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 Financial Year '20 Q3 Sales Announcement Analyst Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Brad Banducci, Managing Director and CEO. Please go ahead.
Good morning, everyone. Thank you for joining us this morning for Woolworths Group's third quarter sales results for F '20. In this era of social distancing, joining me in the room this morning is Stephen Harrison, our Chief Financial Officer; and Claire Peters, Managing Director of Woolworths Supermarkets. Joining us by phone are Amanda Bardwell, Managing Director of WooliesX; Natalie Davis, Managing Director Woolworths New Zealand; David Walker, Managing Director of BIG W; CEO-elect of Endeavour Group, Steve Donohue; and our Chief Legal Officer, Bill Reid. No one will be surprised to hear me say that the last 4 months have been one of the most challenging periods in the history of Woolworths Group, as it has been for all Australians and New Zealanders and the broader global community. For the first 7 weeks of the quarter, our focus was on drought and bushfires, but this changed rapidly on Monday, the 24th of February, with surge buying in the last 6 weeks of Q3 and the first 3.5 weeks of Q4 on what's been about COVID-19. The COVID-19 health crisis has disrupted the world in ways we didn't think possible and have tested the infrastructure, capacity and agility of food and retail businesses globally. The increased product demand and customer key safety requirements as a result of COVID-19 has meant that we have, at times, had to compromise our core customer experience. But on part of the way, we have adapted and innovated to support our customers, each other and the communities in which we live and operate. I'm particularly proud of how our frontline team has responded to this crisis and I'd like to thank all of them for their dedication and commitment to meeting the needs of the community while managing the personal impact and anxiety of the crisis. Our customers have recognized the efforts of our team with customer metrics holding up very well under the circumstances, and customers appreciated the convenience provided to them through our online services. The safety and care of our team and customers is our #1 priority, and we remain vigilant to responding to official advice as well as the feedback from our team and customers as it evolves. Across all of our operations, we have adopted comprehensive safety measures, including the enforcement of social distancing practices and enhanced cleaning practices. This focus has also been extended to our support offices with the large majority of team members working from home and very effectively, I should add. To ensure our team feels safe and supported not only at work but in their personal lives, a number of initiatives have been deployed to bolster existing mental and financial well-being programs to assist all key members and their immediate families. Following the federal government's directives, the group's hotel business has been closed since the 23rd of March. Of the hotel team members affected, over 3,500 have been redeployed across the group to support essential operations, including redeployment of some of our chefs to FareShare community kitchens in Brisbane and Melbourne to help produce over 80,000 meals per week for vulnerable Australians. To further support our team and help us implement our new social distancing and hygiene standards, over 20,000 new short-term roles were offered across Woolworths Supermarkets' supply chain and e-commerce mix. The rapid increase in demand for e-commerce services resulted in significant disruption to the group's online businesses during March, which led to temporary suspension of Australian Food's pickup and delivery services from store. Home Delivery was prioritized to vulnerable customers through the establishment of priority assistance programs in Australia and New Zealand and also the creation of a Woolworths and Countdown Basics Box and more recently the creation of community pickup and start of [indiscernible] Home Delivery. In recent weeks, our e-commerce businesses have materially scaled up capacity with normal levels of service now returning. The COVID-19 health crisis is far from over, but I'm hopeful that we're now settling into the new normal, and I'm confident that we will get through this together if we continue to do work better together both inside our group and with the broader industry, government and supply base. Turning to our financial performance. Group sales for Q3 were strong across all businesses with the obvious exception of Hotels due to its closure in late March. Total sales from continued operations were $16.5 billion, up 10.7% on the same quarter last year. Group online sales were 34% for the quarter at $817 million. However, as mentioned, that growth was materially constrained by capacity issues in March. Our Q3 sales result is very literally a tale of two halves with the last 6 weeks of the quarter very different to the first 7 weeks. Australian Food sales for the quarter were $11.2 billion, an increase of 11.3% on the previous year. Comparable sales increased by 10.3%. Sales growth increased materially from the weekend in Sunday, the 1st of March, and peaked in the weekend in Sunday, the 22nd of March, with growth of over 40%. Growth has since moderated but remains above pre-COVID-19 growth rates. Customer metrics were negatively impacted by material disruption in stores during March with VOC NPS declining by 3 points compared to the same month in the prior year. Pleasingly, VOC NPS has begun to recover in April with VOC NPS favorable to date at record highs of 57. Average prices increased by 2.1% in the quarter. Excluding tobacco, average prices increased by 0.6%. Grocery inflation was driven by the continued impact of drought-related cost increases as well as fewer in-store promotions, which were removed to help improve availability in March. However, in recent weeks, promotional activity has returned to normal with a printed catalog back in mailboxes across the country this week. Australian Food online sales growth through WooliesX was below recent growth rates due to the material capacity constraints I mentioned previously. Online sales increased by 26.5%, with online penetration of 4.1% despite growth of over 40% in January and February. As mentioned, online capacity has now been dramatically increased as we resumed normal services for our loyal customers. New Zealand Food sales increased by 13.7% to $1.9 billion with comp sales of 13.4%, benefiting from pantry-loading and from more customers preparing and eating at home following -- prior to lockdown restrictions and stay-at-home restrictions in Australia. Unlike Australia, all fast food and takeout outlets as well as greengrocers and butchers were closed under New Zealand's Alert Level 4 restrictions. Online sales growth of 36.2% in the quarter saw an increase in penetration to 7.9%. Similar to Australian Food, online services in New Zealand were impacted by capacity constraints with priority assistance customers given first preference particularly in March. While trading well in January and February, BIG W sales growth accelerated in March, although the mix of sales has shifted towards low-margin, everyday needs and household items. Sales increased by 9.5% to $866 million, with comp sales increasing by 9.9%, making it the eighth consecutive quarter of positive comp sales growth in BIG W. For BIG W, Easter-adjusted comp sales grew by 8.8%, with BIG W value business really materially impacted by Easter timing. Online sales in BIG W grew by 73%, with online penetration of 6.5%, up from 4.1% in Q3 in '19 due to increased demand for Home Delivery. Endeavour Drinks sales surged later than in our food business but ended the quarter very strongly. Total sales in Q3 increased by 9.5% to $2.3 billion, with comp sales growth of 8.9%. January and February sales were subdued and impacted by low market growth due to weather and bushfires. The increase in March was more pronounced and came later in the month as customers became concerned that they might not be able to buy alcohol under lockdown in front of the closure of on-premise venues. Dan Murphy's performed particularly strongly in March given its strong brand resonance and breadth and range. For EndeavourX, online sales increased by 43.1%, significantly above run rates with online penetration increasing to 6.9%. ALH Hotel sales for the quarter were $350 million, declining 12.9% from Q3 '19. Prior to the closure of our buildings, sales for the first 11 weeks of the quarter were strong and increased by 3.2%, with comp sales for the 11-week period increasing by 2.4%. Moving to current trading and our outlook. The outlook for the rest of the financial year remains difficult to predict. However, the group remains in a strong operational and financial position. Sales growth has continued in March, although sales growth rates have moderated in April following benefits in March. Australian Food sales growth in April to date is in the mid-single digits. The sales -- the rate of sales growth for the remainder of the year, of course, is very difficult to predict at this stage. Sales growth in March was partially offset by materially higher operating costs. Looking forward to Q4, there are a number of costs which are expected to continue for the remainder of the financial year. These include ongoing costs associated with implementing our social distancing and hygiene standards in store, additional warehouse costs, scaling up online and in particular Home Delivery as well as ongoing PPE costs. In Q4, these incremental costs are expected to be in the range of $220 million to $275 million. The extent to which these higher costs will be offset for the remainder of the financial year will depend on the rate of sales growth and the level of safety measures required. However, we remain focused on doing the right thing for our customers and teams. Hotel team members have been redeployed into other group businesses, and where possible, discussions are ongoing with landlords about rent reduction. However, realistically, there are costs that cannot be avoided. And based on current expectations, Hotels will make a loss before interest and tax of approximately $30 million to $35 million per month while the business remains closed. While BIG W has continued to trade strongly, our sales mix has changed as customers have bought more everyday needs than leisure products and apparel. The key question for the remainder of the quarter is that with the onset of cooler weather, what it will mean for apparel. In the second half, BIG W will also be impacted by incremental costs due to COVID-19 and higher online fulfillment costs. Based on our current forecast, it is expected to still make a profit for F '20 post AASB 16. In the event of a more challenging economic environment in midterm, the group remains well positioned through its focus on food and everyday needs, convenience, online and value. The group's financial position remains strong with access to funding and liquidity as well as significant headroom under rating agency metrics and banking covenants. In conclusion, as we enter a new phase -- a phase of new normal, it's incredible to see the changes to how we all live and shop. We are committed to adapting our business to meet these changing needs, and I want to thank our team for their incredible efforts to date as well as our customers for their patience and support as we face these unprecedented challenges together. I'll now turn the call over to questions, and can I ask that you limit your questions to 2 per person and rejoin the queue if you have any thereafter.
[Operator Instructions] The first question today comes from Shaun Cousins from JPMorgan.
Just a question regarding the higher costs you've called out, the $220 million to $275 million incurred in fourth quarter '20. Can you talk about what additional costs were incurred in the third quarter '20 and what of these costs can be reduced or variabilized if sales growth moderated? And then conversely, what are the permanently higher costs that you will incur? I assume cleaning will be greater going forward and you might need more staff, but can you maybe talk a little bit about third quarter -- 3Q '20 and then also what's variable and what's ongoing, please.
Yes. I'll give you a high-level answer, Shaun, then I'm going to turn to Steve Harrison to give you some details. But in summary, really, our elevated cost started in March. And really, we're on the back of the demand surge and the fact that we needed to, therefore, get some additional warehouse capacity as well as beef up our team forces to manage the -- on the shop floor. And part of that were primarily related to social distancing, hygiene and protective plants and equipment and keeping our teams safe and not be willing to compromise on key -- or customer safety. So as demand becomes more stable, we can start unwinding a lot of the additional warehouse costs that we incurred. But then in terms of the additional operating costs, they will depend very much on the government direction and how we unwind the current social distancing and hygiene practices in the business. And as you see, take a relatively conservative view of those. None of the costs that we are calling out in truth are structural. It will just depend on what a new normal looks like, say, in particular from social distancing and hygiene perspective. I'll turn to Steve to talk about -- give you a bit more color to how those overall costs break down. Over to you, Steve.
Thanks, Brad. Yes, Shaun, so I think to give you some clarity in terms of how we've come up with that estimate and what was in Q3, we effectively projected for the cost that we saw in Q3 and entered throughout what we've seen in April to date. And I think as Brad talked about, our key priority here is about customer and team safety. And so we break them out into, I think, 4 buckets. The first one is really about cleaning and security costs. So as you pointed out, the customer and team expectations is a much greater level of hygiene in our stores. And so we do see that cost to be ongoing for a period of time, certainly for the balance of Q4. How that flows into '21, I think, will depend on how quickly restrictions change from a government perspective and also customer and team expectations. The second bucket of cost is what Brad called PPE or personal protective equipment. So that's the hand sanitizers, the bacterial wipes that we're using to wipe down every trolley before someone uses it coming into our stores. It's giving our teams masks to use as an option if they choose. It's the plexiglass screens or sneeze guards that we have in each checkout and now in most health checkout areas or into checkout areas. So that's the second one. But the third is surge capacity. So we put on additional warehouse in each of Victoria, New South Wales and Queensland. We actually already exited the search facility in Queensland. We've still got the facilities in New South Wales and Victoria. The extent to which we need those is going to depend on the period of time for which we see elevated sales levels, to be honest. And then the fourth bucket is obviously the team cost. Some of those team costs will be incurred in April, for example. So having additional trading hours above our normal levels for Easter and ANZAC Day, for example, incurred some penalty rate. But it's mostly around additional roles that we've put into our stores around ensuring customer and team safety and hygiene standards and social distancing. So that is a still great addition, wiping down every trolley before -- or baskets before people come into a store. In some places, the store counters, so managing traffic in and out of the store. Now we've had that in a lot of stores initially through March and April but gradually phasing that out depending on the demand and the turnover in that store. And then the checkout hosts who's essentially maintaining social distancing at the checkout and directing customers to the appropriate checkout area, the door-to-door or "This is the checkout." So we are very focused on doing the right thing here for customer and team and keeping the social distancing standards in place. We're also very mindful of the cost of that. So we wanted to call it out to say these are costs that we've been incurring, we expect to incur moving forward for the balance of quarter. We will be very sensible about winding them down as the opportunity arises, but a lot of that depends on, ultimately, the government direction.
It's all very helpful. Maybe just to clarify. Brad, you said some of these costs started in May -- pardon me, in March. So is this actually a Q4? Or is this really post the COVID-19 issues, this is the quantum of costs? So I was just a little confused there, please.
So it started in March is what I said, Shaun, and Steve then -- given the estimate for Q4.
But this started in Q4, Shaun.
So -- yes, so there is some cost that sits in Q3. We don't know, but there's something that would sit in that period as well.
Yes. I mean the costs were substantially in March, in particular. So we obviously had that very substantial surge in sales from the beginning of March, which came with the cost. The way we projected for the Q4 estimate is based on what we saw in March. And in reality, we're almost at the end of April. And so it's a combination of those 2 that we're using to predict forward.
I mean if you look at it, I think security is a classic, Shaun. In -- as we got the demand surge particularly in early March, there was a bit of friction, which was covered on social media, in our stores and there was a whole issue of team safety. We made the decision across the group to put security to all of the stores in the group. It was something that we felt was the right thing to do. It took us a while to get enough security to put across, not only supers but across all of the stores in the group. As we're now getting into an environment where we're seeing much better behavior and interaction, we're slowly scaling all that out of the business. And we expect that to go back to where we were by the end of the quarter. So those kinds of activities that you see start building in March, and we just got to be very thoughtful on how we unwind them. We provide the options for our customers -- our team to use gloves or masks. It was something our team really thought they needed. It was above and beyond but it was something -- we wanted to address the mental safety for our team. We bought those. We put those into store. Again, we'll slowly see them decline over time as people feel more -- our teams feel more comfortable and safer that they don't need to use them. So there's a whole range of moving factors going on there. But in a post-COVID world, outside of our team standard, which we'll continue to be highly vigilant on an elevated use of hand sanitizer, which we -- actually, in relation, just interestingly enough, always using much more of, a lot of those are really nonstructural factors.
Okay. My second question is just around the broader promotions. During March, product availability was the priority, and there was significant sort of collaboration goodwill with suppliers and promotions sort of came off. Looking forward and I think you're back on -- you highlighted the catalog starting again, should a level of promotional intensity return to where it was, say, earlier in this calendar year? Or should -- I guess, particularly, could it increase given there's a desire of value? Or will you be able to take the learnings of, "These promotions are wasted. We don't need those ones." And I guess sort of finally, will Woolworths chase up promotional monies that weren't spent in March? Or will there be a recognition that you'll only chase up, from suppliers, promotional monies for May onwards, please?
It's quite -- Shaun, let me try to answer this one. I might ask Claire for some help as well. Clearly, in March, when we saw the demand surge, there were a couple of weeks where we went away from a physical catalog. We've still got a digital catalog, but the catalog was filtered away from specials just to our red program, great value every day. And that was just based on practical issues in the store. As I understand it -- and Claire, please come back and correct me, those promotions were re-slotted with suppliers. We didn't take money for promotions. We didn't execute...
Yes.
But kept an enormous amount of work in our suppliers. As I understand it, speaking with my team, they're fantastic, have been flexible on doing the re-slotting. We then have started to, of course, put specials, promotions back in, given customer focus and need for value. As I talked this week and asked the team on where we're at, we're about 90% of what our previous promotional program was. So it's basically back in the business. And in a digital sense, which really have much higher ratings on, but also in our printed things. Now one thing, the context of that program, we're to work in fine-tuning how many promotions we do have winners and losers. So there is clearly some benefits coming through as we continue to fine-tune that. But that's always been our plan. It wasn't our view or decision to dramatically use COVID-19 as a way of taking this important mechanic out of our business for our customers. And we're very sensitive to their search for value. So Claire, is there anything you want to add on the supplier front? I feel we've re-slotted and done what we needed to do.
Yes, I think just for completeness. It was 1 week where all promotions were canceled. It was 2 weeks where our shelf price promotions were canceled. And from week 3, they started to be stood back up, being advertised through the digital road show, which has proved actually very successful. As you rightly said, Brad, as of this week, we are back in market with a full paper promotion, which we have only been able to do by the support of our suppliers. And as you rightly pointed out, through many phone calls and support from the buying team and the supplier teams, no money was obviously taken for promotion we didn't run and has been re-slotted with the upcoming events that we've got with the normal calendar. But we will continue, as we have done and saw in Q3, our sustainable promotions. So we will continue now with that piece of work of promoting winning promotions rather than losers.
All right. Shaun, I should finish by -- and it's a strange quarter, strange quarterly sales announcement to be talking around facts that are all about sales, but our Voice of the Supplier, just like our Voice of the Customer and our Voice of the Team, is a critical measure for us. We just got our best Voice of the Supplier score. And so it's terrific to see that. And I'm hoping that that's another validation of what I've talked about. I should add -- it's a shameless promotional ad break that our Voice of the Customer scores in April have been the best that we've experienced. So when I look at reputation, which has increased dramatically, Voice of the Customer, Voice of the Supplier, we just got our Voice of the Team crosschecked, the business is in a very strong position. And I would like to think that we've come out of this phase of the crisis and we're going to the normal with -- real strong goodwill across all of our key constituencies.
The next question comes from Michael Simotas from Jefferies.
The first question from me, just following on from Shaun's question about the additional costs. I think I know the answer, but just to clarify that, that is incremental relative to where they would otherwise be and not relative to the pcp. And then also, in the third quarter, is it reasonable to just assume that 1/3 of that $220 million to $275 million was incurred in the third quarter?
Michael, it is incremental. It wasn't -- the third quarter really needs to be seen as a tale of two halves. Really -- the surge and the social distancing practices really were a March story. So we still had a relatively normal January and February. So if anything, it's normal in retail and then we've got the surge in March. So you need to break it. Steve, I don't know if you'd like to...
Yes. That's how I get my 1/3. So is it reasonable to assume 1/3? Or would it have been more than that?
Just slightly higher than 1/3, Michael.
Slightly higher. Okay. That's helpful. And then the second question, current trading for supermarkets, you said it's low to mid-single-digit. You had Easter and ANZAC Day in that period. And I presume when you say April, you mean the first few weeks of the fourth quarter rather than the first week of April, which was included in your third quarter. But can you just talk a little bit about what you saw over Easter and ANZAC Day and whether cycling those holidays from last year with a very different situation this year was a meaningful drag?
So Michael, we said trading to date at the 3 and a little bit weeks of Q4 for us have been mid-single digits. We expect to end up in high single-digit growth over the quarter, and I'll come back and explain why. We'll see how that plays out. I mean there's a lot of uncertainty out there. So that's the range we see. As per your point, that's incredibly volatile. So Easter for us was a very, very strange period. It was really right in the middle of the COVID crisis. And then we ended up with an ANZAC -- and then middle or start was an ANZAC weekend that didn't have an extra public holiday attached. So it's been incredibly noisy period. In the normal course of the business, never mind with COVID-19 climb on top. It did look like to us, our customers are -- you use a lot of discretionary entertainment, as you know, when you don't -- when we get a lot of discretionary entertainment over Easter and the ANZAC long weekend. We certainly saw the compression of the discretionary entertainment over Easter. We saw a little bit of a comeback over the ANZAC weekend even though there wasn't a public holiday. So we remain cautiously optimistic here, but yes, it's hard to call it really.
Okay. And your point that you expect high single-digit sales growth, can you just elaborate on that a little bit more?
Well...
I mean I don't disagree. I'm just interested in your thoughts.
[indiscernible] less data [ presumably were ] these 2 data points to try and describe further. Can't describe even one data point to you -- no, I mean I just think we're getting into a more normal phase. We look forward to sort of our version of a back-to-school. We do expect that people are still going to practice social distancing and stay at home. We do expect and hope that people continue to do a little bit more home cooking, a little bit more home -- and so on. We hope they'll do a little bit more sensible, low-risk home entertainment, which would be helpful and obviously very prudently and cautiously keeping everyone safe through the crisis. So that's our thinking. We're starting to see a much more sensible trade impacting our businesses. They're now back in stock. And the customer data can get a great experience in our stores. Online has now been [indiscernible] for us, which was a big issue for us in March. And so we're starting to see pleasing resonance from that.
The next question comes from David Errington from Bank of America.
Brad, my question follows on from the previous couple. Clearly, the cost increase is expected, whether you're doing too much or not or whether -- whatever, that's a separate issue. And only you will know the answer to that. But my question is -- I understand the cost increase but I suppose what's disappointing is to see the sales slide back to that mid-single digit. And effectively, the current sales is not going to be able to carry that cost. So my question is, is that can -- this cost increase that you've put in, to what degree of sales increase can that support? In other words, if you, say, get 20% increase in sales, like we get stage 2 of COVID-19, we get a second wave, and we go into a bit more panic and all the rest of it, would you need to go to the bank again and get more -- put more costs in? Or is this cost increase that you've put in pretty filled yet fully inclusive that it can cover all bases? I don't know if you understand the question but...
Yes. No. I think I do, David. Look, we have -- everyone says it. But it's not what you say, it's what you do that counts. And I'd like to think our team and our customers can see it. We decided we cannot compromise on our customer or team safety. And therefore, what you see is a plan that does -- that anticipates a very heightened level of expected social distancing and hygiene from our customers and our team irrespective of where regulations go. And I think we should take a conservative approach to it. And so that's what you're seeing in the cost forecast we called out. And we're not going to change that. As I say, if it turns out that we've overreacted and we need to unwind the thing if we can, but it just does not feel like the kind of issue we should underreact or underestimate. So you're seeing a very prudent, conservative position on these things as we think it's the right thing to do. And as I say, we're all worried on expectations and we just think our team expectations, in particular, they do expect us to keep them safe. We're just going to be very prudent on how we unwind. So we've seen a very prudent position there, David. On cost, we are not saying -- I think it's very important to predict what the cost is for the rest of the quarter. We're just saying in the first couple of weeks, we're sort of in the mid-single-digit. That's on sales but we're starting to get into more key period now. And so we are hopeful that we will continue to see the momentum come back in the business with availability right for the customer mix and right for the online. That gives us something higher than that. So where it gets to, I can't -- I honestly can't tell you, but that's our hope and expectation in our plan.
So there's -- like in other words, if you did get a jump in sales, we have a second wave of COVID, your probably stores are in the right place to cope with that? That's where I was going with this.
Yes. Definitely, absolutely. Sorry, yes, absolutely. Well...
So that's where I was going, but maybe looking forward...
The one thing quite positive we do feel that it's rebuilt, yes. So we feel we're in a good place on the same-store supply chain.
Yes. So you've got a 10% -- say, if your like-for-likes went to, say, 10% to 15%, you went back to another -- we went to COVID mark 2, you'd be able to handle that without a significant increase in costs. That's where I was going with this.
Yes. I think we're all wiser and more sensible and we've got things much better organized. Yes, David. That's certainly -- yes.
Yes. So you've -- this is sort of like an investment upfront, if you like. That's where I was going with that.
Yes. Well, I mean it's a conservative setting, but is it the right setting. We've got to be very vigilant here.
Yes. And probably given the conditions being appropriate. So yes, yes, okay, that's where I was going. Brad, the second question, I mean this is going to be really hard. But what is Hotels going to look like? I mean I know we're early into this, but you obviously talk to the government. Clearly, you've got a direct line in there, which you should have. But what -- social isolation and when it reduces, what will Hotels be like? Is this a permanent damage to the Hotels business in that -- how long will it take to get back up? Because obviously, it's shut down. Doors are shut, et cetera, et cetera. But when do you think things might start fading back to normal? Now I know that it's a difficult question but it's a very relevant one given that every day that the hotels are closed, you're losing money.
Yes. Thanks, David. I mean it's a really difficult question to answer, as you know. So I mean -- but if we were realistic, they will be open in the next couple of months. I don't -- I think that's probable. But when they do reopen, there will be very strict social distancing practice that's required inside them. So you would expect that, that would naturally demand constraint and just like we had to with some of our stores on certain occasions. And you would see those social distancing restrictions only come off gradually. So we think it's going to be a gradual glide path between now and certainly the end of this calendar year. That's our expectation, but we're in a land of supposition in many ways, but we want to take a very conservative setting to that. Of course, our aspiration is to go from moving money on the fund cost to at least above breakeven but that would -- we've got to, again, follow government restrictions and be very safe in anything we do. So we do expect to see a challenge in H1 of next year and we -- that's what we're planning on, but we would hope that under the right conditions, our venues are operational for H1.
Because the demergers on hold really, isn't it? Because effectively, Hotels as a business is -- well, it's not a going concern at the moment while they're closed, but depending on what they look like, you've got to basically put the demerger on hold, don't you?
Well, that's what we said, David. So it's not fair to happen in this calendar year. We're still planning on success and planning on it happening in 2021. If the deferral has done anything, it's just helped us actually set up the partnership agreements between the businesses. We've planned what the Endeavour Group looks like in the new world. So there are some benefits -- the word is silver lining in a dark cloud. So there are some benefits in the deferral, which will make it a much easier, more seamless process if we decide to proceed.
The next question comes from Andrew McLennan from Goldman Sachs.
And Brad, congratulations to you and the team for working so significantly for the community. I think that's certainly a great outcome from the whole sector really. Just one final question on costs. I know we've run through it a lot. You've given us some great detail. You mentioned that you shut down your pop-up DC in Queensland. I just wanted to get a sense of -- linking back to David's question around your preparations if there is a second wave. I imagine you'll still need that upside capacity. So I'm just wondering if you could talk to, firstly, what proportion of that cost guidance for the fourth quarter is actually logistics. And whether or not you might potentially need to sort of renegotiate a pop-up facility in Queensland or alternately, whether you can actually shut down New South Wales and Victoria.
No. No. Thank you for the question. I mean I will -- don't know if -- I'll get Steve to talk, but in the heart of the COVID crisis, I actually spent every week -- one -- every week, I was on the phone to leading retailers around the globe and trying to learn from them. And one of the fears in the early stages of the crisis was just how deep it could be and how long it could continue. And we use that to then set up our plan to protect the downside, which was the right thing to do we thought for Australia and for all the communities in keeping the valuable customers in Australia. So we set up a very conservative plan that with the information we've had in early March, that was the right plan we felt. And I don't think we would do anything different. We've turned that not to need everything we did. So with that in mind, for example, absenteeism in Italy peaked at 30% and came back to 10%. We actually are running absenteeism actually where we used to. In fact, we saw a peak but only for a week and has come back. So we thought we're going to get -- because absenteeism was a real worry. We don't really have to do the social distancing. And then we're worried about just the surge in demand and how we flowed through particular bulk lines and actually pulled them out of our automated or semi-automated scheduling and just used box storage facilities to [ job buy ] and flow through bulk lines. And that was really what led to the warehousing extra capacity. As we get into the new normal, the need for this extra capacity falls away, which is why we're not taking it up. The problem is getting the leases ultimately scheduled with 3-month leases. So it takes a practical -- it's a practical service. Steve can give a bit more color.
The 2 small builds -- Andrew, to your question of what proportion of the cost is our supply chain, they're less than 10%. The reason we feel comfortable with exiting the pop-up facility in Brisbane is because actually, Brisbane is our largest shed within our existing network. And so we actually have the capacity there to cope with more surges in demand.
Yes. Got you. Excellent. Okay. And with respect to online, given the very significant sort of complexities there, I think you've done a pretty good job. You've been able to scale up your capacity, you said, in the last weeks by -- I think it was 100%. I think you doubled the capacity. How is the -- how are the MFCs playing a role there? Is that still too soon? And just how do you see things progressing from an online perspective maybe over the next sort of 12 to 24 months?
The MFC -- sorry, the CFCs, you mean, Andrew? Sorry.
Yes, the micro-fulfillment centers.
Yes, okay. Yes. So look, what the crisis has done is really force us to pull forward a whole series of investments into this year but investments we were planning to make in the next 24 months. And that -- we don't think it's a bad thing. Actually, it's pulled us forward to do a series of things to essentially double the capacity we stood at really in many ways from December last year. So if you just kind of looked at what our capacity looks like.In doing that, we've really leaned very much into our stores and leveraging our existing store footprint to date. Our MFCs are on schedule to be commissioned by the end of the year, but actually given the engineering teams are from the U.S. to commission this, we'll kind of see how the travel works. So the [ fast growth ] was driven by our Takeoff micro-fulfillment centers, although we are on track to get them up to the end of the year. It has been enforced to just lean into our store network and learn a lot more about store network and what we can do out of it.In addition to that, we've done a lot more work through our manual CFCs, and it's been amazing. We've done 1/3 more through them than we thought we could do. So we've learned a whole lot how to run our 3 existing manual CFCs, which has been a fantastic innovation from the team. We also, in the short term -- they're not only from one store that we just ran as an online store, which has been [indiscernible] in Queensland, Australia. But actually, in New Zealand, we have seen the team innovate and have more taken 4 existing stores and turned them into dark stores. So there's a lot of learning there for us going forward.So automation will still be an important part of our plan going forward. But all the capacity we've done is really done through a version of switching our existing assets better and some ingenuity from the team. All of this will really help us going forward. It's teaching us a whole lot on how to improve our online business across the group. And I would -- and I've said this to the Board, the last 2 months had been like 3 years in e-commerce time, really. And I don't exaggerate much on saying that.
Yes. Can I just follow on with that, just to ask if you've provided some stats around the comp store sales drivers through transactions and average transaction value. Was there any dynamics to point out from an online customer's perspective?
Well, it was a very -- it was a very good quarter for online and we set a huge incentive to the issue that essentially in March when we had this demand surge, and particularly in Australia, we had to shut down pickup just because we couldn't then ensure the product was going to be available. We then had to take online. And instead of servicing our loyal regular customers, we pivoted it to supporting vulnerable members of the community. And this was a wise decision, but it's one that always sits uncomfortably with us as a management team. We didn't really recognize our loyal customers but vulnerable customers that are in need. As the dust settled, it appeared as if our customers have accepted and understand the logic to that.So we actually ended up servicing and introducing ourselves to a range of people we have never serviced before. In fact, we took a whole lot of people online and taught them how to order online. And so we've -- in a way, technology enabled a whole range of particularly older Australians, which actually some are quite nice. And thinking about that is actually fun enough. So virtually, all of the capacity we had in March was with new customers to us, generally vulnerable customers.So what we've got to now do going forward is for those vulnerable customers who still went online, we need to meet their needs, but we now need to go back servicing our existing customers. And that's what we started doing in the first couple of weeks of April. And so far so good. I don't know if it exactly is in line with your question. I wish I had a different answer, but that's really what's happened in the last 8 weeks.
Okay. So not really representative of what's going to be happening going forward?
Well, I mean basically, we have a much larger online customer database now and we just need to meet their needs. It's basically what we've learned. In terms of the mix they buy and look, to be honest, the product limits impacted online as much as it is in stores. The product limits change. We really -- we'll see a real lift in basket size. We've been pleasingly surprised by online demand and just how it's resonated in 1.5 weeks with 700 stores. Really pleasing.Community pickup. I think our whole pickup experience would have to change. We see people do not want to come to a service desk to get pickup just in this world of being contactless. So our drive-up, drive-through will become more important going forward. In the case of Dan Murphy's, a wonderful innovation of we actually come and do a group service for you just using geofencing. That will inform the strategy for the group going forward, how we actually do group services and just take risk or perceive just for customers out of store. So some amazing stories, but still very early in that next phase of our journey.
The next question comes from Bryan Raymond from Citi.
My first question is also on this $220 million to $275 million of cost. I'm just trying to understand the variable component of it. Given you said -- I think somebody mentioned before that the March impact has been slightly higher than this run rate. I would have thought there would be some material headcount being added in -- to deal with the actual surge in sale. So my question is essentially, is this the right run rate to mark at a mid-single-digit sales growth level that we're seeing in April. And if you could give us a feel in there with the fixed component of that while we're in this lockdown period, that would be really useful.
Bryan, first of all, with remote working, you're going to have to upgrade your technology, if you don't mind me saying. And I think it's a very high fixed component to that upgrade. I think we know the question, which is what portion of our costs are variable versus fixed for Q4, right? I think that's the question.
Of the incremental cost, Brad, just to be clear. So of the $220 million to $275 million, yes.
What are fixed, yes. Got it, yes.
Yes. So Bryan, these are largely fixed or fixed for the period of the quarter would probably be the word that's appropriate. So if we see a surge in sales in May and June, we would obviously have variable costs associated with widening our stores and cost in our DCs and transport lease. What we're trying to call out here is what is the incremental cost of decisions we've made or the way we're supporting and enabling safety and social distancing in our stores. So in the short term, it is largely fixed. But obviously, over time, it's variable.
Okay. And just how much of that is in Australian Food, of that $220 million to $275 million? Would it be a proportion of the sales or over-indexing...
I don't know the number off the top of my head, Bryan, but it's -- this is a group number, but I think it will be fair to look at the proportion of the costs across each of the businesses and assume that Australia has a fair share of that.
Okay. And then just on, Brad, your earlier comment around high single-digit sales growth that you expect to return during this new period that we're in. Obviously, at-home consumption is a big part of that. But I'm just interested in how you feel -- how you're seeing trading down occurring. Obviously, there's some income pressures across the economy. So just trying to understand if your -- if that high single-digit expectation also include a number of other factors like shift to private label, shift to maybe small pack size or trading down in that expectation.
Yes. So I mean we're -- at the moment, it's high, right? So -- and with all the caveats around how unpredictable it is at the moment. We ask the same question. You need to call -- and it's very hard to be definitive on trading down right now just because the demand has been so all over the place. And if you're out of stock -- actually, if you backfill for any retail and look at ASP, ASP has actually gone up, but that's probably as much driven by availability issues as by anything else. So if you actually go and have a look at it, it's been all over the place, and particularly, if you -- I mean you don't get too much sure of ASP by carry. I know you quite like it, Bryan, but you don't. But if you look at that, you'll see that.So it's not in the historical data. However, it's -- I think it's a fair supposition that people are going to focus on value going forward. And we know what value going forward means really does resonate. If you look at it, it does come back to core everyday needs that people will focus on. As you know, for the core everyday needs, we have a Red program already where we do lock those lines down. As I said, right now, the Red programs have not grown in the last quarter, but that's through all the reasons I've talked about. So we'd expect the Red program to grow in our business, but it does play back to our Low Price, Always, which is very own brand-driven program; and our Prices Dropped, which is a bit more action-driven -- third-party driven.So we would expect to see it, but we've not really seen it now. And maybe a little bit of it is in drinks, but I just wouldn't call it. It's just too early to call.
Right. Okay. And then if I can sneak one more in. Just on the CapEx outlook, you previously guided to $1.7 billion. Just checking if that's still on track for your CapEx guidance for FY '20 or if there's been any delays or actually any unforeseen CapEx with what's going on out there at the moment.
Broadly on track. I mean we're obviously thinking about what our F '21 CapEx needs to look like in the world we're going to move into. But we have a series of commitments. And Steve, I think we're broadly on track.
Yes. I think there's been some projects that have been delayed in both like New Zealand where we haven't been able to move forward because of the restrictions, but I don't think -- we don't have anything material in terms of changes in our CapEx development.
We'll be at the lower end versus the upper end, Bryan. I mean that's certainly true. But there hasn't been -- there has been some brought forward of a lot of things we've done in e-commerce, but they really are just bring forward in that we've taken them in an OpEx sense in the way. So mainly around software.
The next question comes from Grant Saligari from Crédit Suisse.
Brad, I'm interested in how you actually come out of this period as a business. You're doubling your online capacity in online now, growing very strongly, your Rewards membership going up. Do you see Woolworths as you -- as I said, so further down the track, is Woolworths going to be -- have a stronger market position, a bigger market share, basically, a stronger moat coming out than it was coming into this? Or do we look back in 12, 18 months, 2 years' time and say, well, that was an interesting experience, but fundamentally, Woolworths’ position hasn't changed?
I think it's a great question, Grant. And time will tell. Our aspiration is to come out of this as a stronger business than we retain. And it's one of the reasons we've been so dogmatic around keeping our team and customers safe. And to us, reputation is everything. And within reputation, you get your NPS of your customers, your team and your suppliers. And all of those things will give you long-term benefits if you do the right thing. So that's been our focus. And it is our true north and so far so good on that. So certainly, in a culture, in a reputational sense, we hope and aspire to come out with an enhanced one through doing the right thing, not through a marketing message or whatever the case may be. So I think that's true.In terms of e-commerce, it definitely has brought forward and made us through -- and just the ingenuity of our team and agility, it's almost extraordinary for us in the last 8 weeks what our team has managed to do inside New Zealand, Australian Food, Dan Murphy's, BIG W. Some of the board, if we could just bottle this up and take this creativity and just turn it into a normal view, it's amazing.Listen, the creativity and productivity we've got in the e-commerce space in the last 8 weeks is well over a year's worth of effort. And that's because we always leaned in. And it was all driven by a noble cause of really primarily looking after vulnerable Australians and New Zealanders, which is pretty amazing, energizing. And we were just willing to take maybe a few more risks, be a little bit more agile. But yes, we will come out of it with a much better digital and e-commerce capability across all of our businesses. And it's fantastic, and it's thanks to them, to the team.
Okay. And if we certainly -- if we focus specifically on BIG W, which is a business that you've been looking for -- to create options for yourself by rebuilding the profitability of that business, is there anything that you can point to that would suggest that you've been able to build customer loyalty or build some better underpinning profitability of that business post the crisis that we're going through now that would give you some optionality around BIG W?
Well, I think it's like my comments on the overall group. When I look at the BIG W's NPS, reputation, being there for the customers, then it has been enhanced in this period. I mean we have been committed to being open, doing whatever we need to do to meet the needs of our customers. And they know we're there, and you can see it reflected in, I think, in the sales number. But actually, more important is in the customer metrics. So we do think we've had good resonance.Importantly for BIG W, as always, for us, we're looking at inventory and how -- the health of our inventory. So far, so good. We've got to wait and see what happens with apparel for winter, but so far, so good. We're in a very good position with inventory management, thanks to the team. And online works very well for a discounted department store, department store. Just your pick, pack and dispatch cost is just much more effective. And so having that really grow to the extent it has is good for us, and we've got the space in it.So we feel the business in a good place. The better it performs, it does create more options for us, of course. So we're not uncomfortable with where it's at. And of course, we've got to deliver to a profitable share, and that's our focus. There's been many things unknown in the next couple of weeks. But hopefully, that's the case.But then the real opportunity for us, we think, going forward is how we more thoughtfully stitch BIG W digitally together with Woolworths. And that's something we'll work on as a bit of a priority in the next year and how we leverage the 2 brands a little more.
The next question comes from Ross Curran from Macquarie.
It's Ross Curran here from Macquarie. Two quick questions. First one is just on online penetration. So you've doubled capacity in online. Should we assume then going forward that online sales as a percentage of total sales is going to be up at the high single-digit figure by the end of the year?
Ross, I mean that will depend very much by business. And so it will certainly grow dramatically based on customer demand, I should add, not based on the capacity. We're trying to keep up with our customers and their needs and wants. So I'm hoping that's true, to be honest, but we really expect to see material growth in Q4 based on the pent-up demand that's out there.So if you look at New Zealand today, and I think there's 7 or 9 [indiscernible], that certainly would be the case. We've seen this fantastic growth in Dan Murphy's and this digital resonance. So that's the supplier direct as well as normal wage, but we expect that to really get up there. In food, it's just much lower until how that comes through [indiscernible] to be honest, but we really expect meaningful material growth.
Yes. I think we called out in the New Zealand section 11% penetration in the last week of the quarter. So it's particularly illustrative of we've been sitting around that 8% -- 7% to 8% mark. We've got quite a surge just in New Zealand where we've had more capacity. And obviously, the circumstances of the lockdown in New Zealand and the Level 4 restrictions have probably played more to an acceleration in New Zealand. But I think that's illustrative of the type of growth that we can get, and we're very focused on unlocking capacity so that we can meet the customer demand.
And is any of the investment required to improve the online capacity, is any of that included in that $220 million to $275 million incremental investment for the fourth quarter?
Yes, yes, there is some. I mean there is also some capital costs associated with just putting equipment into stores as we put more stores online for home delivery, but it's modest capital.
Yes. And capital is not going to be as big as -- I mean a lot of the OpEx that we talked about is -- yes, I mean there's a certain element there.
The next question comes from Niraj Shah from Morgan Stanley.
Just first on MSRDC. I guess first, just to confirm that Hume was shut in late in January and that it sort of stayed shut through this period. But also more generally, how did MSRDC perform through this period? And the disruption we've seen, what does that mean for the path towards sort of business case type returns?
Sorry, it was a very bad line. The question is around MSRDC and our performance.
And having closed Hume.
Yes, we did close Hume in line with plan. MSRDC, the automation in MSRDC is tracking in line with plan, achieving its business case in line with plan. Obviously, we have a few things in place during the year at a store level around trying to extract productivity, as you might imagine, because -- as in the time and place. But actually, MSRDC has had a very -- has had a very positive 4 months in terms of tracking in line with our expectations. So yes, so far, so good. And actually, yes, I mean, very helpful for us as we think about the future.
Yes. Got it. And then secondly, just to come back to online, and sorry if I missed it earlier. But the trajectory prior to all of this was of improving sort of profitability in that business. You've now obviously doubled capacity. I get that it's going to be demand dependent, but does that sort of alter the profile of improving profitability in your view, at least in the short term?
Well, I mean I think what we said traditionally we would hope would apply going forward, which is that business is getting more and more efficient as it scales. And certainly, even in the last couple of weeks, we've seen that happen. Just our drop densities are getting better on home delivery and just the benefits we're getting at that. The pickup as we get more dedicated and experienced teams is just -- the pick speed is going up.We are fully utilizing CFCs. With Footscray, it was running at about 65% capacity; it's now up at 100%. We actually found we could do more volume than we had expected and so on. So that business is becoming materially more efficient. We are hoping that, that efficiency more than offset any other drag it might have on the P&L. So I don't think that expectation has changed for us at that level. So no, we don't expect that.
Yes. Probably the one consideration we just need to bear in mind is the mix of home delivery versus pickup. So we are seeing home delivery accelerate at the moment. Pickup in this period of restriction is running at a lower level. So I think that's just one of the things that we're mindful of, just that balance because obviously, we know pickup is a higher margin category for us [indiscernible].
And that will depend in the next 8 weeks to what extent pickup comes back to that core margin.
The next question comes from Ben Gilbert from UBS.
Brad, just one question for me, but probably 2 parts, so it's probably 2. Just -- I was pretty surprised, Brad, by your comments at the start that you don't see this as an opportunity to reduce sort of your promotional intensity and focus more impactful promotions given, I think, in the past, you've talked to it. And just the second part of what's interesting in your comment is given you sort of got now 300,000-odd consumers from online and 700,000-odd in Rewards, I would have thought there's more of an opportunity to leverage the database coming out of this, taking advantage of, say, independents, et cetera, that might not have that capability versus sort of just reverting back to sort of some of the more blanket promotions, which I think you sort of indicated in the past probably haven't been -- there probably have been too many.
Yes. So Ben, the question -- again, the line is really bad. I'm sorry.
Yes. Your comment, Brad, said you've gone back to the same level of promotional intensity given that I think in the past, you said you think there are too many in this market, you should be more impactful. And I would have thought it's more of an opportunity to put more money into leveraging the database and the capabilities you've got behind the rewards program.
Yes. No. Look, I think it's a great one, Ben. We've gone back, but as I said, we're continuing to refine what we do in stores. So -- but just given the current market we're in, doing anything radical there with our customers, we just -- we're continuing to consistently, importantly reduce the number and improve the number of winners as Claire talked to on the promotion. So that's certainly true. We just don't feel given where the customer is right now, just doing something dramatic was right. We really -- we've been monitoring our value scores on the way through this, and we wanted to make sure we did that.In terms of taking value and delivering it below the line via the Rewards program, this is a big priority for us as a group. And we're working on that absolutely enough. This will accelerate that. If we can do the right thing, we're very hopeful of accelerating, moving it from the store into below the line. And there will be, of course, benefits for our customers but hopefully benefits from what you can do there. And there's no question that, that will be helpful. But just given right now where the consumer is, we just got to be very cautious we don't lose their trust on the way through. But we do see upside there. When and how we bank it in the next couple of months is a difficult question.
Because in theory, a larger share opportunity, in answer to Grant's point before, because you've got this customer base that didn't probably shop as much as previously. And obviously, independents don't really have a very strong -- even healthy strong online offering. So it's probably...
So it's below the line. Well, we've got to execute. I mean -- but we do see -- yes, we have great aspirations online, and we do aspire to grow. We do have a bigger database, to your point. So we do plan the market in sort of -- and we've doubled our capacity. We'd like to fill that capacity, of course. So yes, we have great aspirations, and we'll continue to work on those. And we know that online is accretive to store. So if you can execute it online, hopefully, it helps our overall share position. We saw a little bit of the impact of that on the negative side in March, of course, and we couldn't actually do what we wanted to do online. So I absolutely agree with your point. It's just a question of when and how.
The next question comes from Rod Sleath from Rimor Equity Research.
I just wanted to very quickly come back onto MSRDC. You certainly said it's tracking along according to plan. But I'm just interested, given the advanced technology employed there and presumably some excess capacity versus current volumes, did that make handling the spike in Victorian demand easier than perhaps the experience you had in New South Wales? Was there any material difference?
No. No. [indiscernible] We spend a lot of time just on the phone with Sobeys, Kroger and many others sharing messages. Automation is unbelievably powerful where you've got predictive demand because you are essentially building a pallets bespoke to put down an aisle. And so its real strength is its ability to curate a pallet for an aisle in a particular store, and therefore, do that in an automated, seamless way overnight and attach it to the store and really help the team than pull the shelf.So its real strength is in a time of nondemand, unpredictable demand surges where you just -- where flexibility becomes important and flexibility in a manual shed is just easier. It's not significantly more expensive to do. So it has been a help to us in Victoria. We saw Victoria very challenged for a variety of reasons to be where we wanted to be availability. The demand surge was higher through a number of announcements that came out of Victoria. And if we were -- we felt we didn't deliver the right customer experience across the country, but Victoria, we particularly felt we didn't do everything -- well, we didn't do what we wanted to do for our customers.That is not the fault of MSRDC, I might add. What we did find, though, is the automation work that hit the capacity we wanted to hit the actual cost to a carton that we wanted to hit, and we know that it materially helps the stores. But actually, with the demand surges, what you've got to have, which we will continue to have, is manual flexibility where you just want to do full pallet, cross docks and things like that, which don't really need the automation. They just need an old fashioned grunt.So obviously, it didn't help us. But what it did was we stress-tested the automation and we put through the volumes we wanted to. And we didn't have any issues, and I'll say touch wood, we didn't have -- literally, I can't think of one major issue that we had. So...
Absolutely. It's something we're just confident in the automation through having tested its capacity limits.
But you always want to have a bit of manual capacity on the site.
Yes, absolutely. Can I also just ask about the -- also a question on the cost? With the 22,000 additional staff that you have hired temporarily, presumably, they are all casual staff? And presumably, they are not full-time equivalents? Otherwise, that would be all of the additional costs that you've been talking about, I would imagine. Could you talk about the additional cost range? How much of that is coming directly from additional staff? I would presume that's the majority of it. And then secondly, is that staff component really pretty much fully variable depending on, a, store demand; and b, on the continuing extra actions that you have to take as a result of COVID-19? So as things [indiscernible], the costs become variable?
Absolutely. So we hired the extra team based on, initially, actually looking at the absenteeism that have been seen everywhere else as people stay at home or the family stays at home or the kids stay at home and been able to operate the stores. So you want to have the asset -- we want to have the right staff there to just manage product flow. Actually, as it turned out, most of our demand turned out to be social hygiene standards, not in the demand surge and the absenteeism.But keep in mind it's all casual. So it was never meant to be anything more than a short term. But we're also sensitive to -- you can't turn something on and turn it off. So it is a casual team, but we still want to be very thoughtful. If someone comes across and takes a casual job in Woolies and goes somewhere else, we can't just turn it off immediately. So it is casual. Most of the hours now going forward are associated with social distancing practices. So as those come off, you can manage the glide path. And we intend to manage the glide path between May and June. I'm not sure if there's anything, any other color you can add, Claire.
Key one is obviously ALH and Qantas would be casual as well and some of the extra resources would have gone into stores that we stood up for Home Delivery, which didn't happen before.
Yes. It's a good point.
And it's sort of in the 40% to 50% of the cost, right?
Yes.
The next question comes from Phil Kimber from Evans & Partners.
I just wanted to explore when you talked about the pubs you're working with your partners and suppliers around cost reduction. Can I -- I mean is there a realistic ability to, one, reduce rent? And then secondly, are you getting any better from a job keeper? Have you shifted any staff onto that system?
Phil, well, if you say -- we're not getting any benefit from anything like that. I was going to just -- and that's reflected in the commentary we've made and the numbers we've quoted. Any benefit we get would be greatly received. But it's in about anything you see in the documents.We just -- so on rent reductions, we have written to a number of our landlords, particularly in venues, but also in some cases, CBD stores, for example, in metro, are down 70%. And so we have written to our landlords asking for their support in the context of those stores. We haven't done anything unilateral in that regard. Certainly, a number of other retailers may happen to have, but we haven't, but we have written to them. That's not reflected in the numbers we have today. So we're not seeing any rent benefits right now.I should add, we haven't done that without asking on our own. What is reflected in our commentary is that for our specialty credits in those marketplace malls we own, we have actually addressed their rent in the short term. So we think that's the right thing to do, and we would have done it either way, but we're not having the benefit.On job keeper versus job seeker, we have 2 engagements with the government and the ATO on how we deal with that in the context of those ALH team members that haven't got a role at Woolworths or didn't want to have a role somewhere else than Woolworths. We're still working through that. We're hoping ideally to get to some resolution at the end of the week. It does weigh heavily on us to make sure that just someone who's caught up in a Woolworths structure doesn't get penalized versus someone who works in a different kind of a venue. And that's happening intensively with -- at a government level, and we hope to resolve it, as I said, by the end of the week. But in all of that commentary, we've not seen any issues -- benefits from either of those.
Okay. That's great. So the numbers that you've given, hopefully, could be better if some of those things fall your way, but that remains to be seen whether that will happen.
Yes, exactly. Exactly, yes.
And then just last one for me, if I can. Is one way to think about the Easter impact -- in the past, when Easter's timings moved around, you've given us Easter adjusted growth rates. Is that a good guide to work out what the impact would be on the quarter? Obviously, it will be higher on just the month of April. As to what circumstances have meant that we didn't really get a proper Easter from a supermarket and liquor store sales business this year? Are those sort of historic adjustments that you made some sort of a guide? Or is it just too messy to work out?
Outside of the Easter bunnies having taken a lot of Easter eggs to families' homes, there really wasn't an Easter in Australia. I'll let Steve talk to the technical details. We sold a lot of Easter eggs. But outside of that, really it was -- there really wasn't a headline Easter in Australia. But Steve?
And we would typically adjust for this, that if we saw a change in the timing between quarters. So the reason that, with the exception of BIG W, we've made no Easter adjustment is largely because Easter was in Q4 -- last year, it's in Q4. This year, the only business that saw any benefit of sales ahead of Easter in the back end of Q3 and the last week of Q3 is BIG W. We've looked at it in every other business, and there's no benefit. So that's why we've made no Easter adjustment.
The next question comes from Richard Barwick from CLSA.
Just maybe going back on these incremental costs, just really to clarify. One, the $220 million to $275 million, does that include the recognition bonus that you're talking about paying to the frontline staff?
Richard, no, it doesn't. But we also need to work through exactly what it is, how it works. We're not going to do anything that's imprudent in that regard. So no, it doesn't. It will be dependent on trade and a number of other factors that we're working through.
Okay. And I know you sort of talked around it a little bit already, but I mean, if you assume that the $220 million to $275 million is genuinely a fixed cost for the quarter, what level of sales growth would you actually need to be able to offset that?
Look, to be honest, we haven't yet calculated what that is, if I'll be honest with you. But if we did, we wouldn't necessarily talk to it either. So I think it's a fair question, but we haven't [indiscernible]. I'm looking at you, Steve.
No, I think one of the challenges here is the costs are across the group. We're seeing different levels of sales uplift in different businesses. And so the sales that we've seen in New Zealand is higher than we've seen in Australia. And in reality, we've seen quite a bit of volatility by business. So at this stage, we're not prepared to sort of make an estimate of what we think the uplift would be, but I'm sure you can do some math yourself on that.
I think we're at the end of questions, but I sort back -- are there any questions?Okay. So just final remarks from me, if I could. Our aspiration, and I think Grant asked the question, it is to use this time to actually build a better Woolworths and to come out of it as a business that is a better business that sets us up for the future. Many -- it's a humanitarian crisis of some significance, but there are many good things that have happened at Woolworths in terms of what we've done, how we've lived to our purpose and how we've invested in the areas that are central to the future growth of Woolworths. And I'm hopeful as we come out of the crisis that this will position us appropriately for that future.I'd also just call out for me what I find interesting in our results and I always find interesting in our results is just in terms of our venues, our growth was between 9.5% to 13.7%. And so we're really sitting there at very nice elevated growth across the group. And I like that because it says something about us as a business, as a culture, as a team and how we've all lifted together in the crisis.As importantly, setting aside some home delivery scores, we've come out of it in Q4 with record customer scores in general with very strong supplier scores and enhanced reputation scores across every dimension. And these are incredibly important to us at times like this, and it hopefully reinforce what is our aspiration.So thank you all for your support and questions. We're going to sell 12 million toilet rolls this week, if you [ compare ] that from current run rate, only down from the 15 from an average growth rate of 10.5. And we look forward to reporting on how we form together better in the new normal. Thanks very much.