Thank you for standing by, and welcome to the Woolworths Group FY 2021 Q3 sales results announcement. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead. Good morning, everyone. Thank you for joining us for Woolworths Group's third quarter sales results for the 2021 financial year. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Amanda Bardwell, Managing Director of WooliesX, Steve Donohue, Managing Director of Endeavour Group, Teresa Rendo, Acting Managing Director of BIG W, Claire Peters, Managing Director of B2B and Everyday Needs, Natalie Davis, Managing Director of Woolworths Supermarkets, and Spencer Sonn, who recently joined the group as our Managing Director of Woolworths New Zealand. Just turning now to our Q3 results. We wouldn't normally split a quarter into a seven and six-week period, but I hope today's announcement clearly shows the two very distinct trading periods we had during the quarter. The first seven weeks of the quarter reflecting the period prior to cycling COVID, with the second six weeks reflecting the period in which we cycled the COVID peak, which began in late February last year in our food business and peaked in late March. For the first seven weeks of Q3, group sales increased by 8.1%, and for the final six weeks, group sales declined 7.3%, resulting in total sales of AUD 16.6 billion in the quarter, or growth of 0.4%. In the final six weeks, Australian and New Zealand food sales declined materially on the prior year. Drink sales declined modestly. BIG W remained strong, and hotel sales growth improved as it cycled closures at the end of Q3 in the prior year. Two-year average growth rates across Australian Food, Endeavour Drinks, and BIG W remained on trend at 5.3%, 8.2%, and 14.8% respectively, with total group sales up 5.6% on the same basis. In general, we are seeing customer shopping behaviors continue to normalize. While food customers are still shopping less frequently, the growth in the number of items customers are putting in their baskets is slowing. Customers are also shopping more on weekends, state-based performance is becoming more balanced, and there is less divergence in trading across our fleet, other than in CBD and transit locations, where foot traffic remains below pre-COVID levels. While we remain vigilant in looking after the safety of our customers and team, as foreshadowed, COVID costs continued to trend down over the quarter. Group e-commerce sales continued to be strong, increasing 64.2% in Q3 to AUD 1.3 billion. Digital engagement also continued to grow, with average weekly traffic to Woolworths digital assets up 48% to 12.4 million visits per week. During the quarter, we launched our latest micro-fulfillment centers in partnership with Takeoff Technologies in New Zealand, with Penrose opening in January at Leon Leicester Avenue and Moorhouse opening in late March. Together with Carrum Downs in Victoria, we now have three micro-fulfillment e-stores, with a fourth launching in August in Maroochydore, in Queensland. Earlier this week, we announced plans for the next phase of our e-commerce fulfillment program with our first automated customer fulfillment center to be built in Auburn in Sydney, in partnership with KNAPP, with a capacity of up to 50,000 orders per week. KNAPP are leaders in automated storage systems and warehouse logistics software and already partner with Takeoff to provide the shuttle system for its units. In what has been a busy few weeks, we also recently announced an increase in the group's ownership of Quantium to 75%. This will reshape the way we partner with Quantium and is a very important step in the evolution of the group's advanced analytics strategy. A new business, Q-Retail, will also be established to deliver against our advanced analytics roadmap and commercialize products externally. It is important to mention the devastation on local communities of widespread flooding across the eastern seaboard and bushfires in Western Australia. Our team rallied to ensure communities were supplied with essential groceries. Together with the generosity of our customers, almost AUD 200,000 was raised for our S.T.A.N.D. program partner, The Salvation Army. We also supported the Foodbank with food and essential items for emergency relief hampers and paid for the volume lost by the dairy farmers who supply our Farmer's Own branded milk in the Manning Valley. Taking a closer look now at each of our businesses. Australian Food total sales for the quarter declined 0.7% on the previous year, after being up 8.2% in the first seven weeks. Comparable sales decreased 2.1%, with two-year average comp sales growth of 4.1%, which is more typical of pre-COVID growth. Average prices during the quarter declined 1.8%, or 3.4% excluding tobacco, with all major long-life categories declining largely as a result of cycling the temporary removal of promotions in March 2020 following the onset of COVID. Fruit and vegetable prices also declined due to improved growing conditions and cycling higher prices in the prior year due to droughts and bushfire-related cost increases. WooliesX eCommerce sales increased by 90.5% with a penetration of sales of 7.9%. Last year, some eCommerce services were disrupted following unprecedented demand during the onset of COVID and a decision to focus on our most vulnerable customers. However, even on a normalized basis, we estimated that eCommerce sales growth exceeded 70% in the quarter. New Zealand Food's total sales declined by 6.9%, and New Zealand Food cycled the peak of last year's pantry loading. Two-year average comparable sales growth was 3%, with the market continuing to be impacted by border restrictions, lower prices, and lower growth in fresh. CountdownX eCommerce sales grew 37.9%, with a sales penetration for the quarter of 11.6%. BIG W's total sales increased by 18% in the quarter, with comparable sales growth of 20%. Sales growth was strong in every month of the quarter and across all major categories, despite cycling the initial COVID demand surge in March last year. BIG WX e-commerce sales increased by 34.8% in the quarter, with sales growth moderating from previous quarters as we cycled a strong uplift from when initial COVID restrictions drove a surge in demand for home delivery. e-commerce penetration was 7.5% in Q3. Endeavour Drinks' total sales increased by 6.3% in the quarter, after increasing by 14.4% in the first seven weeks. Comp sales increased by 5.5% with two-year average Comp sales growth remained strong at 7.2% as customers continue to consume more at home and favor more premium products. EndeavourX e-commerce sales increased 23.8%, with a penetration of 8% of total sales. Hotels' total sales in Q3 increased 11.5% on the prior year to AUD 390 million. Hotels saw improved trading trends in the first seven weeks of the quarter compared to H1, and a material improvement in sales in the second six weeks as the business cycles last year's lockdowns, which started on the 23rd of March. Turning to current trading and outlook. Sales growth for the first three weeks of April remains volatile and impacted by prior year growth rates and the timing of the Easter and Anzac Day public holidays. In Australian Food, total sales were broadly flat compared to last year. This reflects the cycling of mid-single-digit sales growth in April last year in comparison to double-digit sales growth in May or June. In Endeavour Drinks, sales increased marginally in April. However, Endeavour Drinks will cycle sales growth of over 30% in May and June. In New Zealand, sales growth remained materially negative in April, cycling sales growth of over 20% in the prior year. BIG W sales slowed in April to date relative to Q3, with sales growth in April last year of over 20%. We continue to expect sales to decline over the March to June period for all of our businesses other than Hotels, where Q4 sales growth declined last year on 86% on a normalized basis. Despite this trading volatility, we remain focused on delivering the best possible experiences for our customers. The Endeavour Group's demerger remains on target for late June and subject to board and regulatory approval. The demerger documentation is expected to be released in mid-May. Finally, we also provided an update today on the independent panel review of the Dan Murphy's Darwin development. The board has supported management's recommendations, and we will not be proceeding with the development at the site. We will take time to reflect on the findings of the Gilbert review and release our response to it once we've had time to consider it, and we'll tie it through that by the middle of June. I will now turn the call over to the operator for questions. May I please ask that you limit your questions to one per person and rejoin the queue for any follow-up questions. Thank you very much. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are using a speakerphone, please pick up the handset to ask your question. The first question today comes from Michael Simotas from Jefferies. Please go ahead. Good morning, everyone. I don't think we've ever had as many sort of moving parts in terms of the way the base is shifting and timing of Easter and Anzac Day, et cetera. I was just hoping you could give us a little bit of help with, firstly, the benefit that Easter was to the business, and predominantly food, but you can touch on the others if you like, in the third quarter. In terms of your April trading update, what impact, if any, Anzac Day had on that? The reason I ask is clearly the market's comparing Coles to Woolworths based on the share price move today, and it looks like Woolworths is lagging Coles in April. I just want to understand whether there's any nuances in the timing that's driving that. Thanks, Michael. You're right. We've never had more complex numbers. We used to talk of a game of two halves, H1 plays H2. We started talking about a narrative of four quarters. In fact, in Q3, it was really a tale of three very different months. You're up, you're flat, you're down. Now we're talking about a question of three to four weeks and the material differences in those weeks. The word volatile, I think, is the best description of where things stand right now. We haven't adjusted anything, in truth, for Easter or for Anzac Day. We've just let the numbers fall the way they have in our document because any adjustment we did we thought would be just very hard for us to do. As you're aware, Easter fell in Q3 for us this year and Q4 last year. You're looking at a Q3 number with it. That's different because we've done, therefore, reported three weeks of trading for April versus the full four weeks. Quite big differences in where it fell. Last year, you may remember Easter was very muted. COVID almost stole Easter, so to speak. It was very hard to actually get a good bead on Easter last year. It was a very strange trading period. In fact, we even traded on Good Friday, which was something that we felt very uncomfortable on in New South Wales. The whole trading pattern was very different e-commerce business wasn't where it needed to be. It was just very hard for us to understand. Anzac long weekend last year was also quite muted, but again, very different in the way it fell. In fact, our numbers don't report the benefit of this current week, which gives you the Anzac washover. So hard to make all the adjustments between those two, in truth. A couple of comments. We felt pretty good about Easter trading this year. We thought Easter traded well. We got good seasonal sell-through in all of our businesses. We hit what we assumed was a sensible forecast. We didn't feel uncomfortable around Easter, and it felt good, and we got out of it in a very clean way. You know, it's a very expensive holiday because of the two public holidays that sit there, and it has its stock loss challenges because of those two public holidays as well. We got through it what we thought was very pleasing. Anzac Day is very different, as you know, by state, whether the public holiday is not and when we got to trade or not. I happened to actually be in Adelaide on Monday, which we got to trade a half day on Monday. It was very noisy. We're actually only starting to see now some of the overflow from that Anzac weekend and how you want to adjust it. We're actually getting a better bead on Anzac this week, and that's changing as we go. Again, very hard to understand. It would be fair to say that some of the benefits of the Anzac weekend are starting to manifest this week versus last week. I wouldn't want to overplay that. It's just very volatile, Michael, in truth. We feel pretty good on our settings. Our price settings are good. Our general market share settings are pretty stable and good. We know we've got a big mountain to climb as we cycle COVID this quarter, and that's what we're focused on doing. We're not feeling in a bad place on it at all. We just need to continue to execute and keep our team very focused on our two-year numbers. That's our real metric we're talking to inside our business. What is the two-year number as we normalize out COVID? I'm sorry I can't answer your question in a precise way. The word volatile is what we think best describes our business. On all of our settings, are we feeling in the right place for this critical transitionary quarter? Maybe something that would help is, you've clearly been leading growth, certainly amongst the major supermarket chains, for some time now. Do you think that's still happening based on the trends that you're seeing in your business? Or do you think that that period of gaining share relative to Coles has come to an end? Our focus is always on running our own race, we're not overly focused on that. As I said, there are just so many moving pieces. We feel we're in a good place. We just need to continue to execute against our strategy. We are seeing reversion back out of neighborhoods into malls that is disproportionately impacting some of our competitors. We've got a much more representative fleet, we get the puts and takes wash out in our numbers. There is a lot of movement beneath the scenes, I would say. As I say, that washes out for us. We've got more natural hedges in our business between our metro and our city stores and our neighborhood stores and between our neighborhood stores and our malls, between our balance across the country, in truth. Yeah, no, we feel pretty stable. We aspire to continue to grow our business and grow our customer franchise, but not to use illogical ways to do it and to do it in an unsustainable way. Thank you. The next question comes from Grant Saligari from Credit Suisse. Please go ahead. Good morning, Brad. Thank you. Brad, there was the report last week about Woolworths launching an online marketplace. You've now got some really consistent, strong sales growth out of BIG W. BIG W historically has been described as a portfolio business, and which I've interpreted as non-core. I don't know whether those two events are connected in any way, but if they are, I'm wondering whether you could put some context around Woolworths' broader intention in the marketplace and its intentions with respect to BIG W. Thanks, Grant. Two different questions. Like many retailers globally, we are looking at providing extended range options to our customers. We already do that inside Endeavour. In fact, inside with the Endeavour Marketplace, which is primarily driven through Dan Murphy's, where we have an extended range. We actually have a very modest extended range in BIG W today that we're looking to expand. Of course, we do plan to do likewise inside woolworths.com.au. That would be the marketplace statement I think you saw last week, and it's just really providing that extended range to our customers. Some of that extended range being provided to the woolworths.com.au customer will be some of the key ranges in BIG W, we know complements what we do inside Woolworths, particularly as you get to these entertaining categories, as you get to quality and things like that. I don't want to overplay it. It's just a logical evolution. It's not something we haven't been doing. We just need to do more of it because we know it's important for customers. When we use the word marketplace the way it was used, we're talking about a very curated offer, a very logical extension of what we do today. It's not trying to go head to head with all the other marketplaces that are out there, the Amazons or Kogan or Catch and so on. I don't want to overplay that announcement of last week. It is just expanding what we do today. We do think that's important, Grant, and it's logical and we need to follow what our customers want, and they want to get a holistic solution, and we need to provide it to them. I think the article actually came out of a very modest investment we've made in the platform that will be the vehicle to extend the marketplace, which is Marketplacer. I think it's actually just nice to be supporting a local Australian business. It's pretty cool to be doing that. That's part of what we want to do in general is support whether it's Australian growers or Australian tech companies. It's a very modest thing we did, but a really important step for us. If you then come to BIG W, what is true, and we've said this, and we'll engage with the board in May again on our strategy settings for the next three years. As we get into this digital world, BIG W has an important role to play for us. In a physical store world, it's important, but in a digital world, it's much more important. You see that, I think very importantly, if you just look through some of the numbers that we start talking about around digital engagement or digital visitation, and there the long tail of products inside of BIG W becomes really critical for us. We're kind of carefully thinking through how we can make more of the overall digital experience between BIG W and Supermarkets on a go-forward basis. We're certainly working through that. We could do that in partnership with BIG W as we aspire to do with Endeavour or through ownership. It's not an ownership play, but certainly, we're feeling much more comfortable in this digital world on how we knit the assets together. We'll come back to you on that. Yeah, we are certainly feeling a lot more comfortable about how BIG W is performing and its role in the digital ecosystem of the future for Woolworths Group. Mm-hmm. Okay. Thank you. I was hoping we were going to get a question on your report last week, Grant, but maybe we'll come back to that in your second question. Fantastic. Mm-hmm. Okay, thanks. Thank you. The next question comes from Ross Curran from Macquarie. Please go ahead. Hi, team. Maybe we can delve into the deflation figures a little bit. Price deflation, 3.4% ex tobacco was larger than Coles was quoting. Can you just talk us through what's happening there and where you expect that to go from here? Thanks, Ross. This is very much like Michael's question. Incredibly complex environment. I'll have a crack at it. I might turn to Natalie Davis to elaborate on some of it. It's again, a very messy period. Let me just go through the individual components of it if I can. Firstly, of course, you need to think about the tobacco and how the tobacco distortions. You'll see that we've taken it out. I think that's quite important because we've still been living in the world of CPI-driven tobacco increases. We'll see how that plays out going forward. In our numbers, you're still getting that impact from tobacco. If I then take that out, then the next thing that we've called out, which I think is very important, is you've seen deflation in fruit and veg, and that has actually been in both fruit and vegetables. A useless fact, may I say for many of you, is we actually have a bigger vegetable business than fruit business, and it's unusual to see the level of deflation we've had in vegetables. Normally in fruit where we get deflation, we get a volume uplift through deflation that's harder to claw back in vegetables, which tends to be relatively pricing elastic. Both of them have been deflationary, and really on the back of what happened last year with droughts, and then the bushfires. They've been deflationary, and continue to be that. Park that for a moment. You get into the rest of the categories, there the big issue for us has been promotional programs. We did have to stop our promotions last year in general, and we're putting those back in. You've seen that come through in the deflation. We're not more promotional than we are on average, but we are cycling a period where we just couldn't execute promotions and therefore we needed to stop them. You've seen that impact there. I guess, sorry, the last one I should say, which is counter to all of that, which is the red meat inflation that we've seen, but that sort of gets washed out by some of the other impacts. It's incredibly messy for us, Ross. The question I have personally as I speak to our team is, what does this mean on a go-forward basis and in a structural inflation sense? I think we still see some inflationary pressure in the business. How it manifests on the go forward will depend on how we. We've still got to cycle the putting our full promotional program back in. It was this week a year ago that we actually went back into a physical catalog, which I think is quite important to log, and it was a 28-page catalog, not our usual one. We've still got quite a period to go through. We still think that there is some inflationary pressure, but still a lot to cycle before we see it manifest. I don't know, Amitabh Mall, anything to add? It's very complex. I think that's a great summary. I think you have to look back at our inflation statistic a year ago, and what you're really seeing, as Brad said, a resumption of normal promotional patterns, as well as some very favorable growing conditions in fruit and veg, which our customers really enjoyed in March and we really celebrated, whether that was grapes or broccoli, and tomatoes. We continue actually to have some fantastic fresh fruit and veg. Avocados are really great at the moment. Something that our customers have enjoyed. We don't get as much volume uplift on the vegetable lines when we do see that deflation coming through. Can I just ask, given you are seeing greater deflation than the competition, where does that leave the price of a basket at Woolworths versus Coles? Ross, look, it's how you calculate it and what time frame you look at this. I wouldn't look at these numbers. It's very hard for us to comment. We can only look at ours. What I would say is that the price indices between our two businesses have been relatively stable, both very competitive as we work on delivering value. We are seeing relatively stable price indices, whether it's on shelf or on a promotionally adjusted basis or on a basket basis. Just how they calculate inflation, we have different methods for doing it. We just can't talk to be honest. No, Ross, Stephen Harrison here. My observation, just having studied these figures for a few years, is to look at the relative movements, which I think are pretty consistent across both retailers. Thank you. The next question comes from David Errington from Bank of America. Please go ahead. Morning, Brad. Brad, look, I don't know how to ask this question. The best way would be, the detail that you've given us, all of us should already know in that March last year, there was massive panic buying. April, there was the de-stocking, where you had the pantry coming off, and there was no Easter. May, June, it normalized to a lot of at-home eating, et cetera. The way you're talking has disappointed me because you're basically, as in a football analogy, you're waiting for the ball to come back to you. You're not going out there and getting the ball. What I mean by that is when you basically said that April sales, you're flat on half, 5%, but then May, June, we're cycling 10%. Hey, market, get ready for some negative comps. May, June last year, there was a lot of trends there, such as localization. There was online disruptions. There was inefficiencies in your stores. You're talking today more like you're just waiting for things to unfold. You have to cycle these comps. You're not talking about the opportunities that Woolworths have got. You're not talking about the fact that April should be a month of opportunity. You're almost talking apologetically. Now, I don't know if that's the message you're trying to give, but your current trading outlook was quite disappointing and bearish. It wasn't, in my opinion, I think May, June is an opportunity for you guys because as you say, the independents gained a lot of share through localization. You didn't capture as much market share in online as you could have because there was disruptions to your supply chain. There's been enormous amount of disruption to your supply chain because of COVID costs. They're coming out. You haven't talked about the upside. You've basically talked about, "Oh, yeah, this quarter's going to be really tough and you're just going to have to wear it. Well, thanks, David. Great question. To be honest with you, we're always focused on the 18 - 24 months, and we feel very positive over 18- 24 months. To be sitting here talking about three weeks, and in fact, not even adjusting for the next four days after Anzac Day, I think is a peculiarly strange situation to be in. We're just saying it is volatile, and it's just very hard to make calls based on the next day or the next week or what it might look like after six weeks. We're just trying to be very realistic and give you a sensible view. Do we feel positive over the next 18- 24 months? Yes, we do. We can see a lot of things that if we execute our plan against, we can deliver what our aspirations are. Do we think there'll be some ups and downs in the next 10 weeks? You betcha. Will some things go away? Yes. Will some things go against us? Probably. We're just saying we are cycling some very large sales numbers. This isn't a profit announcement, this is a sales announcement. We're saying there's just a lot of volatility out there. We don't feel in a bad place. We're in line for we want our forecast to be. Our customer metrics are good, our price metrics are good. No, we're just trying to be very balanced in the way we look at it and not get sucked into the volatile environment ourselves. We're at our best when we plan and we execute over a meaningful amount of time. Not three weeks, and a meaningful amount of time. Sorry. The best question, the way to do it then, is your business getting better? Is it just the case that it's a cyclical business, basically, that we just cycle through these comps and you've got to wear the higher comps and you've got to wear the lower ones? How much step changing are you improving your business? I think COVID, as I think I've said to you before, has made us a better business, and we continue to be a better business. We never improve quite at the rate we would like. That's the nice thing in retail. You get to wake up the next day and continue to focus on improving, and we feel very comfortable we're improving as a retailer, and that's across all aspects of what we do. Of course, as you all know, when we get to the full year, the proof will be in the pudding. We'll need to show you then. We feel not uncomfortable with where we're at. We feel very comfortable about our long-term plan, and we just need to keep focused and execute and not let the emotion of COVID surge sale and day X or day Y knock us off course. Thank you. The next question comes from Bryan Raymond from Citi. Please go ahead. Thanks, Brad and team. Just weighing in on the CFC versus MFC debate, which is, I think, raging across the market. Interesting to see you guys doing your own CFC. Can you just help me understand how you're thinking long term about the mix of business that will be flowing through, for online obviously, through your stores in terms of fulfillment versus CFCs versus MFCs? Like how you see the future looking on that front? Yeah. Thanks, Bryan. We're all iterating as we go, as the world changes around us, let's agree. I think, by the way, the nomenclature doesn't help us out. What is a CFC? Or what's an MFC? I'll come back to it. Let me just give you a quick run through and then if, Amanda, there's anything you want to please jump in. Our stores remain key to our fulfillment strategy across all of our portfolio, in fact, and it's how we actually enhance how we do fulfillment in store. That's one of our biggest investments that we're making at the moment and how we do to-booth services, how we put capacity in the back of the stores, how we redo our routing around the store, how we create real-time systems so we know what's taken off the shelf at any point in time, are our biggest actual investments inside Woolworths right now. We believe, no matter what we do outside the store, which I'll come back to, that our stores will still do somewhere in the order of 80% of our fulfillment. That can sound strange, but actually just look at Australia and think about where you might do automation, and you're not going to be doing it outside of the three capital cities, no matter how you model these things. Stores are key for us. We're trying to become a digital retailer where our stores form an important, critical part of the customer experience. A lot going on there, I say the highlight for me was that we managed to increase our pickup or to-booth service inside the group, which is key. We do want our stores to continue to have relevancy. That is actually the highlight in the quarter where we drove up our pickup percentage, I think from 34%-39% inside food, which was terrific. You say, "Okay, we've got to get the store right," you say, "We'll never on this drive to e-commerce penetration of whether it's 20% or 25%," I don't think any of us know. You still need some extra capacity in the denser areas. You have to pull that out. We've done that, as you know, to date, through manual CFCs. We invested a lot in that in Q2 with the commission in December of a manual CFC in Lidcombe, in Sydney and in Notting Hill, in Melbourne. They complemented the other three we had. So we've got five manual CFCs running right now. Again, we're working very hard to use technology to make those much more efficient and doing smart automation into those, which we've got a lot of work to do. We've got that working. We've said, "Actually, now we need to look at these micro-fulfillment centers," which we can ideally, as stores shrink, we can expand into the back of a store. We've got 3 test cases running now. We started with Carrum Downs. All of it's commissioned during the time of COVID. I generally get to see everything. I still haven't been to Auckland or New Zealand to see how the two that we've commissioned there, which is intensely frustrating. We've commissioned three of those. If a store can do 2,000 orders a week of online to say, in crude terms, a micro-fulfillment center can take the two and turn it into six. Ideally. We're still trying to see whether we can get to six. We've got three test cases running, Carrum Downs, Auckland, and now Moorhouse. Actually, we're learning a lot, our New Zealand ones are actually ahead of where we are with our Australian one, that's for very practical reasons, which I could bore you on now or at another time. We learned a lot from those three, but they were still only 6,000 orders, Maroochydore will, if at best, be the same. We've got that layer. The final layer for us was a mid-size CFC in these big capital cities. When you get to the city of Sydney, we've got very constrained stores in Sydney. Most of them are in malls. It's very hard, therefore, to do a truck haul off a mall. It's very hard to expand the back of house in a mall. We tend to have a higher sq m in Sydney. You say, well, we do need something in addition to that. That's where our mid-size CFC that we've announced at Auburn comes in. We've spent actually, this isn't a knee-jerk reaction. We've just spent three years driving around Sydney, Amanda, myself, and many of the team, looking at many locations to do this. That's what we've announced with Auburn. In terms of KNAPP, and that's 50,000 and a quarter units, and you'd have to speak to Coles, but the ones we looked at the day were 180,000. It is probably less than a third of the size of what you look at. We've gone 2,000 inside a store, 6,000 in a micro-fulfillment, and then 50,000 in this facility. Our manual CFCs, by the way, are doing somewhere between 10,000 and 20,000, depending on whether. Well, ideally, we think we can get them maybe to 25. They're all put together and powered in the store. KNAPP itself has been a very long-term strategic partnership for us. They run the shuttle system inside the Takeoff facility. We can show it to you, and we felt that they were the best partner to then therefore do a slightly bigger unit with us. We felt that was a logical extension in our broader partnership. We're excited because some of the people who are doing Takeoff are also doing KNAPP, and there's therefore an ability to create a learning network globally. If you look at that, you'll only be there in calendar year 2024, and we're sitting here in calendar year 2021. Most of the work for us is fall back to the store. I hope that all makes sense, Bryan. If you had a question around the CapEx difference between this and perhaps what our competitors have done, it's because we're CapExing versus doing capacity as a service. There's just differences in how we're choosing to do these things. Generally, across our whole supply chain, we've CapExed what we've done rather than using supply chain as a service, and there are trade-offs and benefits to either one. One's not better than the other, it's just how you want to approach these things. I think that's right. Having a balance is certainly the right approach. I'm just interested in how you see the cost to fulfill and inclusive delivery costs out of those four methods. Is there one that's a standout that you think is a cheaper method of fulfilling that order, including picking and delivery? I think it's a great question. Amanda? That's a question we get asked a lot. Maybe just to recap on your starting point, Brad, which is why we are excited about the potential of the store network is because we're seeing the speed to customer being really, really important. That's why when we talk about that 80% in terms of continuing to look to our store network to fulfill, we're excited about the potential there, both for direct-to-boot, but also for some of our stores that will continue to provide home delivery services. What we're seeing certainly increasingly in this quarter is more and more customers wanting that same-day service and that faster service. In all of the solutions that we've looked at in stores first and foremost, because obviously proximity to customer, if you think about our network, is one of our great advantages. We want to leverage that first. The stores are continuing to improve in terms of both our voice of customer scores that we're seeing come through from the experience, but also in terms of our efficiency from a picking perspective. Our manual CFCs are also improving in terms of their performance. Of course, we do anticipate that we will see significant efficiencies from an automated facility. Again, you do need to, as you rightly point out, look at that from an end-to-end perspective. I think that's really important. When we've looked at the Auburn facility, we've lined that up against the market that we look to serve, the speed with which we want to be able to reach those customers, and that end-to-end cost. In many ways, Bryan Raymond, it's a bit like, it sounds strange, but a non-sequitur back to David Errington's question. What we're trying to do is have balance. We're trying to balance and meet the needs of our customers and do that in a very balanced way. We have sat on this decision for a couple of years, but when we forecast forward to 2024, we can see the demand we will have in that part of Sydney for home delivery, which is what we will pull out of the stores, and it becomes the next day, and only selectively same-day home delivery business. We've been very thoughtful in trying to model where we think the market goes and when we should anticipate bringing different layers of capacity in. We've had lots of conversations, when do we pull it into the capacity plan? That's when we think is the optimal time from what we know now. Yeah. Absolutely. Thank you. The next question comes from Andrew McLennan from Goldman Sachs. Please go ahead. Good morning, everyone. Thanks for that. Really good detail on the e-commerce side. I'm just wondering, that's obviously very insightful for the longer-term strategic change going on. Just thinking more from, and I'm not expecting guidance here, but from profit management perspective, there's lots of volatility right now. As you said, you're benchmarking on fiscal 2019 levels to get a better understanding of the longer-term trend. Is there anything that's going on here that is requiring you or the industry to be more adaptive that may not have been in line with sort of your expectations from 12 months ago as this all started to play through? Thanks, Andrew. Obviously, this is a sales forecast, not a profit result. Actually, broadly this year, we are tracking in line with plan in a funny way. The only thing that is surprising us on the upside is the continued strength of consumer confidence. I would say the rest in terms of digital growth, the need to make sure we've got e-commerce capacity, the need to continue to think through our store network. The fact that we're going to go negative on sales in late February and early March. Actually, the year is playing out very much the way we had broadly looked at, except consumer confidence has remained higher than we'd initially anticipated. We'll see how that plays out, of course, with the roll-off of JobKeeper into Q4. No, it's steady as she goes. That's not to say on any one day or day of week, there's not some excitement somewhere in our business and we've called something wrong. If you kind of look at the broad shape of what we were expecting, it's basically in line with that. I don't know, Steve. I think there's just more consistency actually in how we're trading the business. Actually as we look at it just on a linear basis, it's actually pretty consistent. It's the relativities to what we're comping that makes some of the comparisons hard to look at. Actually it's pretty stable week on week on week as customers get back to normal shopping patterns, post everyone going back to school, the weekends are much bigger shopping days, et cetera. Those types of things are actually much more predictable. When you think about that. Sorry, go ahead, Brad. No, that's it, Andrew. Sorry. I was just going to say, when you talk about that underlying CAGR that you're trying to benchmark to, is there an expectation that the supermarket system or yourself specifically are anticipating that you've been able to hang on to some additional sales for a longer period of time that's come across from the dining out category? I think there are two different levels of question. One is, do we think the market will inherently have higher at-home consumption related to it? Then secondly, can we get more than our fair share of that at-home consumption? We do think, in line with other comments that have been made, that in-home consumption of food and everyday needs will continue at a slightly elevated level going forward. How much of that we'll see, the washout and the pantry stocking is gone. The pantry stocking stuff's gone, but elevated at home consumption, we do expect to continue mainly because of flexible working and just the fact that people are spending more time at home, and that just leads to more consumption at home. We do think that creates good opportunities for us, actually more in breakfast and lunch than dinner, which I'll come back to. We think the Everyday Needs, which was never under play on a household, plus then we're trying to make sure we hold share and get share in breakfast and lunch. In the dinner category, we are seeing customers starting to go out a little bit more for dinner, or we're still seeing the continued growth of Uber Eats into the home. We need to hold on by providing more solutions into dinner. While there'll be more in-home dinner consumption, we're at risk of, as a collective, not only at Woolworths, we're losing some share, particular to Uber Eats if customers aren't going out. We're starting to see a little bit of the tussle on that occasion play out in some of our more premium or what we call up stores, where you would've seen a bit more of the more affluent consumer segments dining out a little bit more or leveraging Uber Eats a little bit more. Yeah, we think there is an opportunity, but we need to be quite forensic and strategic in doing it, and as I say, feel a little bit better about breakfast and lunch, and we need to continue to be very focused on simple solutions for dinner. Otherwise, we could lose a little bit of share there. Plays to Amanda's point on same day and on-demand and things like that where we can hopefully hold relevancy and share. In terms of our overall share position, we aspire to modestly, of course, continue to chip away. The fact we've got the balance we have, I think gives us an ability to do that. Of course, we've got to continue to make sure the e-commerce services are there to do that. As you feel like you're getting on top of capacity in one area, then you feel like you need to focus on the next. If you came to one of our meetings, all the narrative of growing e-commerce is the same, but in any one month, the priority changes. If we were talking about home delivery capacity, and then we got into how we need to make pickup more convenient and boot solutions, or then you'd come and say, "We need to get same day right," or "We need to come and be very thoughtful in the sub 60-minute segment where we're seeing DoorDash and Uber Eats becoming a lot more aggressive at providing more immediate solutions." It's what makes retail fun, actually, but it's changing as we go. Thank you. The next question comes from Phil Kimber from E&P. Please go ahead. Hi, Brad. Just wanted to ask a question about normalization. I get the sense that you've talked a lot more about it, this result, late April versus, say, late February when you had your profit result. I'm just wondering, have things really changed as dramatically as it seems in the last two months, or is it more a case that the data that you're looking at has now just ticked over the COVID impact period, as a result, all the percentages are changing, that sort of makes it feel like things are normalizing more? I'm just surprised that in two months, both yourself and Coles are talking normalization a lot more than you were two months ago. We decided not to normalize anything, Phil. We're in the second camp, the latter, not the former. We haven't normalized anything because it's just too hard to normalize right now and too many judgment calls. We just focused on executing against forecast versus trying to normalize the past. Brad, sorry, when I said normalization, I meant talking about the localization theme, the people moving back to shopping centers. I wasn't talking about normalized numbers per se, just the commentary that shopping habits are going back to normal. It just seems like there's a much bigger focus versus two months ago, and I'm surprised things would change that quickly. I think, to be honest, in our half-year profit results and when we spoke to yourselves and to our shareholders, we talked about being able to see even from July to December, the reversion to mean. It was just coming in very gradually. What's happened is we've sort of gone through the tipping point, so to speak, of the COVID peak. We've seen the reversion to mean in terms of consumer shopping starting in July. It's just we've now sort of gone through that tipping point. We've seen it as a very consistent trend. As I say, if you look at COVID, and COVID is this calendar year phenomenon, and we're trying to model it in financial years, which is the problem. Actually, you sort of hit the peak in April, May, and then from there, depending on which business, some part of June, and then we started to see it slowly tail away from there, and that's changed over time as little lockdowns have happened and things have gone up and down. No, reversion to mean has been going on, as you say. We've just clicked through, though, the big peak of last year, which is why I guess there's more focus on it. It's enormously relieving to know that the theory of the reversion to mean is working out because one of the big conversations we had before was structurally, does that mean people are only going to shop locally for the rest of their lives? The truth is no. As they go back to work at least a couple of days a week, as they take the kids to school or whatever the case may be, or they actually go on holiday, even if it's locally, you start seeing a very different shopping pattern, and that starts manifesting back in our stores. No. It's a point well made, but yeah, we're in the second narrative, not the first. Yeah. As a follow-up, can I just say, I assume that holds also, I know it's not a profit result, but for your COVID costs, that as you normalize, they will continue to come down significantly. Yeah, I think we alluded to that in the report. We are seeing the trend lines understandably and logically do that, of course. We'll see what happens in the next 10 weeks, but yes. Next month, nine weeks, sort of budget. Thank you. The next question comes from Ben Gilbert from Jarden. Please go ahead. Morning, Brad and team. You guys have obviously done a fantastic job over the last sort of through COVID, and you've outperformed all of your vertically integrated peers, as I look at it. You've obviously collected an enormous amount of data. You've grown online at two times the inflection levels of your peer set and probably generated a lot more cash. How are you thinking about how to capitalize on that now? You've obviously got a stronger balance sheet. CapEx is peaking. Specifically there, I'm thinking around presumably online's going to have to moderate to some extent. How do you look at the value of that customer from a lifetime perspective? Do you decide to go a lot harder trying to drive them into store, capture as much share of wallet? Secondly, around price, because there is a big delta between your deflation versus last year versus Coles, and there's obviously a lot of talk around price wars. Just interesting how you think about capitalizing on the momentum that you've got in your business across those two specific areas over the next three, six, 12 plus months. Most people will be allowed to ask one question, Ben. I think you've got five there. They're all good questions. I tried to fit it into one. Yeah, there's a certain genius to clustering it all into one, the future of retail. Look, as you know. Maybe just the two ones, I suppose, are just the data piece and how you're going to really try to monetize. Yeah the momentum you've got online and WooliesX. Look, we're still very early, we think, in our journey of how we layer digital and e-commerce services on our store network. The journey's just started. It feels like it's come massive, but actually, when you look at it's the old paraphrase of the end of the beginning, not the beginning of the end. We're still very early in that journey. What was personalization, for example, as a narrative six months ago, it's not personalization today. Personalization is very contextual. It's not if you like this, you like that. It's where are you? What did you buy last? What are you looking for right now? What's the weather pattern? Whatever the case may be. There are layers and layers, and it's actually, we're getting to the more interesting bit, I would actually say. We're still very early on building our digital and e-commerce services around the store network and then expanding into the extended range that we want to do then. We've got a lot of plans, of course, and as we said, and David, you've got to judge us on what we execute in the next 18 to 24 months. No one thing by itself will get us to where we need to get there, but collectively they will. Quantium was a very big step for us. A lot of challenges on execution. As always, when I sit here and talk to you, I remain anxious on making sure we execute against it. We knew that advanced analytics, and therefore being able to support our team with the right tools to make the right decisions was going to be central to our future, and we needed to do that. It'll be great sort of coming into 1 July, having Q-Retail up and running for us. Tons to do on the whole agenda. What we're trying to do is connect everything, and that connection is the key. It's hard to do, but we're feeling pretty good about it. There's no one answer there. Ben, whether it's e-commerce, we can sit here on 8% now, but we know it'll end up at 20. It's not going to be 20 next day. It'll be some same day. It'll be B2B services and say sub 60. Many things to do around it. The digital engagement side is still the thing we feel is most important, and the shopping journey starting digitally and how we do that, how we do it through the app. You'll see some of the stats we've shared. We're obviously working very hard on those. We believe that the shopping list is the sticky thing that helps you manage the customer experience and hubs for the customer, and we think that's the key to driving lifetime value for customers. Yeah, I think very early in that journey. Lots to do, but in a good place. We just need to keep focused and not get caught up, if you don't mind me saying, into what's the sales forecast going to be for April versus May. It's going to be how we layer that onto Q1, Q2, Q3, Q4 next year, and so on. Is price a lever in that, Brad? Yeah, sorry. Say that again. Sorry, Ben. You were just about to talk about it. I was just going to say, is price a lever that you think about as well? Yeah, look, price. On the price, as I say, we are in a very rational market right now. We all know price is important. We all wake up every day. David Errington is going to have gone through a hard time on his basket because we're trying to re-engineer his basket better on the report he did a week ago. Rest assured, we spent a lot of time on this issue, all of us. It's a rational market. We're all jostling on price and making sure we deliver value for customers. That's no less important, but it's been very irrational to date, and we'll wait and see how it plays forward. The key focus for us, as Natalie pointed out a bit earlier, is we're trying to do a lot more through one-to-one promotions or one-to-many and delivering personalized value, in particular through our rewards program. That's a big area of focus for us, as it is for many retailers globally and locally. There's a lot of work going on there. If there's a thing that we know is as we move into this next phase of COVID, and also just the economic outlook, is that we need to be much more deliberate on one-to-one promotions, so we drive meaningful value for different customers, and that value differs by customer. Sometimes it's price, sometimes it's affordability of basket, sometimes it's inspiration. That's one of our biggest areas of focus right now. It's one of the biggest opportunities we want to use our Q-Retail team to do is help us be a lot more thoughtful and forensic of what we deliver and when we deliver it. That'll be an important part of our long-term narrative and a lot of work to do there. Pricing outlook right now is stable. We'll see how we go going forward. I don't know why I could sound that, I think. My one build, Ben, would be look through methodologies on how you calculate price and look at relative movements between periods. We look at our price index, and we feel very comfortable with that index. It's stayed very stable over really the last 12 plus months. In that sense we see it as a rational market. The only thing we should reference, and hopefully everyone is aware, we run indexes against Coles, but then we also run an Aldi index and a Discount Chemist Warehouse index. Sometimes an individual movement in Woolworths could look illogical relative to perhaps a Coles, but it's with an eye to some of our other competitors. You may see individual skew look a bit irrational in a very lineal sense, but in an overall sense, it seems right. We think that's important for us. We've got to make sure we keep balance against the full competitive set that we operate in. Thank you. The next question comes from Scott Ryall, from Rimor Equity Research. Please go ahead. Hi. Thank you very much. Brad, you've given a few comments on different fresh categories over the call, and I was wondering if you could just comment on what you're seeing more broadly with fresh? I guess the things that I'm most interested in are the inflation, the reaction of consumers to that change in price dynamic and what you're seeing with respect to e-commerce, which is clearly going gangbusters, and whether you are underrepresented there and what you can do about that, please? Thanks for-- That's a really- I didn't get as many as Ben in, but yeah. Let me just say that one of the higher growth categories, probably for everyone, is health, and fresh extends into health food. I should call that health foods as a trend, is a very strong trend in Australia and globally and the growth of health-related products. How we merchandise them is a topic that's very front of mind for us. Fresh extends into health. If you look at it as a broader category, you'll see a lot of growth in general in the market there and products. You can debate the health attribute, but certainly not a health attribute, and that's no different really in drinks as well, even with some of the high growth categories we're seeing. I think that's important. The point I made earlier, which I think is a very important one, firstly, we're delivering great value, as Natalie mentioned, for our customers with great value prices in fruit and veg, and that's true across the market, and I think that's great. We went through a milestone, which is sort of talismanic for us, giving away 100 million pieces of fresh fruit for kids. We started that program really quite early in our turnaround strategy. The veg deflation is generally not reflected in a material lift in consumption. It just is delivering great value and affordability, whereas fruit, generally as you get prices going down, there's elasticity. There's a different trade-off between those two businesses. There is great value at the moment. It continues on. We expect at some point, of course, it turns because at some point there will be a pinch in some of the picking costs. We've just not seen that to date, but our team suspects that'll be true as we get deeper into this. A lot going on there, and we expect at some point it'll turn slightly inflationary or won't be deflationary, but that'll play out in the next three to six months, I think, Nat. On meat, very importantly, meat has been, as part of the fresh category, a very challenging one for us, as you know, in particular in red meat and the price increases we've had. We've done a lot of work on this. You may have seen last week we announced Anna Speer becoming our managing director of Greenstock, which is a really important business for us to just do a much better job of managing our end-to-end red meat business. We're trying to provide a lot more specialist skills. Actually, the AI, so we can optimize carcasses and so on inside the forecasting of that business. We are really trying to do a lot of work there to drive profitability up in a very challenging category. That business is challenged, but it's growing. A business that we don't talk enough about, but is actually our highest growth business right now is seafood and the move into protein. I think that's very interesting, into peak protein. Seafood's growing very strongly for us, as it would be for everyone, in fresh and up and down the aisle in long life groceries. That's an interesting trend. It's not as economically challenged as red meat, but it's sort of an interesting one that we're working very hard on providing a better experience. Of course, in there, that's interesting. I don't know, Claire or Nat, are there other key ones to call out on what's happening in fresh? Yeah, I think it's interesting. We're still seeing that trade up across protein categories, whether that's in seafood. We had very successful seafood sales through Easter. The lobster came back. Oysters were up. We're finding a lot of the demand moving into our convenience section, which is growing more strongly than our service section as well. The other trend I'd probably call out is easy-to-cook ranges for both meat and veggies are growing strongly. As we're seeing some of this annual cyclical decline in more of your scratch cooking categories like pasta and rice, we are seeing growth in our shortcut ranges. We've got some fantastic own brand ranges called Barbecue and Cook that have really resonated with our customers. Actually this week, we've got new ranges, new products going out into stores. We've got a Beef Wellington that I'm looking out for. Also a lot of plant-based options like halloumi chips and zucchini fritters. Our customers are definitely looking for those plant-based options. This is an infomercial. The new Cook range will be store on Monday. We're hearing fabulous things about it. We can't wait to go and get out of town, buy some, try it yourself at home, and we'll hopefully win back that dinner occasion we're at risk of losing to Uber Eats. Thank you. The last question comes from Richard Barwick from CLSA. Please go ahead. There we go. The best to last. Thank you. I've got a question actually online again, because when you talk about reversion in consumer behavior, that seems true, but for online, and you've talked about the lift in pickup, and we see the voice of the customers improving as well. What's actually driving the growth here for online? Is it the same shoppers shopping more online, Brad? Are you actually bringing in brand new online shoppers? If you are, how many of those are you winning from other customers, or how many of those are just switching from shopping in store? Yeah, thanks. Thanks, Richard. I don't know if I can do this again, these are complex questions. Essentially when we say reversion, to me, we had seen a lot of people start using online and once you start using it, you tend to continue to use it unless you have a very bad experience. In COVID, where a lot of one-off people use it or vulnerable customers in particular, but quite like going to store. We cycled out of that and the size of the core online shopper customer database, because it really is a database business, continues to grow very pleasingly. Now, what we know for those online shoppers is they don't do all of their shopping online. They do still continue to top up in store. You can debate the cannibalization number, but essentially, you don't move from one channel to the other. You build a composite of channels. If we can continue to help our customers build a composite of channels, we get a higher share of their wallet. Then to Ben's point, hopefully a higher lifetime value of the customer. The core customer database of regular predictable shoppers is growing, and we're becoming much better at measuring that. The core active database, as we think about it, is an area we focus on greatly, and that was growing very strongly before COVID and has continued to grow pretty strongly through COVID. What we find in, Richard, though, is as we enhance online services, that drives the next level of growth because our theory has been, it has been proven to be true to date in all of our businesses, is that customer demand has been ahead of the services we provide. As you provide the service, you find actually it resonates. If you go to our pickup service, our pickup service when we started it just by practical nature of it, needed to be on a service desk, and that was true in all of our businesses. Actually, as we got into COVID and we decided we needed to put it in the boot to make it safe for the customer, we found it just accelerates. That said, well, the customer wanted it in the boot, which made sense. The business that modeled it best for us was Dan Murphy's, and when we were fearful that we'd have to close our stores in Melbourne, the team just made the pickup service or boot service work, and it was an inspiration for the rest of the group. We found actually the reason pickup's grown is not because we could get any more customers to come to our service desk, but because we've changed the service and made it a boot service and we need to make it a drive service. We've got a lot of work to do there. We found the same in home deliveries. As we got to same day, we've actually found that's added and there are a whole series of customers who it's very valuable some customers to pick a day, but some customers aren't planned enough and they need it same day. As you add that, you see the growth. We still see the online database grow. The demand has been ahead of what we think is the right experience for the customer. As we've provided, we've seen the customers resonate with that and continuing the growth. We've now washing through, we've still have a bit to go to wash through the one-off COVID surge for vulnerable customers, and we'll hopefully cycle that in the next few months. The core active database is growing. As I say, we're habitual creatures and habituality is so striking when you go to focus groups on food retailing, that the 2% of our lives where we do something interesting, we think makes us spontaneous, but the 98% of the time, we're habitual. E-commerce has been built into the habituality of the customer, and once it's built in, it's very hard to see it unwind. Not a great answer, I think, Richard, but we see it at Anzac Day. It's actually just back on the trend line we saw before. It'll bounce up and down as we cycle COVID surges, but we expect it to continue to grow. Okay. Thank you. I was going to say, talking about that habituality, is it fair to say that if someone is online, shopping at a particular retailer, that is more habitual than their in-store shopping? For instance, my understanding is if in-store shoppers would shop across a range of supermarkets, but if you're an online shopper, you tend to only shop at one. Is that accurate? This is a really tough one, and we think if it's a great experience, yes. If it's a bad experience, they'll switch more quickly because a bad experience online is more profound and more impactful than a bad experience in a store, because you can always top up outside the store. If it's bad online, yes, but boy, if you don't do a good job, you can lose them. We think that's important. The shopping list, which is key in the online environment, and using that shopping list, just makes the reorder very easy is the key. It has executional risk if not well done. Thank you. That was our last question. I will hand the conference back to Mr. Banducci. Thank you, everyone, for your interest in our business. We've never talked in such macro details about three weeks of trade. I'm deeply anxious. On a Wednesday, I'll have the fourth week of trade, so we'll have 25% more trade at the end of this week. Thank you for your interest in our business. Thank you for your support. The truth as always is out there in our business, in our stores, so go and try our Cook range, tell us what you think, and speak to you all soon. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.