliesX front?
Look, a few comments. Let's say, in the first quarter, completely focused really from an e-commerce perspective on just serving that demand. And it was very, very volatile. So having the team focused with Natalie and the Supermarkets group on just getting that service right was the main priority. Towards the back end of the quarter, we started to release a few new initiatives like an upgrade to the picking up for our personal shoppers, which is really, really important, makes their life a little bit easier to help speed up the process of picking as well. So we prioritized some of those things that we thought, given the volume adjustments, were critical. We also did slow down and take more of a test-and-learn approach on things like Everyday Market launching. And that was somewhat delayed, and we've been progressively rolling that out. And we'll start to ramp that up through quarter 2. And then as we're leading in now to sort of the halfway through the first -- second quarter, it's all about service. We had a lot of new customers joined e-commerce in quarter 1 again, and it was a volatile quarter for us. So getting that customer service consistent and great every time is incredibly challenging in grocery e-commerce, in particular. And so the teams are really putting up [Audio Gap] we get that right for all of our loyal customers but also those new customers [ today ]. Thanks, Scott.
Thanks, Scott. Well, Paul just asked me to correct -- make sure that everyone was clear that when I said mid-single-digit, that was on a CAGR basis that I was talking to for the non-COVID-impacted states, in case anyone thought it wasn't.
The next question comes from Shaun Cousins from UBS.
Just regarding the store sales in Australian Food, they're down. And you've highlighted some efforts on productivity initiatives to sort of take costs out of that. I'm just curious around how confident are you that you can actually defend margins in your stores? Or are you going to see some of this structural shift to online such that you're effectively unable to catch up and that you continue to get some sort of margin pressure in your stores? So it's really a question around how quickly you'd be able to sort of change your in-store processes, maybe for you, Amanda, Natalie, sort of take costs out of stores to deal with, stores that generate lower levels of sales.
Thanks, Shaun. Obviously, this is a sales forecast, not a profit forecast. I'm not going to get into margins. I think what we're learning, though, just is the key issue that I think we've been talking about in various guises today and between Natalie and Amanda's comments as well is we are changing what our store does for us. So the same store that actually fills the shelf for the consumer is the store that actually picks an order and puts it in someone's route. And we can improve both of those processes. And that's what we're doing, whether it's a picking app, which accelerates the pick rate for a personal shopper in a store, which is mainly where they are, or automating some of our temperature checking processes in the store, which are very manual, time-consuming. So we're working on getting all that balance around how we reimagine the store. But the key to us is optimizing the overall economics of the store. And we continue to see that as something that we can see enormous opportunities on the go forward. And we look forward, when we get to the half year profit announcement, of course, Shaun, answering that in a lot more detail. Probably looking -- when you didn't ask the question, I thought I could ask you one. How are we looking out west?
Yes. I know you guys were pretty hectic at Blacktown, yes, very, very busy.
As long as we're looking okay, obviously, we're very excited about the renewal. To Natalie's point, that is only partway through in the Blacktown BIG W, which we're just in the process of finishing. And then we're scoping out the renewal, which we're pretty excited about, for the Blacktown supermarket actually, which we hope to do next year.
The next question comes from Bryan Raymond from JPMorgan.
I might just follow up on the supply chain disruption that we're seeing and really just how that's playing out through availability and then on to the promotional programs you guys have basically seen over the quarter. But probably more importantly, how that's looking into Christmas? Obviously, volume is picking up, and some of those pressures might be amplified a little bit. Do you expect to be able to run the typical level of promotions that you've been doing in recent years, given the disruption you're seeing through the supply chain?
It's a great question. And I think all of us, as per previous comments, are trying to think through first, second, third order of impacts of what's happening. And so when I comment, it's really the first order impact of do we have enough product inside the systems [Audio Gap] sales aspirations and our promotional aspirations. That's based on the first order, not the third order of what happens when you can't get containers or pallets and then some of the inputs into key production onshore delayed. So I think we'll wait [Audio Gap]more volatility than we are talking about today, but I can't tell you where or how. In terms of today, I can tell you that as with BIG W, all of our key ranges are on way to be with us in Australia so we can execute on average our promotional plans. Undeniably, there will still be some out of stocks on some brands but not categories. So we'll see some brand issues. In preparing for this meeting this morning and speaking to our Head of Supply Chain, he would say the canned Dole pineapples, as we get into canned fruit for Christmas, there's quite a bit of pressure there, particularly in that particular line. There will be alternatives on shelf for there but maybe not that brand. So that will be where our issue is. It will be much more tactical, much more based on individual lines. On a previous -- at our -- on our profit results for F '21, I talked to Canadian maple syrup. And I'm pleased to say Paul van Meurs, our Head of Investor Relations, has stock built that in his pantry well ahead of the curve. So again, that's a line that I keep talking to. So there'll be a lot of things like that, that will happen. But on average, we will have enough product. We will have enough ability to promote what we do, but we'll just need to be very tactical at figuring those ones out. And then as I said, the second order is going to be back-to-school and what happens in Q3, which is really where we need to do a lot more work and where the more structural systemic issues are. I wish I could give you a better answer, but we feel okay right now. But I'm worried about what we can't see.
The next question comes from Richard Barwick from CLSA.
Obviously, we've -- you've covered off heaps. There's lots of moving parts. You're talking in-store, online, lockdown, no lockdown, the changes in shopper behavior. And I'd also imagine there's some interesting competitive dynamics going on given the inflation within meat, for instance, and what it means for how the specialist channels are reacting or not. Can you give us a sense, given all those moving parts, how are you performing in market share terms? And I'd also be keen if you're able to give us a view or split that out somehow for like an in-store type market share versus how you see your online market share?
Thanks, Richard. Look, retailers like a lot of moving pieces and a lot of excitement. So it is certainly a very stimulating time to be in retail, I can assure you, on behalf of the team. There's a lot going on. In general, we don't feel badly placed going into Christmas. So there will be some challenges we haven't anticipated. But we have -- and I think many of you have heard us talk in the past of rhythm and momentum is so important in retailing and how you engage with customers and with the team. We have a little bit of rhythm and momentum right now, and that's really important for us at this time of year. So on market share, our market share positions across our various brands, whether it's New Zealand, Australian Food, BIG W and so on, we are -- appear to be in a good place and certainly market share neutral, if not gaining a bit of market share. So -- and that's the position we want to be as we go into new year. Measuring market share online is one of the hardest things to measure of all. Just -- it's just there's no easy way to measure it. We have had material -- a very high market share there. That still continues, but it's probably tapered a little bit from where it was before. But it was at levels that were arguably unsustainably high. So we were in the high 50s. That's certainly come off a bit, we think. But we can't calculate it the way we used to be able to calculate. You calculate it in a physical store level. At a store level, we believe we are continuing to hold, if not grow, share.
So the change or the way people are shopping, I mean, there's been -- that's been a driver of market share, positive and negative, for you over the last 12 months? I guess is there anything there to call out that's new or different?
Anything to call out in terms of the change in how -- well, look, Richard...
Well, I guess the change in the way people are shopping and the implications for market share?
Yes. Look, I mean, I think what is important and continues to be, and we talked and our competitors have talked about it, is in a time of COVID lockdowns, neighborhood and freestanding stores performed best. And so -- and that has been true in New South Wales and in Sydney in the last quarter as much as it was in Victoria in H1 of last year. So the freestanders and neighborhood stores performed slightly better. And it would be fair to say we have a very balanced mix of stores across different geographies. But relative to others, we've got a good strong portfolio of freestanders and neighborhoods. So clearly, we've got some benefits on the way through on those in our supermarkets than in our Metro stores. And you would see it in the numbers and in our commentary. Obviously, the city is still very, very challenged. And so we've got some BIG Ws in some of -- particularly in Melbourne that has been challenged. But then we've also got a big supermarket in Town Hall that's been very, very challenged. And then our Metro city stores in both Sydney and in Melbourne have been challenged. But it's one of our benefits, I think, it's this balance that we get. So when one's challenged, the others are going a little bit better. What was very interesting for us last year, and this is going to be one of our major challenges this year, was our resort stores or what we called our resort stores. And what is a resort store this year could be very different to last year. I'm told this year, [ Carrara ] will be a resort store. We've never thought of [ Carrara ] as a resort store before, but we're planning that more people in New South Wales are going to get out into the country, which will be interesting. We're hoping we'll get a little bit of a balance in our very traditionally strong resort stores in Victoria, which were much more subdued last year. But we're hoping we'll see some balance. So quite a few moving pieces in that, if you know what I mean.
The next question comes from Johannes Faul from Morningstar.
I was hoping to learn a little bit more about Everyday Market. For instance, how does that fit into your ecosystem and strategy or really how large is that addressable market online for everyday needs? And perhaps also, I know it's very new, but how has the uptake been so far on the pilot?
Thank you, Johannes. It's very, very early in its journey. And as Amanda said, in some ways, we've sort of slowed it down or reprioritized it, just given the needs to deliver against our traditional e-commerce services. But Everyday Market, we see as a very important mechanic for complementing or supplementing what you could buy in a Woolworths Supermarket. And so there's these additional ranges that go very well with it. The #1 partner is BIG W. So if you want to do a party, you can leverage the BIG W party range together with all the food range that you need to buy out of the Woolworths Supermarkets. And so just getting the 2 businesses to work together in the digital way, in a way that we'd always aspire to make them work in the physical, but it's a lot harder, is very interesting to us. The resonance, it's very early, but the resonance is high. There's -- so we'll look forward to continue to grow it and build out the range of partners that sit within it. So today, it's really been focused on -- focusing on our own brand, BIG W, then with a little bit of supplementing with HealthyLife and PetCulture, which are partner pure plays that we've got. But so far, so good, very small, very early. I think we'll have a more meaningful update on it at the half year. But a key point...
Sorry, our last question today comes from Adrian Lemme from Citi.
Brad, look, I just had a question on the Woolworths Bricks promotion. Just wanted to get a sense from you on how you felt it went relative to some of your past promotions, whether you sort of felt like it moved the dial.
Adrian, it's too hard to tell given the challenges we've had in truth. It's resonated really well with families, and it's been great, particularly with kids at home. That has given them something really interactive to do. And the eco features of it have resonated particularly well within that as well. But as to whether it impacted ourselves, honestly, our marketing team would argue yes, but you don't see it in our overall sales momentum line. So I'm not certain whether it has, but it has been a great mechanic for Australian families to engage and great interactivity on it.
Thank you. That does conclude the question-and-answer session today. I'll hand the conference back to Mr. Banducci.
Thank you, everyone, as always, for your questions. Our mind is very much on Christmas, as you'd all understand, with Halloween just coming up and then the run into Christmas. As we've always said, our truth is in our stores and in our digital platform. So I encourage you to engage with those. We feel excited, confident, have a little bit of momentum going into Christmas and look forward to speaking to you all too soon as we get through the half year. Take care.