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 F '19 Q3 Sales Announcement. [Operator Instructions] I would now like to hand the conference over to Mr. Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.
Good morning, everyone. Thank you for joining us this morning for Woolworths Group's Third Quarter Sales Results for F '19. Joining me in the room this morning are David Marr, our Chief Financial Officer; Amanda Bardwell, Managing Director of WolliesX; David Walker, Managing Director of BIG W; and Steve Donohue; Managing Director of Endeavour Drinks. Joining us on the phone is Natalie Davis, Managing Director of Woolworths New Zealand. Today, we are reporting group sales from continuing operations for Q3 of $15 billion, up 4.2% on the same quarter last year or 5.1% on an Easter-adjusted basis. During the quarter, we saw sales momentum improve across the group with strong growth in Australian Food, a particular highlight of the more challenging first half. Australian Food sales for the quarter were at $10 billion, an Easter-adjusted increase of 4.7% on the previous year with Easter-adjusted comp sales at 4.2%. While we had positive transaction and item growth, sales also benefited from lower deflation, particularly across Fruit & Vegetables and more settled weather.Customer metrics in Australian Food remained high with Voice of the Customer Net Promoter Score of 47 and store-controllable Voice of the Customer of 80%. However, these were below the prior year and the previous quarter. This was driven by the recent extreme weather conditions which impacted Fruit & Vegetable prices, quality and availability. In addition, the unanticipated success in an online Freezer sale in March also impacted Ease of Pick up metrics during the quarter. Plans were in place to address underperforming areas with an improvement in customer metrics evident in April.During the quarter, we were encouraged by the support and positive feedback from our customers on our decision to move to $1.10 pricing nationally on our Woolworths 2- and 3-liter branded milk. Today, over $10 million has been directly returned to our dairy farmers. We opened 4 new stores and completed 3 renewals in the quarter as well as the reopening of our Fairfield Central store, which underwent one of the fastest-ever rebuilds after being severely damaged by floods in Townsville earlier in the year. WolliesX continued its strong performance with online sales in Australian Food increasing by 34.7% in Q3 to $368 million, which is equivalent to 3.7% of sales. Pick up is still the strongest contributor with increased customer participation during the quarter. We also continued to make progress on driving ultra-convenience and effortless customer experiences through upgrades to search capability on our woolworths.com.au website and same-day delivery expanding to 56 stores by the end of the quarter. Following a challenging second quarter, sales momentum improved in Endeavour Drinks in Q3, with an Easter-adjusted increase of 6.4%, and Easter-adjusted comparable sales increasing by 5.9%, assisted by the timing of New Year's Eve and more settled weather. Despite the strong overall growth, category mix remains a challenge, particularly for Dan Murphy's, with the overall wine category in Australia contracting marginally in the quarter compared to beer and spirits which saw category growth of 2% and 4%, respectively. Online sales grew by 10.5% in Q3 through the continued rollout of on-demand across both BWS and Dan Murphy's.New Zealand Food had another strong quarter with customer metrics improving on the prior year with the store-controllable Voice of the Customer of 80% driven by significant improvements in Fruit & Vegetables' scores. Sales were also strong with Easter-adjusted sales increasing by 2.9% and Easter-adjusted comp sales increasing by 3.8%, supported by strong growth in Fruit & Vegetables and Perishables. Online sales growth also remained strong, up 42.8% in the quarter, resulting in a record online penetration of 6.6%.As announced on the 1st of April, BIG W delivered strong sales growth during the quarter with Easter-adjusted comparable sales growth of 7.4% driven by strong underlying transaction growth and continued growth in online sales, with Everyday, Leisure and Home the strongest performing customer Universes. Customer metrics have also improved, with store-controllable Voice of the Customer reaching 80% in March, the highest level since the launch of the survey in March 2018, as customers responded positively to our changes in store.Hotel sales and comparable sales for the quarter increased by 2.7% on an Easter-adjusted basis with strong growth in Bars and Food. As previously announced, the sale of Petrol to EG Group was successfully completed on the 1st of April. The completion of the sale also resulted in the proceeds of $1.7 billion being returned to shareholders by way of an off-market share buyback, which is underway with the offer period closing on the 24th of May.In summary, we are pleased with the momentum across the group during the quarter as we progress our strategic priorities with our focus now moving to plans for F '20 to deliver for our customers, team members and shareholders.I will now turn the call over to questions. [Operator Instructions]
[Operator Instructions] The first question today comes from Michael Simotas from Deutsche Bank.
First question from me is around collectible programs. So your competitor had a program which it called out as being very successful. You also had one during the period which you haven't said a whole lot about. Can you just talk about what you saw in the market and whether you think the market was significantly impacted by those collectible programs?
Thanks, Michael. That is right. Obviously, our competitor ran the Coles Stikeez campaign, and we ran the Disney Words campaign. Their campaign went from the 13th of February to the 26th of March, and ours was from the 27th of March to the 9th of April so it sort of all sort of washed through into Q4. Look, the feedback on the campaign was clearly positive with customers liking the educational aspects and the environmentally-friendly components of the plan. But it's really hard to unpick what it did for us, in truth, in a very specific way. So a good engagement, went well, but it's -- I couldn't really specifically point to a material jump driven by the program in particular given it did wash into April.
Okay. And if you sort of look at it the other way given the success that was called out by Coles, did you see a drag on your sales from their program?
No, we didn't. So obviously, you can see from our sales numbers that, that's the case. And it was relatively -- we're always looking for consistency, as you would be aware. And it was a relatively consistent half in terms of the sales momentum, and we did see that continue into April as well, so no. It would be fair to say possibly that one program neutralized the other to some extent in the context of our customers, that's the only thing I'd say.
Okay, that's helpful. And then the second question for me is on pricing trends. Obviously, you've given some numbers around inflation and spoken to them. I'd just be interested to sort of get your views on how customers are likely to receive this sort of slight change in the pricing dynamic and your ability to pass on price increases and the extent to which you're expecting customers to trade down a little bit in response to that.
Yes. Look, I mean it's a very challenging time as you would be aware with a lot of cost pressure on us as well as our suppliers whether it's through the enterprise agreements that are out there or energy prices, and of course, that's also impacting our suppliers. So there's a lot of pressure building in the system. And we are negotiating on a case-by-case basis with our suppliers as to how -- what portion of cost increases we accept. We keep that issue quite separate to how we think about pricing in the context of our shop for our customers, but it would be fair to say -- and I think our competitors called it out as well that they feel consumers are looking for value. We've got to be very cautious into what extent we pass cost increases through to our customers. They are looking for value and so we've got to be quite cautious in this regard.
The next question comes from Shaun Cousins from JPMorgan.
Maybe just to further that question with regards to how you engage with suppliers in food. I think in [ Kent ], there were stockouts, and press reports indicate it wasn't a product availability issue. It seemed to be more that the product was in the supplier's warehouse, but Woolworths were reluctant to take a price rise through. Maybe just a few points on that, are you expecting more of this behavior to happen where you will get gaps on shelves like this as you, I guess, try to represent the customer there? And did any of the out of stocks that you endured in what is a popular category, did that weigh at all on your Voice of the Customer?
Shaun, thank you. Look, I can't speak to the specifics of individual negotiations, as you would understand. It would be fair to say being out of stock on shelf for customers is something we never want to have happen, whether it's through an inadvertent incident or a negotiation with a supplier. So I don't think we ever want to see an out of stock on a shelf, and it's not our aspiration to have any more of those going forward.
Okay. Maybe a question for Steve. Can you just talk a little bit about, just in liquor, can you talk a bit about the progress on range curation in Dan Murphy's? I think you highlighted some progress there in BWS. And also just the size of the container deposit scheme uplift you may have received in Queensland. And more broadly, did you gain market share in liquor? So just some liquor questions there, please.
Yes, thanks, Shaun. Well, I'll let Steve talk to where we are in Customer 1st Ranging, or range curation, in Dan Murphy's, and then we can come back to the CDS impact in Queensland on overall sales numbers. Over to you, Steve.
During the last month or so, we've managed to get the first couple of categories rolled out into stores in terms of Chardonnay, Sauvignon Blanc. But it's fair to say it's taking -- it's taken a while to stand up the program inside there, so we're really just starting to get traction there. We're getting the initial feedback from customers in sales results and other metrics. Right now, red wine's what the teams are focused on at the moment, and that's about to flow through too. So early days, but it's the same sort of program that we've stood up inside supermarkets so we understand how successful it can be.
And so I should also add, Shaun, as you'd be well aware, we've been working on range curation, or Customer 1st Ranging as we called it, in BWS for 2 years or over 2 years. So you're starting to see the full benefits of that flow through in the shop as we speak. And so there's a -- it's just the lead and lag time with these programs that you'll appreciate. On the CDS question, it really did -- it did impact sales. That was beneficial somewhere in the order of $10 million of incremental sales or about 50 basis points of aggregate sales. And we are performing relatively strongly in Queensland, but I don't think it is related to CDS, it's just related to the strength of our business up there.
Did you gain market share in liquor in the quarter?
Yes. I mean I should add, across all of our businesses, actually, we gained market share in the quarter, and that's true across all of the states. It's a bit hard to measure for BIG W, I might add. But as a universal statement, that would be true.
The next question comes from Andrew McLennan from Goldman Sachs.
Just following on in respect to online, very good growth there. Obviously, your competitors are starting to tweak up delivery fees. I'm just wondering how you saw your performance and whether or not you felt any need to make any changes to delivery fees at the same time if that was a potential positive for yourselves.
Thank you, Andrew. Let me talk to at a general level and then I'll ask Amanda to just comment specifically. Look, it was a good quarter for us in online, setting aside what we called out is this 24-hour freezer sale that went viral and impacted our -- on the metrics. So it was a good quarter, but we're working on improving every aspect of our online business to make it efficient as possible. And so the underlying operation efficiency is our major focus, actually, just our pick speeds, just our drop times, drop densities. So there's work across every aspect of the business to improve efficiency, and that's the major focus. But of course, we are also trialing and making sure we fine-tune our delivery fees and also optimize against excess capacity in the market in that regard. And Amanda, I don't know if you'd like to talk to some of the trials that we have underway.
Yes. Thanks, Brad. I think, Andrew, on your question, what's interesting for us when we look at online now is that pickup is becoming an increasing powerhouse for us when we look at how customers are connecting with that particular service. And we're very pleased with the level of growth that we're seeing out of that channel. And of course, as we all know, that is the most competition channel for which we can serve customers in online. Having said that, there is also a lot of customers who are interested now in our Delivery Now service, so that's where you can place an order and receive it within approximately 2 hours. And we're very conscious of pricing and the need to get that right if customers are wanting that quite urgent sort of service when it comes to groceries. Getting the right price point for that is important, and we are continuing to test and learn in that space.When it comes to optimizing the overall delivery fleet for Nexday. I'd say that is an ongoing piece of work. And again, we do -- have got a number of trials out in that space. Very dynamic right now. And we are quite excited about what we're seeing in terms of both leverage but also meeting the customer needs in terms of capacity.
One of the areas we are all looking at, Andrew, as you might imagine, in the Nexday business is more dynamic pricing based on availability of delivery slots. And that's where we think the market will go to and is an area of focus for us to build the right capabilities to offer that service to our customers.
Yes, okay. No, that's interesting. I have just a quick maintenance question, but I just wanted to ask you since you mentioned it. The 24-hour freezer promotion, that was rather spectacular. What was the intention there? And what have you learned?
This issue has taken more of management's time than most of the quarter, and I think Amanda was mortified by it. But we have learned a lot so I'm going to turn over to Amanda to talk about it. For those who are not aware, it was a 24-hour freezer sale. It ran on the 14th of March. It was half price on Freezer. We had run it the year before. But it went viral. And it just really popped. But Amanda, over to you to provide the logic to it.
Thanks, Brad, I really appreciate that. So look, it was completely unprecedented, as Brad explained. We had run the same sale back in July with very strong results. The difference this time, as Brad's already highlighted, is the campaign went unexpectedly viral. And when we say viral, it actually went across millions of social media accounts shared by customers and ended up, I think, on no less than 25 media stories as well. This was a 24-hour-only sale. The intent of it was that customers who are exploring our website would discover it during their sort of shopping journey. It was never intended to be advertised across Australia. The outcome was, in effect, we, from an online perspective, did Christmas volumes in that week with less than sort of 12 hours' notice. Normally, when we are planning for these sorts of large-scale events like Christmas, we would plan for 4 to 6 months to ensure we can manage capacity through the system, provide the best possible customer experience. Now obviously, given the unexpected viral nature of that, we were caught short in terms of both ability to supply customers but also to ensure we could give the right customer experience. A lot of learnings from our end on this front and, in particular, just understanding the power of social media and the need for us to respond more quickly when these sorts of events happen.Having said that, it actually was incredibly positive in terms of attracting a lot of new customers to Woolworths that hadn't shopped with us before, both in-store customers and online customers. And pleasingly, we've seen a very significant increase in terms of Voice of the Customer scores since that campaign hit.
I bet. Yes. I was actually just thinking you probably delighted a lot of university students out there in the market. But on the other hand, capturing those millennial customers is going to be crucial anyway so it's probably ended up being...
Yes. Look, you -- I'm sure it was an element of university customers with their chips and pies, no doubt. But there's also a lot of our core customers who are budget customers for which the Freezer category is an incredibly important part of their shopping. So we were really pleased to be able to give them the opportunity to shop with us online.
The next question comes from Bryan Raymond from Citi.
Look, my question actually follows a little bit from that 24-hour sale but also just onto the inflation side. Ex fresh and Tobacco, your inflation measure moderated by about 60 basis points, so quarter-on-quarter. And given things like that Freezer sale, that would obviously lead to more deflation, typically, in that metric. I'm just interested in what's driving it. Obviously, there is a lot of price applications coming your away from suppliers, but we also hear that you guys are clear that you want full mitigation of any price rises when they do come through. So I just want to understand sort of, is this something we should see continuing on the ex fresh ex Tobacco front? Or is this sort of -- is there a few one-off items in there we need to be aware of?
Thank you, Bryan. Look, just contextually, it's important to talk about the 24-hour Freezer sale, but it was $5 million in a $10 billion quarter so it was not material in any stretch of the imagination. What was interesting about it, though, that we did learn is just how sensitive customers are in the online space to not meeting their needs. And they will reward you materially if you do in a Voice of the Customer sense, and they will penalize you materially if you don't. So it was actually really interesting on sensitivities on customers that's got no materiality in the context of our numbers. But Bryan, coming to your real question, we are seeing -- we are slowly transitioning out of being deflationary in long life, excluding Tobacco, to being inflationary. And you will have seen that, of course, with us going the 50 basis points movement you alluded to. Now what we reported, of course, for the quarter as well is a rolling average. It would be fair to say the exit rate from the quarter has seen us move even closer to being at 0 inflation or deflation. So you are seeing a move in average, and it is slowly becoming inflationary.In terms of color to what occurred, and as I said, we are excluding produce and Tobacco in talking about this, which produce has gone inflationary. We'll see how the model plays out going forward and Meat has been inflationary for a while as well. In terms of the Long-Life business, there were some investments that you see reflected in the results, and they were important strategic investments for us. We did invest in Health & Beauty, and making sure we were competitive. We benchmark ourselves against a whole range of players, including discount Chemist Warehouse, and very important to keep focus on that. So there was a strategic investment thought process there. We also did invest in international foods and health foods, making them more affordable for key communities that we operate in. So you did see some investments come through there as well. So it's a running number. There are some investments that offset it, but as I say, the exit rate is different to the average that you see there.In terms of your second question obviously for reasons you would well understand, we are very sensitive to making sure that we don't undo all the good work that we've done over the last few years to be price competitive in the minds of our customers. And so we are very sensitive to making sure that we deliver value for them at all times and in every community within which we operate and we know that value has -- as price is a very important aspect to it. So there are very robust conversations. We are working very hard inside our business to offset our own cost pressures, and we would expect our suppliers to do likewise. However, we are accepting price increases where -- and we look at -- if we were looking at it on an individual basis, there are a number of increases that we do accept. And in a number of cases, of course, we do pass those onto our customers. So it is a case-by-case basis. And we are working through it, as you would expect, on a very practical, pragmatic basis.
Okay. Great. My second question is just around April, actually, Coles came out and talked about a moderation in like-for-like sales growth in April so far. And I understand it's a messy time of year with Easter and school holidays and the timing of all of those things. But as best as you can tell, have you seen the market maintain the right run rate that you saw in the third quarter or start to moderate similar to what your competitors are seeing?
Well it's still early in the process, I would say, Bryan, to draw any conclusions. I would say we weren't unhappy with our Easter and ANZAC trading.
Right. So I interpret that as continuing to maintain momentum that you saw in the third quarter.
Look, as I said, it's still too early to really call these things, as you might imagine. And it is a messy time of the year. But yes, we were not uncomfortable with where we are from a sales perspective going into the last 8-and-a-bit weeks.
The next question comes from Rob Freeman from Macquarie.
Just in terms of flowing through the P&L a bit, Brad, did you indicate that you've absorbed most of the price increases that you're now seeing? And could you perhaps just talk about fresh versus dry goods, please?
Look, Rob, I think the point I was trying to make to Bryan was that we looked at each increase -- cost increase on a case-by-case basis, and then we look at it -- likewise, when we look at set pricing and what pricing will then flow through to our customers on a case-by-case basis. So it's very specific to the individual circumstance and the sensitivity of that product in the basket of the consumer. So it is very specific.It would be fair to say if I -- just look at fresh for a moment, there's been a huge cost pressure, as you would be aware, in meat, in particular red meat and in particular lamb. And we did absorb a lot of them in the first half and called it out. In the second half, we've had no choice but to adjust our red meat prices to our customers. So we did absorb, but there was a point at which we couldn't continue to do that. So that certainly would be true in red meat.In produce, or Fruit & Vegetables, the demand and supply is such that a lot of the price increases, we have passed them on, and you see that in our Voice of the Customer scores, there's just been such scarcity out there that it's been unavoidable to do that. Of course, we've tweaked it. For interest, the product that's gone up the most is melons at 35% cost increases to us. We haven't actually passed the whole 35% on, but we have passed on an aggregate. Most of the increases we've had, we've just been forced to in that category.So certainly in those categories, flows are a bit more dynamic and prices are a little bit more volatile, up and down. In Long-Life, as I say, we're working it on a case-by-case basis.
And then just maybe going further down the P&L. Is there any sort of new comments now given we're a further quarter in just on your ability to handle that EBA increase? And can I just confirm you're also still expecting D&A to increase 10% for the full year?
Look, Rob, this is a sales call, so it's not a profit call. So if you don't mind, I won't answer that except to call out what is in the announcement that our stock loss continues to be higher than our expectations. And we're working very hard to offset that either -- both in terms of our activities and stock loss and also in our broad productivity plan.
Okay. I might have one more just given that one [ whisked ] out of the way. Just on BIG W, when do you think it can sort of return to profitability? And is there any update just on how the store closures have commenced, please?
In the spirit of Geoffrey Boycott, it is a sales results so I won't get into the profit forecast except to say we reaffirmed the range we put in at -- on the 1st of April. In terms of progress on what we announced on the 1st of April, it's still very early days. We have started to engage with landlords. I think we were, hopefully, quite clear on the 1st of April that we expected store closures to the extent they happened really to come through in '21 and '22. So there's a lead and lag time underway, as you might imagine. But very early days in that process in a month later.
Next question comes from David Errington from Merrill Lynch.
Brad, Jesus, Geoffrey Boycott, that's my generation. That bloke used to send me to sleep no end. That was unbelievable.
I realized just how old I sounded when I said that. I've got a...
When you said that, that was my generation. I used to watch that bloke bat all day and only get 10 runs. Can I ask 2 questions? On Page 2, I just wanted to ask if there is anything to be worried about or if it's actually a positive thing where there seems to have been a big turnaround in the makeup of your sales this quarter where comp transaction growth dropped significantly, but comp items per basket increased significantly. Is there anything happening within the business that you haven't already touched on that would be causing such a big pickup in comp items per basket? Is it meaning that your existing customers, you're finally cracking them to buy more? Or are they buying something more? I imagine they would've bought less fresh this quarter. But what's going on that would cause such a turnaround in those metrics?
Thanks, David. Look, The comp item number, it gets distorted by the fact of the -- we sell plastic bags. So the single-use plastic bag issue does somewhat distort the items per basket. So I wouldn't read too much into it, except I should add that we did make progress with the young family segment or the new family segment in the quarter, which has been a challenge for us, which is a bigger basket segment. And Disney Words undeniably would have helped us a bit with that segment. But I wouldn't read too much into the size of the growth in items per basket. It's nice that it's turned around. But there is the sale of single-use plastic bags in that number.
What about on the other one, the transaction growth fading quite rapidly?
Yes. Look, it really -- we're not, again, as -- it's just sort of -- it's up year-on-year. We're not really unhappy with it. It's just a very hard quarter to assess it because of the Easter move, and Easter is a big basket time of the year, and Easter was in Q3 last year, and Q4 this year, and how you make those adjustments is quite complex. So I'm not -- it's very hard to read a lot into it, if you know what I mean, David. Because of the limited trading days going into Easter and then ANZAC day, there is a real mix volatility issue which will wash out over the half.
So nothing to worry about. Okay.
No.
That's good. The second point, Brad, and that's a forward-looking comment now -- or it's a forward-looking question, and it's on sales. I remember the first quarter of '19 was a particularly, not a dark time for Woolworths, but it really did shake you guys around because Coles went pretty hard on Little Shop. Now everyone knows -- I mean everyone should know that Coles are going to come out, in the first quarter '20, come out pretty hard with probably Little Shop mark 2. And it has to be bigger and better than Little Shop mark 1 because they've got a 5.1% comp to cycle, and if they don't come out with something pretty special in that Q1, they're going to be in a bit of a strife. But -- so my question to you is, how much thought are you giving into that so as that we could have a reasonable Q1 '20? Because the last thing we want is you've got this great momentum, and then all of a sudden, the competition comes out with something like that, which they've got the right to do, that could derail this momentum that you seem to have picked up in the last 3 to 5 months.
Thank you, David. Look, I do think what happened to us in Q1, whether a single-use plastic bag phaseout or Little Shop has made us a more resilient business, and I think we've taken a lot of learnings from that. We've certainly discussed it many times. And I'm actually very excited by our plan for F '20. And all the things you say are very legitimate assumptions to assume. So I think we're a more resilient business given what we've learned, and the team have really come together and responded, I think, very pleasingly when we saw our improvement into Q2, in particular, into Christmas and then into Q3. So yes, we would expect what you would, but we are feeling we've got a good plan, and time will tell, of course.
But you know that they're going to come out Q1 with something pretty strong. How prepared -- because, look, let's be honest, we were accusing you guys of being behind the pace a little bit and underestimating the impact and...
I remember your question, and I remember how you phrased it, and it sticks with me, David. So we are being thoughtful and planned. We're always trying to balance those is the one thing I would say, so we're always trying to make sure we get a balance and we hit all the right marks for our customers. And we also are very sensitive, of course, to the sustainability agenda. But absolutely, we understand, and we think we have a good plan. Time will tell.
The next question comes from Tom Kierath from Morgan Stanley.
I just want to explore the online strategy a little more. Is the way to think about it you kind of lost lead a bit with promotions trying to attract new customers and then over time turn it profitable? I'm just trying to think about the impact over the next couple of years as you drive the online business, the impact on profitability.
No, thank you, Tom. We don't. I mean this was one-off a sale that we talked about, $4 million to $5 million that gave us a lot of learning. So no, in general, we don't. Certainly, when we started the business, it would be fair to say as you try to build capacity into your network, you do. And that's certainly true for both major competitors, especially as you put dark stores or customer performance centers in place, invariably, you've got it full and balanced to capacity. But our capacity is pretty well balanced right now. And really, we're very focused on just making sure it's a great experience for our online customers and continuing to improve the underlying processes there. So no. We're not trying to drive a continuity business. This isn't structured as a continuity business as maybe a meal kit solution is. So that is certainly not the strategy. In certain ZIP codes, postcodes on certain days, if you've got excess capacity in your truck rolls, you may provide a better delivery fee so that's certainly something that we alluded to in dynamic pricing on different routes on different days. But it's not a conscious headline strategy for us, no, not at all.
Okay. And then just secondly, so in this period, you sold plastic bags. In the prior period, the pcp, you didn't. It is there an uplift in the comp as a result of selling plastic bags? And can you...
No. No, it's diminished, really. And in the prior period -- it's really diminished. It just distorts. $0.15 bag distorts items, but that's diminished, really, in the number of bags. I'm pleased to say that, between ourselves and our competitors, we have made a meaningful difference to the amount of plastic in the community. And actually, people are very moving rapidly from buying a single-use plastic bag to bringing a multi-use bag to store of whatever description. So no. And it's rapidly declining as a component of our sales.
But it just had a big impact on the difference in items per basket, I guess that's the reason I...
Yes. No. It's just -- I mean a $0.15 bag just does drive -- it just does drive it up in a relative sense. But no. No. And it's rapidly, as I said, declining as a portion of our sales.
The next question comes from Grant Saligari from Crédit Suisse.
And great result, guys. Just first, just a clarification question. Just on New Year's Eve adjustment. I think the period started 31st of December, if I'm not mistaken. So was there any need to adjust for New Year's Eve on food and liquor, particularly? And would it have been material if you did?
Yes, so it's quite different, the 2 of them, Grant. On food, it was approximately 10 basis points so it wasn't material enough to make an adjustment. On liquor, it was material, and we've called it out in our commentary. It was in the order of 160 basis points. So we've called it out so you can see it. So in food, it just wasn't material, and liquor was material. And so -- and that's why you'll see the commentary there.
That's really helpful. And just second on BIG W, again, really terrific sales result you're getting out of that, particularly even taking the plastic bags out and looking at your items per basket growth ex plastic bags was around 7%. So can you expand a little on what you're actually doing there to get that transaction growth. And I know it is not a profit call and so I don't want to go towards the profit guidance. But that seems to me to be almost as good as you can get in terms of run rate growth out of BIG W. So I would just be interested in your thoughts on...
Yes. Look, I mean I think what you're seeing, and I'll let David Walker add some color to it, was really pleasing transaction growth. This was a business that historically would have had a declining transaction growth so to have it turned around and to have the quarter we've had was very pleasing. It really is based on the same issues we saw in Woolworths Supermarkets a few years ago, where all of our customer scores are improving. So we were just doing a better job of delivering value, getting on-shelf availability right, the look and feel of our stores, the quality of our products. So it really -- when you look at all of our Voice of the Customer scores in detail, they're all improving, and they have all been improving consistently for about 5 quarters. And so you, unsurprisingly, hopefully, you've seen that come through in more people shopping in our shop. David, anything you'd like to add?
I mean -- thanks, Brad. I mean I'd say it's a compound effect of many things. We started early looking at price and making sure that we were absolutely competitive on price. The other things have taken a bit longer, so getting our ranges right, really nailing our events, getting our experience right in stores, training our store teams to better support our customers. Pick up is absolutely helping. The latest initiative that we've got starting in February was Free books for kids. It just all layers on top of things like everyday -- Woolworths Rewards and all of those things starting to get noticed by our customers. So we're seeing real momentum. You can see it build each quarter. So we're really pleased with the momentum we've got so far.
The next question comes from Ben Gilbert from UBS.
Just wanted to follow up on some of those comments around plastic bags. I understand they're still pretty popular, even just buying them as a single plastic bag. Just wanted to touch on your point around sort of that shrink of wastage, first point before, Brad. I know you said it's still higher than you were hoping, but are you making the inroads there in terms of reducing that? Because obviously, I think, a reasonable drag on your margin for the first half.
So I don't know if I understood the plastic bag question, Ben.
Well, I think a lot of them are being scanned through, they're just scanning the plastic bags aren't they, and maybe food is being took out?
Look, there was an element of that, certainly, in the first half where we just had plastic bags scanned instead of the product, the full shot that should've gone with it. And I don't think we called it out in the investor call, but certainly, when in some of the analyst lunches, we had quite a few of those. That certainly has dissipated. But it would be fair to say that stock loss is still higher than we would like, and we've got to continue to work on it. We've got a very holistic plan in place, but these things take time. So we're continuing to work on it for the reasons you've rightly pointed out, that it does cause material impact on margin.
So we should assume there's some inroads being made but there's still work to be done?
Yes, there's still -- yes. I would say that's fair. There's still quite a lot of work to be done.
And just final one for me right now, the stocks. I know you sort of talked to some out-of-stock issues in fresh, et cetera, through the third quarter. But even looking around through April and just even this week and looking across a few stores this week, there seems to be quite -- some few out-of-stock issues within fresh. What are you doing to sort of remedy that? How easy is it to do? And do think it's having a drag? I know you've talked about Voice of Customer, but do you think it's adversely impacting your top line as well?
Well, certainly, it certainly is, of course, in the sense of whatever assumptions on such [ suitability ] you might want to quote. To be honest, it's surprising, what you just said now because, actually, the customer scores have come back quite materially. And our lost sales measure, which measures it, is not in bad shape. So it might be a case of the stores that you shop in, Ben. So...
It's one of your biggest ones and then the Balmain one as well, just even sort of 6:00, 7:00 this week. There were just no produce on the shelves in the Bondi -- sorry, the Double Bay one and also in Balmain as well.
Well, the Balmain might just have a bit of -- look, I can't comment, but if you...
No, no, no. Sorry, yes, I'm not trying to -- I know you've got a lot of stores. It's just I just wondered if you...
No, no, no, in aggregate. Not -- keep it in aggregate so it's not a systemic issue. We're opening our small Metro next week in Balmain. I'll give you a plug. I mean if -- so it's just up the road in Rosehill, which is quite...
Rozelle.
Rozelle, sorry, which is not very far. We're opening on the 8th of May so make sure you try it.
The next question comes from Phil Kimber from Evans & Partners.
First question on online and Australian Supermarkets versus New Zealand. Australia's growing well, but it's still a fair way behind New Zealand in terms of penetration. What's the difference between what's happened in New Zealand? And why are they not far from double the penetration that you have in Australia?
Thanks, Phil, it's a really good question. It's just a very different market construct in New Zealand to Australia where our major competitor there is a cooperative and so has just been a bit slower to provide online services or pickup or home deliveries. So there is a difference in the competitive structure of the market. But what is very useful to us is being able to learn from the New Zealand experience in Australia. And we're working very hard to learn from it because what New Zealand has to confront, Natalie and her team, are very large in-store picks and how they manage those and making those as efficient as possible is key given we would be at pick-ins over 10% of volume in terms, [ it's also regular ] earnings for us. But it's just the different structure of market. Overall, online penetration in Australia and New Zealand is basically the same so there's not a structural difference in the marketplace.
Okay. And then my second question again on online but for BIG W is -- sort of try and backsolve. A fair bit of like-for-like growth is coming from online which I think you said grew 167%. Is that one of the reasons why you're finding it hard, you're getting the sales growth but you're not getting the profit growth that you expected? Is that because a lot of the sales growth is coming from online and that's either not profitable or a much lower profitable segment?
Look, a very good question. Look, it's about -- if you backsolve, I think you'll find it's probably just about half of our sales growth is online. The vast majority, actually, unlike the rest of our businesses, I think about 65% of online is Pick up in store, just to make you aware, which is relatively cost-effective for us given we've always traditionally in BIG W run a lay-by business and that's been repurposed. So it's not as costly to provide the services as it might be inside the food business. But it is half the growth. And it would be fair to say that online has a lot of mix of apparel so that does cause, of course, some margin differences, clearly. But it just also creates lots of opportunity. As I say, the Pick up means that we are working very hard on getting the cross-shop in the store, as you might imagine.
The next question comes from Scott Ryall from Rimor Equity Research.
I just wanted to concentrate on Fruit & Vegetables and fresh, please. I would echo Ben's comments about the anecdote of out of stocks just for the record. I guess in terms of what you called out with respect to high prices in supply issues impacting the quarter, are you pretty convinced there's nothing that you're doing internally that is creating an issue here so it's all an external issue of availability and pricing, please?
Thank you, Scott. I'm actually quite concerned that you and Ben have made the same observation, but I'll perhaps follow up on that separately with Paul to come back to you. Is your question that is there something in our internal system which means that we're out of stock on fruit and veg, is that your question?
Yes, yes, essentially.
No, not at all. I mean one of our big issues right now is getting our Voice of the Customer right in Q4, and that requires us to address fruit and veg, and the team are focused on their action plan to get that right. So it shouldn't be the case, in truth. So the incentive is to get Voice of the Customer up because the team need their scorecard to get their stuff ] and to do that, they've got to get the product to flow and make sure it's the right quality on shelf. So no. But let me take your question on notice more broadly.
All right. And then just going further on from that, in terms of when you do see a market like you have been in the March quarter where pricing's high, you've got supply issues because of the extreme weather, et cetera, what do you do as the market leader and one of the market leaders in fresh? What can you do to, I guess, strengthen your business so it's more resilient in the face of external pressures?
Yes. Look, I mean I think it's a great question, and I think we need to take some learnings out of what happened. And 1-in-100 lifetime events are now becoming 1-in-5-year lifetime events. So I think that's the issue. For the vast majority of our fruit and veg, we give a rolling 12-month forward volume commitment to our core growth. So we are essentially forward committing 12 months out with almost all of our core volumes to our strategic growth. The issue we've had is when they don't have any product. What do you do on the rebound of that? So we are pretty well planned, but whether we are sufficiently planned to deal with the issues around what is becoming a more and more volatile weather pattern I think is a very fair question. I think we need to take some learnings as I say. The Townsville incident that happened twice in 5 years, and it was at both times a once-in-100-year kind of incident. So we've -- I think we do need to build more resilience in there, certainly a conversation we started having. But we generally are pretty -- plan now for volume commitments going forward.
The next question comes from Richard Barwick from CLSA.
Brad, I just wanted to pick up and talk a little bit more about liquor. There's no change to your liquor EBIT expectations despite the much-improved sales growth. I mean I think we're all surprised by how weak that second quarter was, but you bounced back really strongly. Is the sort of no change in earnings expectations a reflection that wine is a significantly higher-margin product for the business? Or are you adding some extra cost into Dan's, particularly when you try to -- you talked about making steps to dedicate it for the convenience shopper. Just trying to sort of unravel that...
Look, Richard, it's -- obviously, as was -- as with anything, there's a lot of moving pieces, but in truth, that's one. In Australia, the category has been flat to declining, and certain segments have been declining quite materially. So it really is wine that's the major story. Dan's is highly leveraged to the wine category and so that really is the major reason for it.
Right. And presumably, that would be exacerbated in that Christmas quarter with champagne, et cetera.
Yes, look, I mean champagne is not of the same margin as the rest of the category as the white wine category is key, and that's the category that really has battled, actually, to our collective surprise, in Q3 given the weather pattern we had. So that was relatively surprising to us, but that's why we called out the issue. It is a national category issue. It's not a Dan Murphy's or BWS issue. We're continuing to grow market share, but it was a challenging quarter for wine and particularly for white wine.
And just want to also ask about a couple of things you've talked about, making a more resilient business. I mean is part of that you -- are you actually seeing that you have more loyal customers? Because where I'm going with that also, I'd love to hear your comments around the shopping patterns that you're seeing and if there's any sort of changes you would talk to about cross-shopping across retailers.
Yes, we need to. I think it's a great question. I mean we're obviously just very focused collectively on the topic of advocacy and getting our customers to advocate for Woolworths and also getting our team members to advocate for Woolworths. Advocacy is the core of our strategy and getting customers to put us first is what, in summary, what we're trying to do. So we do want advocacy, we're very focused, therefore, on NPS, which is a good measure of advocacy. We know that advocacy creates stickiness. It may lead to the occasional cross-shop perhaps on the back of the collectibles program, but it should lead to the customer bouncing back into our business at the end of that program. And so that is very much the core of what we are trying to do. In truth, about every 6 months, we do a detailed analysis with Quantium on cross-shop trends. And we'll only do that in the next 2 months so I can't tell you whether in the last 6 months it's gone up or down. I think in truth it would have gone up on the back of the success of the collectibles program ran by our competitor in Q1 of last year. But we clearly are very focused on this resilience. We know that customers are going to cross-shop on occasion, either driven by convenience or other factors. And even out of our best customers, we get about a 65% share of their wallet. But our name of game is driving up the share of wallet of our core customer, absolutely.
Thank you. At this time, we're showing no further questions. I'll hand back to Mr. Banducci for closing remarks.
Thank you, everyone, for joining us on our Q3 sales call today. A lot has happened, as always, between Q3 and where we stand today. We have gone through Easter, ANZAC Day and school holidays. And we have less than -- we've got 8 to 9 -- just a bit less than 8.5 weeks left to the end of the financial year. So look forward to speaking to you then. And please keep shopping in our shops. And thank you for the comments made by the 2 of you on some of our fruit and veg issues, which we'll follow up on. But thank you for your time.