Thank you for standing by, and welcome to the Coles Group Limited Q1 2024 Sales Results Call. 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 Leah Weckert, CEO. Please go ahead.
Thank you, and good morning, everyone. Welcome to Coles's Q1 Results Of The 2024 Financial Year. Before I begin, I'd like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri peoples of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders past, present, and emerging. I am joined today by Charlie Elias, our CFO, Matt Swindells, our Chief Operations and Sustainability Officer, Ben Hassing, our Chief Digital Officer, and Mark Howell, our General Manager of Liquor Finance, who is attending in place of Michael Courtney, who is currently overseas. Before I open up to Q&A, I would like to make some comments on Q1 results.
We delivered group sales revenue growth from continuing operations of 6.7% to AUD 10.3 billion, and gross retail sales growth of 7.5% to AUD 10.6 billion. In supermarkets, sales revenue grew by 4.7%, with gross retail sales of 5.7% and with comp sales of 4.6%. This was supported by e-commerce growth of 25%, the launch of the Great Value Hands Down campaign, and the DC Comics collectibles. In liquor, sales grew by 1.8%. The timing of the AFL Grand Final, which fell in Q1 of the prior corresponding period, but will fall in the second quarter this year, had an impact. So we have also provided the 14-week growth number from the 26th of June to the 1st of October , which was 2.5%.
Sales were supported by E-commerce, Black and White renewals, the Price Drop Value program, and local range tailoring in new stores. We continue to focus on providing our customers with more value at the checkout through our Great Value Hands Down campaign, as well as everyday prices, weekly specials, and personalized Flybuys offers in supermarkets and the Price Drop Value campaign in liquor. Our expanded Exclusive to Coles brand portfolio across both supermarkets and liquor has never been more important. In supermarkets, Exclusive to Coles products grew at 9.4%. In liquor, ELB products grew at 2.4%. Pleasingly for customers, availability continued to improve and inflation in key categories moderated. Grocery, dairy, non-food, and bakery continued to be in inflation, whereas fresh produce and red meat were in deflation. Fresh produce deflation was particularly pronounced in July, moderated in August, and then further into September.
Looking ahead, in the early part of Q2 , supermarkets and liquor sales revenue is broadly in line with Q1 . And just to be clear, the liquor trend is based on the AFL Grand Final adjusted number. The Curtis Stone Barbecue collectible range has also had a strong start and is already proving popular with customers. We launched our Christmas range two weeks ago, and there is already quite a few products available in store, and early sales results from these are encouraging. Customer research indicates more customers will be cooking and eating at home this Christmas season, and we believe we have a great range of products to support them to do that. Although this is a sales call, I would like to spend a couple minutes talking about loss.
Enhanced process, security, and service measures to reduce total loss have been rolled out across supermarkets in Q1 and will continue into Q2 . Pleasingly, improvements in waste and markdown have been achieved across the quarter. In stock loss, the loss technology solutions, Skipscan and Smartgate, are expected to be operational in over 250 of the most impacted stores by the end of calendar year 2023. The early results of stores where the technology has been rolled out are in line with our expectations. In addition to this, a number of broader cost and margin optimization measures have been initiated across the group, with some benefits expected in the first half.
Finally, on our transformation projects, the WITRON ADC in Redbank now has all stores transitioned, and the New South Wales Kemps Creek site is on track to receive inbound orders in Q1... Q3, I should say. The CFCs are also on track versus schedule, the schedule we shared at the full year reporting, and the remediation works are progressing well, and we now have bots operating successfully on the grids at both sites. So with that, I will now hand back to the operator for Q&A.
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 two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from David Errington with Bank of America. Please go ahead.
Morning, Leah. Leah, at the full year result, and I know it's a sales call, but it was such a big issue, and you've called it out that you just needed to address it, and that was in your loss. And you've really made some great progress in, in rolling out, you know, Skip scan and Smart gate to 250 stores. But I noticed that you've called out that your improvements to date are mainly in waste and markdowns.... Is that, are you referring that at this stage, even though you're making great progress, you're still, you know, you haven't really dented the theft yet? Is that, is that a, is that a fair call? But you-- given this great progress that you're making, that that's yet to come. Is that, is that what you're trying to tell us today?
Thanks, David. Appreciate the question. So perhaps if I go back to where we were at the full year and just reflect a little bit on the H2 results. So in the H2 result, what we highlighted is that we had a drag in there due to total loss. And total loss includes both waste and markdown and stock loss components. So we have put in place a strong plan to address both of those elements. From a waste and markdown perspective, we have seen improvements across the course of the quarter, and in fact, we're now running at a rate on that which we are happy with and satisfied to sustain going forward. That is the key area where we have seen improvement across the quarter.
We have rolled out initiatives to address stock loss, and as you've highlighted, we expect to have the technology solutions in place by the end of the calendar year in 250 of the most impacted stores. At this stage, we would expect to see benefits from that on the stock loss number starting to come through in H2.
So it seems like everything's going according to plan, and we should start seeing some good benefits coming through in 2024. So that sounds pretty pleasing. The second question, if I may-
David, just before—sorry, just before you move on, I would make the point that from our perspective, this is a short-term problem. And actually, this is a short-term opportunity for us at this point, which is we have a strong plan. We know what needs to be done, we're getting it done, and the numbers will move. And I also do want to highlight that in addition to all the measures that we're putting in place, given we are expecting the stock loss benefits to start to come through in H2, we have initiated a number of other actions across the group, that while we have that headwind in play, we look to address some of that through other initiatives on cost and margin optimization. Sorry to interrupt you.
No, not at all. Not at all. That's a very good feed, good color. The second point is the availability. You seem to have made some really good progress with on-time delivery. Has that transpired to shelf availability? Because you did have some problems there, like, for example, chicken and eggs and that, you had problems, which I'm assuming, you know, would show up, that you're not—you know, your on-time delivery would increase, but it might still impact your on-shelf availability. Are your numbers as good on shelf availability as they are on-time, you know, delivery times? Or is there still a gap in on-shelf delivery that you need to address?
The benefits that we've seen or the improvements we've seen come through on the DIF and DIFOT are definitely translating into improved on-shelf availability, and that, in turn, is translating into improved customer satisfaction as well. I might just get Matt to maybe just give a bit of a color on,
Yeah, sure. So David, our inbound fulfillment from suppliers definitely stepped on significantly. We are broadly in line with pre-COVID levels around the volume that's coming in. There is a little bit of opportunity still on timing, but that directly then translates into improvements both in gaps on shelf and in our online fulfillment. And we've seen some of our best metrics in two years come through in availability as part of that recovery. So there is absolutely correlation there. There are still some pockets at times, so eggs is still an area of supply that can be challenged. But across the whole, both our customers and our store team members would say that we're in, we're in significantly better shape than we have been for some time.
Oh, excellent. And just before I go, Leah, I must admit, I'm glad you called out the Grand Final, as you know, impacting your quarter, because last time I saw you, I think you said that you shamelessly supported anyone but Collingwood. And I just wanted to point out that Collingwood did win the Grand Final this year, which was a very pleasing outcome for us, Magpie supporters. So I just wanted to highlight that to you, Leah.
Thanks, David. I think, as you know, every other person in my household is a Collingwood supporter, so this has been reinforced somewhat significantly for me over the last two weeks.
As am I.
Fantastic. Fantastic, fantastic. Thanks, Matt. Thanks, Leah.
Thanks, David.
The next question comes from Richard Barwick with CLSA. Please go ahead.
Good morning. Hi, Leah. I thought one of the, the highlights here was the strength in, online, so it's a really strong outcome there. I guess it's been touched on a little bit, but maybe it's tied in with the, the availability. Is there anything else that you've done or can call out to, I guess, explain why there's such a strong growth in online?
Thanks, Richard. Yeah, I mean, I think there's a few elements to this. The availability component has definitely helped us to improve our customer satisfaction scores in relation to online, but we've also been doing quite a bit of work on the features we've got in app and website, and also the network. So I might maybe just get Ben to give a little bit of color around that.
Yeah. Thanks, Leah, and thanks for the question and comments. A little bit is hard because there's so much. I guess it would be the sum, just 1%. As Leah and Matt mentioned, there's been improvements in availability, and when you have issues in availability and online, they become more pronounced from a customer experience standpoint. We've seen a really big step up in customer experience scores. But, you know, we're on a journey, and one of the things that we've been consistently talking about is unifying the customer experience. So if we think about the app, it just turned two at the end of the quarter, that it's shoppable. And it's not in the terrible twos, by the way. Actually, the customers really enjoy the app.
We unified the website in Q3, and, you know, we also in the last quarter, as well as this quarter, we began integrating loyalty. So we're on a journey. We know there's still a lot more that we can do, but I, I'd really say it's a sum of a lot of different pieces of the customer journey.
I think the integration-
Sorry, go ahead.
Sorry, Richard. I was just gonna say, I think the integration of the Flybuys offers into the app, that has helped us on a couple of fronts. I think it's helping customers to find more value through the app. And I think some of the features that were also landed during the quarter around the filtering ability on lowest unit price on specials and a no-name brand has also helped that too.
Yep. Okay. Within that sort of integration with the loyalty, does that also include, I guess, more targeted promotions or targeted deals and so on to customers via online?
Yeah, that I'll just pick up, really quickly. We're focused a lot more on personalization, so you get a lot more efficient promotions. Two big events that we ran as example was the July Big Deal event, which was a personalized offer, by customer cohort, as well as the Coles Plus week event. So we're adding more personalization in our promotions, and it's having a good effect.
Okay. All right. Thank you. That's, that's all very helpful.
Thanks, Richard.
Your next question comes from Bryan Raymond with JP Morgan. Please go ahead.
Hi. Just my question is around the sales line in supermarkets. Just keen to understand the price elasticity you're seeing. I noticed your private label growth is a bit stronger than your major competitor, but the slowdown in inflation was similar, but you didn't see quite as much of a volume and mix uplift as what they did. In the quarter, from a sequential basis, looking at Q4 2023 versus Q1 2024, just keen to understand how you're seeing consumer behavior respond to this lower level of inflation and whether you're capturing that upside at the moment and market share in the quarter. Thanks.
Yeah, thanks, Bryan. So I think our view on the sales result is we're actually quite pleased with it. We think it's a really solid result for the quarter, particularly given the strength of what we were cycling last year. And I think, you know, candidly, the Magical Builders Harry Potter campaign last year was probably a bit stronger than the DC Comics this year. If I refer you to a couple of numbers in the supermarkets table, the sales ex tobacco was at 5.9%, and then the inflation ex tobacco was at 3.1%. So in terms of that differential of 2.8%, that covers both your volume growth that we saw and also the impacts of mix.
Volumes were definitely positive for us, led by food. If I was to sort of prioritize the categories where we saw the most volume growth, fresh produce was definitely number one in that space. As we saw deflation there, customers definitely bought more of it. We also saw really good volume growth in meat and really good volume growth in grocery. Then it was sort of the non-discretionary areas, the household items, where we saw volume growth was a little bit weaker.
Okay. But thanks for that. That's helpful. Just on the theft piece, you were calling out post the result last in August, that you had about a 70 basis point headwind from to gross margins from theft alone in that period, if I understand that correctly. Just keen to understand how we should be thinking about that number in Q1 . I know it's not—I know it's a sales result, but just keen to understand if there is any progress on that gross margin headwind, if the underlying run rate of theft has gotten any better. I know some of the implementation is taking time, which is understandable, but keen to just get a feel for that theft piece into first half 2024. Thanks.
Yeah. Thanks, Bryan. So, I mean, the first thing I'd say is that, the drag on the H2 result that you've identified there, was total loss. So it was inclusive of the effects of waste and markdown and the effects of stock loss. As I've highlighted, the waste and markdown, we have successfully improved that across the quarter, and we're now running at a rate on that that we feel comfortable with to sustain going forward. So in terms of how we think about total loss and our total stock adjustments that we're making across the store, the improvements during the quarter have come from the waste and markdown. We are not calling out any worsening of the stock loss number. We are very focused on the plan that we have.
We have put in place a large number of measures now, and we are optimistic about the Stock Loss technology that's going in with the Skipscan and the Smartgate, because the stores that we have already put it into are delivering results in line with the expectations that we had.
Okay, great. All right, thanks.
The next question comes from Shaun Cousins with UBS. Please go ahead.
... Thanks. Good morning, Leah and team. Maybe just further on theft. How many stores had the Skipscan and Smartgate at the end of Q1 , 2024? And maybe just confirm, I think we're coming from a base of four at the end of Q4 2023, please.
Yeah, we won't be disclosing the number of how many we're at at the moment. It is changing daily because, as you can imagine, with 250 getting rolled out across the half, we are going at pace. So it is definitely higher than four, but we're headed towards the 250 by Christmas.
Great. Okay, and then maybe just another conscious as profit sort of this question, but, maybe for Charlie, WITRON, Ocado costs step up dramatically in fiscal 2024, as per your guidance relative to 2023. How should we think about that first half, second half skew, in that it was quite second half weighted in 2023? I'm just curious if there's any, sort of guide you could provide there, please.
No, look, I, I think, Shaun, we'll kick off. Firstly, this is a sales call, obviously not an earnings call. But in relation to, I think the project implementation costs, which are obviously in the CODB perspective, I think if I just give a bit of a weight, because I know they're a material amount, if I give a bit of a weighting on that, we believe on the WITRON side, they're probably closer to 50/50 across first half, second half. And if I look at Ocado, they're probably weighted more—they were probably, they are more weighted to the second half, as we expect, obviously, the first of the CFCs to go live into the second half of the fiscal year.
Fantastic. And maybe just my, my final question, just to follow up on liquor. Maybe just how have you seen the aggression in promotions and, and just the promotional environment, in the... You know, Coles was quite aggressive online earlier this calendar year. I'm just curious, how you've sort of seen the broader promotional environment, any change from your, from Endeavour or Dan Murphy's? And, and how's Coles sort of gone about promotion in-promotional intensity, please, during the quarter?
I'll get Mark to take this one.
Hi. Hi, Shaun.
Hi, Mark.
We in terms of promo, obviously we have a range of different promotional mechanics. We haven't seen the breadth or depth of those promotions actually increase year-on-year. So the actual promotional depth actually is relatively similar to what it was in Q1 of FY 2023.
Yourself and the market?
Yes, broadly, on the in terms of the market, that's what we're seeing as well.
Fantastic. Great. Thanks, Mark. Thanks, Leah. Thanks, Charlie.
Thanks, Shaun.
Your next question comes from Tom Kierath with Barrenjoey. Please go ahead.
Morning, guys. Just wanted to clarify that comment on where you say a number of broader cost and margin optimization measures have been initiated. Is that, over and above the Simplify to Save stuff? So in other words, these are incremental measures that have been identified since you outlined that program.
So the measures that we're calling out there, quite a few of them wouldn't be included in Simplify and Save, Tom. So, for example, when I talk about margin optimization, I'm really talking about things like, promotional optimization, which we would include in Simplify and Save. So that's going around the promotional program and making sure that that's strong in terms of driving incremental margin. It's also things like, we have upweighted our focus and strength of the plan that we have for Coles 360 in the half, and are really pushing hard on that.
And then, on the cost side of things, we have done some things like reprioritization of spend within the half, and rephasing of spend, which is more temporary measures to help us to offset the impacts of the stock loss in this half.
Cool, cool. Thanks. That's clear. And then just secondly, just on the stores that have Skipscan and Smartgate, are you noticing a difference in sales growth versus the rest of the group? I'm just cognizant that you're doing this pretty quickly. You're doing it at a really important trading period. Just want to understand if there's any kind of sales impact as people, I guess, get pulled up or what have you at the checkouts.
Yeah. The stores that we've got it in so far, we haven't seen any impact. I probably should share that one of the first stores we put it in was my local, so that I had to go and experience it three or four times a week with my kids. I can report that for customers that are doing the right thing, it's pretty seamless and actually, it's an improved experience because I don't have to wait for interventions anymore.
Cool. That's great. Thanks, Leah.
Your next question comes from Michael Simotas with Jefferies. Please go ahead.
Good morning, everyone. I'm sorry to labor the point on Stock Loss, but just another one from me on that. In addition to the technology, you've called out process security and service measures to reduce total loss, and appreciate some of that is around the technology. But how significant is the incremental cost investment that you've made there so far, and what do you expect over the course of this financial year?
Thanks, Michael. Appreciate the question. I'd probably say at a high level, the way we're doing it is we're balancing out the costs with benefits that are coming out from those additional, in particular, the security and service measures. Maybe I can get Matt to just articulate a little bit what some of those look like.
Yeah, sure. Thank you. The best way to think of the operational focus is probably in three areas. So we've increased security in stores that really need it the most, and there's obviously a double benefit there, not just around stock loss, but also for team member safety.
... The second part really is to think of our investment in service. So having the right focus in the right stores at the right times at the front end, which of course gives us the additional benefit of a better customer experience. And then the third part is around increased management focus and coaching of process. So clearly, there's a different degree of investment with each of those three. We track them very closely. We're making sure that where we make changes, we get a return on that. And I would say that the technology is clearly a structural part of that change. It has to work hand in glove with our operational focus, and it all has to have an overlay of good financial return.
I just want to remind the analysts on the call as well, we did call out that we will be managing CapEx rollout of this technology within the capital envelope that we'd already guided.
Okay, so just to be clear on that, the incremental OpEx that you're putting in, you're effectively getting a one-for-one payback on that immediately?
Well, I think it's fair to say that we'll continue to execute changes that give us a return, and we'll review the ones that wouldn't. Okay. All right, and thank you. And second question from me is just around volume. Now, you don't disclose volume, and, you know, we can sort of have a directional go at it by looking at the difference between sales growth and inflation. But to sort of make some adjustments for what's happening in ASP around the industry, it looks like your volume growth is very modestly positive and well below the rate of population growth, while your major competitor appears to be growing volumes a little bit faster than population growth. Is that assessment right? And why do you think your volumes are lagging population growth, if that is correct?
Thanks, Michael. I'd refer you back again to that sales ex tobacco at 5.9%, and then the inflation number for sales ex tobacco at 3.1%. So that number that you get there is the combination of volume growth and mix. As we've called out in the food space, we're very comfortable that with the levels of volume growth that we're seeing in that space, particularly led by fresh produce and meat, but grocery also in a good spot. Then that's somewhat offset by some of the effects that we're seeing in the non-food space.
Michael, just on a PCP basis, too, just a reminder, we are cycling a very strong growth from 12 months ago as well. So if you're looking at it on a PCP basis, you need to take that into account.
Yep. Okay. Thank you.
The next question comes from Craig Woolford with MST Marquee. Please go ahead.
Good morning, Leah. Just a question on the sales impact you may be having from theft. Some of the feedback we've had is that some products might be rearranged, and there's in some categories less facings on shelves for products that are being impacted by theft. So is there anything you could quantify, and are you seeing anything on that front in terms of sales impact from theft?
Thanks for the question, Craig. I mean, I think that's not something material that we're calling out in the whole scheme of the equation that we've got on loss overall. I mean, definitely, and we included it in the full year as part of what we had as one of the points of the plan is to have a look at what is the right range by store, and that's across a variety of categories. So we definitely see higher levels of stock loss in areas like electric toothbrushes and makeup and skincare and things like that. There's certainly some stores that lend themselves to having a broader range than others in that area, and we are working on implementing that across the network.
Got it. Thank you. Is there a figure you can share on what the price inflation in Liquor is? Just trying to make a similar assessment on price and volume performance in Liquor, like we do on Supermarkets.
I won't, I won't comment specifically, Craig, on it, but it's fair to say that inflation in liquor is running lower than it is clearly in food. In terms of the makeup of kind of sales growth, obviously liquor is a bit more discretionary, clearly a bit more discretionary than food. We've had sort of what I'd call very modest volume growth, and a large part of the growth is actually coming from ASP, which is driven by inflation. So hopefully that sort of helps answer that question.
So, just to be clear, like, the comp was 0.1. Surely ASP growth was higher than that.
Yeah. So I think the way just to be on the comp, for everybody's benefit, the comp on an adjusted basis is 0.8%. So on a grand final adjusted basis, comp is 0.8%. So the point one is the recorded number, which is equivalent to the 1.8%-
Yep.
sales, headline sales growth number.
We are getting the benefit in the headline sales of a number of new stores that were launched in Q4 and also some in Q1 as well.
That's right.
Yeah. 'Cause there is a meaningful excise. Are you saying that the ASP is higher than the 0.8 ASP growth?
Yes, I am saying that, Craig.
Yeah. Okay. Thank you.
Thanks, Craig.
The next question comes from Lisa Deng with Goldman Sachs. Please go ahead.
Hi, Leah and team. I just wanted to understand a little bit around the qualitative drivers of the e-com strong growth. Do we think that after a period of-
...Lisa, we just missed that. Could you just repeat that? Sorry, the what related to e-com growth?
Just some of the drivers of the strong e-com-
Oh, the drivers?
Yeah.
Yeah.
Okay. So, for example, you know, yesterday we, we talked a little bit about convenience being a real factor. I wanted to understand, like, how much of our delivery—how much is it pickup versus delivery, same-day delivery, potentially, if you have it, you know, any of the other, like, expansion in click and collect or Rapid, any of those that, we typically update at the half year and the full year. Can you just give us a color—a little bit of color, whatever you can?
Yeah. Hi, Lisa, it's Ben. Good to hear from you. I did mention some of the improvements, first and foremost, around the unified experience. Secondly, with the app, we mentioned 39%, better than that, growth in active users. I think it's really important, too, when we look at the app user base or customer base, more than half of them are using the in-store shopping mode. So it's not just about e-commerce sales, but it's actually activating a lot of the in-store sales. And then to your point, as well, we're serving more than just a weekly stock application. Now, we've got a weekly fill-in that's nationwide. You mentioned Rapid, an immediacy offer, that last year at this time was in 21 stores, and today it's well over 400.
It's still early business. We're learning a lot from that, but we're meeting the customer where they want. We talked about Omni-channel, and the omni-channel customer spends 2.2 times more with Coles when they're shopping across both channels. We're also finding when customers shop multiple propositions, those three shopping occasions, they're also spending more. They're not just trading from one proposition to the next. So there's a lot more, too, around customer experience, but I'd say those are the key points to answer your question.
Yeah. I think, I'll build, and then you can build.
Sure.
The other thing I'd probably say, Lisa, is we're definitely seeing two cohorts of customers as it relates to their interaction with online. There's one cohort of customers which tell us that they use online to help them to manage their budget because it prevents them from impulse buying by going-
Mm-hmm
... into the store. And so, that's, I guess, the collision of value and convenience there. And click and collect, obviously, is a great option for customers that, you know, don't want to pay the delivery fee in that way. But there is actually another cohort of customers that have actually moved away from online to go and shop back in store because they want to be able to shop things like markdowns, for example. And they see that as a good way to manage their budget as well. So I think there is a little bit here, which is you kind of have to meet every customer where they are and provide a broad range of options for them to actually find value in the business.
Yeah.
Charlie, what were you gonna add?
Lisa, you might recall, we've certainly stepped on the network in the last 12 months. I mean, if we look at the, and Ben touched on a few of those, but we did launch, you know, 35 new home delivery stores over the last 12 months, over 460 stores with Rapid delivery, and, yeah, upgraded click and collect in sort of over 450 stores. And even liquor, we now have on-demand delivery in over 660 of the stores. So we actually have stepped on the sort of network growth the last 12 months. And I guess, in addition to the customer experience, the customer behaviors that Leah's appointed, the rollout of the networks also helped grow the e-com sales.
Got it. And then the second question is, around Coles 360. So Leah, you mentioned that you guys are really stepping it up there now. We've seen the number income, growing strongly. Can I confirm income meaning revenue or income meaning profit, for one? And then what's sort of the slightly medium-term, aspiration there for us?
Yeah, thanks, Lisa. So that income number is revenue growth. It's, sorry. Just hold on, Lisa. I apologize, Lisa. That number is profit growth. So, it's not the revenue line, it's the margin that we take for that. So-
So we're profitable, we're profitable, on Coles 360 already?
The Coles 360 is definitely driving strong profit for us.
Got it.
We've got growth across all the different channels, and the business is continuing to build capability and its reporting capabilities as well, to improve the experience that suppliers are having. So in the medium term, I think what we're really focused on is driving the capability up around campaign execution, and we saw some of that starting to come through this quarter with what we did on the Footy finals campaign. And then, secondly, continuing to build out the capability and the breadth of what we've got in terms of the number of assets, the types of assets, and how we report the return on investment for our suppliers against that.
Okay, but just, just one clarification, is even though we are continuing to build out the foundation capability, it will be a strong profit driver for us, despite the investment?
Oh, yeah. Coles 360, we believe, will be a strong profit growth-
Okay
... area for us. Yeah.
Got it. Thank you.
Thank you.
Your next question comes from Kseniya Chudaeva with Jarden. Please go ahead.
We might move on to the next question.
... Next question comes from Phil Kimber with E&P Capital. Please go ahead.
Hi, Phil.
Hi. Hey, how are you going? My two questions. One was just supplier-driven price re-request. In the past, you've sort of talked about how that had started to slow. I was just wondering if you could give us any color on how you've seen that over the quarter.
Yeah, sure. So broadly, Q1, in terms of the number of requests, was in line with Q4. So it's definitely come down from the significant highs that we saw sort of 12 months ago now. But it's still elevated versus what we would have considered normal on a pre-COVID basis.
Great. And then, can you give any color just around, you know, basket size transactions in and I'm really talking about the supermarket business here. Are you seeing that trend that others are seeing where people are reverting back to smaller baskets but increased transactions?
Yeah, that's definitely what we're seeing in the supermarket space. That's been a trend pretty much continuing since COVID lockdowns came out, and it's the same actually across supermarket and across liquor. So we're seeing less of the go once a week or go once a month. It's much more frequency of shop now and smaller baskets.
Great. Thank you.
Thanks, Phil.
Your next question comes from Adrian Lemme with Citi. Please-
Good morning, Leah and team. Yesterday, we had Woolworths report lower NPS scores, and I just was wondering what you're seeing in your metrics, and what are the key factors driving it up or down, please?
Yeah. So, with the improvements that we've seen in availability, in addition to what we've been driving with some of our quality and value campaigns, we have actually seen our customer metrics step on in both in-store and online. What I would say is we are very focused with the team on consistency of delivery, and that includes the execution that we've got of the weekly trade plan. It includes what they do in terms of their processes around availability, their processes around quality, and that is making a positive difference to our, our customer metrics.
Great. That's great to hear. And could I ask one more follow-up question? Apologies, it's again on the stock loss. So when you get to the 250 stores, that I think that would represent about 30% of your store portfolio by number of stores. But we know you're targeting the more vulnerable stores initially. So I was just wondering, once you get to that 250, might you be addressing, I don't know, something like half or so of the weighted stock loss exposure? If you could just give some guidance, that'd be great. Thanks.
Yeah, I probably won't put a number on it, but you've got the right idea here, which is that these stores will disproportionately impact the benefits that we can achieve on the stock loss.
Understand. That's very helpful. And then just one last follow-up on that. Are we right to assume then as, as it's rolled out, that those stores, once they've got the technology, that you'll, you'll gradually, I guess, ease back on the security guards and, and the other sort of short-term measures you've been taking?
Yeah, that's correct. So, I mean, even in my local, the difference that we've seen, and it's been in for a couple of months now, is quite significant, and we just don't need the level of security that we had pre.
Excellent. Thanks very much, Leah.
Thanks.
Your next question comes from Ben Gilbert with Jarden. Please go ahead.
Uh, morning-
Hi, Ben.
Leah, good day. Thanks for your time. Just keen on loyalty, Leah, just to understand how you think Coles is performing now. And I know you don't like to compare to Woolies, but with Woolies' scan rates and their participation rates were up quite materially through last period. I'm just wondering where you think you're at in loyalty. Are you seeing sort of similar improvements in scan rates and penetration? And particularly interested in the context of, again, consistent comment to yesterday, just around some of those everyday needs type products like your health and beauty pet, that's probably seeing some leakage to Amazon, Reject Shop, et cetera, and how you combat that or how high a priority that is.
Yeah, so let me deal with the first one around the Flybuys. We have also seen improvements in our scan rates over time. There's obviously a few things that are driving that. First of all, we have been driving signups to Flybuys through our service teams, and you'll see that reflected in the active membership number that we've reported. We're also, as Ben highlighted, doing a lot more personalization of our offers, and that includes our Flybuys old offers. And with those now integrated into the app, that's positive. And we're also just making sure that we're reminding customers to scan their card at points of purchase.
So, for example, we've got the reminder now on the self-checkouts to scan your card, and we also have the service team focusing on asking for Flybuys cards as people go through manned checkout. So I think, you know, that's very positive. We know that one of the big call outs from all the customer research that we do, as customers are thinking about cost of living, is that loyalty programs are important to them, and they are actively seeking out ways to find points, activate bonus points, and a lot of them are thinking about how they will use those points to actually convert them to dollars off their shop, particularly as we come into Christmas.
So, Flybuys is a really key focus for us in terms of trade driving as we go through the rest of this calendar year. In terms of your question on the household items, so the non-food items. So, you know, as I indicated around some of the commentary on the volume, this is an area where we have seen weaker volume growth in the business. Potentially, there's some leakage to other players, but what our customers are also telling us is that these are products which they are extending the time between purchase on.
So, how do you, how do you make the cleaning products just last a little bit longer now that you don't need to maybe be quite so rigorous with so many sprays because COVID's not so much of an issue anymore? So really trying to, to stretch out the time between purchasing some of these non-food, more discretionary items, and that's definitely playing an impact as well.
Thanks, Anne. Just a final one from me. Just in terms of how you see the market backdrop broadly from a promotional standpoint, one of your competitors went more aggressively on 50 off in the beginning of the year, but it feels like the market's still pretty rational. I appreciate, obviously, you're very focused on client and customer value, but do you feel that everyone's acting in a rational way, and there's, you're not seeing any behaviors that would suggest otherwise?
So I mean, the promotional intensity that we've got, I'd say, is broadly in line with pre-COVID levels. I mean, we definitely saw promos dip off in the last couple of years, and that number has come back up, which I think is a bit of a combination of, we've got through some of the supply chain issues, but equally with cost of living, a significant focus area right now, having a great weekly specials program is important. And again, all of our customer research would say that customers are definitely shopping the catalog quite significantly to find the best price, to find value. But I wouldn't make any call-outs in terms of, you know, behavior that's sort of significantly different to what we've seen.
Fantastic. Thanks very much.
Thank you.
Your next question comes from Scott Ryall with Rimor Equity Research. Please go ahead.
Hi, thank you. I've got no questions on stock loss, but I have just two that I think will be reasonably quick. Just on page three of your disclosure this morning, footnote one says you've restated due to understatements in the first three quarters, the sales revenue from the last quarter. Could you just... I, given you rounded to one decimal point and had it in billions last time around, I can't quite tell how material that was. Can you just talk to the materiality, whether it's the same across all three quarters, and what was the reason for the restatement, please?
I think, Scott, thanks for the question. If you go to the appendix, Appendix four, which is on page-
Page seven.
Oh, sorry. If you go to the appendix in our full year results, Appendix four in the full year results, there's no appendix four in this result, I've just realized. You will find a table which lays out that adjustment for you.
Okay, perfect. I'll look at that. Thank you. I figure it's probably-
Thank you.
Not, not the most material thing. And then the exclusive to Coles range, could you just give us an update on what proportion of your supermarket sales that's now sitting at?
We haven't disclosed the number. It's sort of around a third overall, but it's actually around 40% food.
40% food, third overall. Okay, great. That's all I had. Thank you.
The next question comes from Johannes Faul with Morningstar. Please go ahead.
Good morning. I understand there's been a few shifts in sales, so there's greater than average growth in private label and also more sales in fresh, and then there's also more sales online. And I was wondering how each of those three movements impacts margins, I guess in a directional sense, if you could give some guidance there.
So, right. Well, we manage margin overall, so we always think about it as all in. The other thing I'd probably say, Johannes, is this is a sales call, not an earnings call, so I'm not gonna necessarily go into detail on the moving parts of each of those. But I would just refer you to statements that we've made previously, that we look at the margin overall for the entire supermarket business. We don't tend to focus on different components of it because we consider ourselves to be omni-channel, and we think about the customer from an end-to-end value perspective, as opposed to which channel they use or which category they use.
Okay, so does that mean that we can't generalize that private label sales would be higher margin at the store level than national brands, for instance?
As I said, this is a sales call. We're not gonna be getting into an in-depth discussion around margin.
Okay, thanks.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question is a follow-up question from Bryan Raymond with JP Morgan. Please go ahead.
... Thank you for taking a follow-up. I'm just interested in how you're feeling about your relative price position at the moment. You've obviously got some gross margin headwinds, which you've called out around loss, but and you're making progress on. But, you know, in our survey, we've noticed some the private label premium to Aldi stepping up a little bit versus your competitors' premium to Aldi. And we've seen what's happened in milk there, where you're AUD 0.10 higher than Woolies and Aldi. I just wanted to see... More strategically, I just wanted to hear how you're thinking about balancing gross margin and sales with value for the shopper. So, it's obviously a very hard thing to manage in this sort of environment, but just keen strategically on how you're thinking about that issue. Thanks.
Yeah, thanks, Brian. You're absolutely right. It's really complicated at the moment, and there's a lot of movement from all players. What I would say is we are very, very focused on value. We are very aware that it's the number one concern for consumers at the moment. But we do think about our value proposition as being an all-in proposition. So we think about price, we think about own brand, we think about Flybuys, we think about the Omni-channel offer that we've got with online, and we also think about our continuity program. If I talk specifically on the price point, so we launched Down Down at the end of August. That was 500 prices on quite large volume items that we brought down.
That was a meaningful value investment for us, and had a, you know, very strong response from consumers in terms of the growth that we've seen on the lines that have gone on to those Down Down products. So we look at that and think that that's been a very strong move on the value front. We also spend a lot of time looking at the indices, and from a competitive perspective, we are feeling like we're in really good shape. Actually, from an Aldi perspective, we would actually say that we've probably improved over the quarter in terms of the index position. And we look at individual category indices, but we also look at whole of store, and we balance that out.
Whereas there might be some examples, as you've highlighted, where we're higher, there will also be plenty of examples where we're lower, which helps us to manage the index overall.
Okay, and so that's the priority over gross margin at the moment. I know it's a balance, but, that value in this sort of environment, I'd imagine, would be the primary focus.
Well, Phil, I'd say, Brian, I don't want you to walk away thinking I'm not prioritizing gross margin, because I've just spent most of the call talking about a set of initiatives that we're taking to help us to offset the impacts that we've got with stock loss. We've talked about the improvements that we've had on waste and markdown. We've talked about upweighting our program around Coles 360. We've talked about promotional optimization. All of these things go to our gross margin health, but we are also very focused on value for the consumer, and we've spent a lot of time focusing on that and talking about it as a business to make sure we're in the right place. Both of those are important, and we are actively walking the line between them.
Excellent. Thanks.
Thank you.
There are no further questions at this time, and I'll hand it back to Ms. Weckert for closing remarks.
Thank you very much for your time this morning. I actually just wanted to finish with a reflection on where we think we are. We're really pleased with the very solid set of results that we've presented today from a sales perspective, and we believe we've got a strong plan as we go into the back end of this calendar year. We've been encouraged by the trading that we're seeing in the last few weeks as we head into Halloween, Spring Carnival, and Christmas. As I've just articulated, we are very focused on providing strong value for customers across price, own brand, Flybuys, our Omni-channel offer, and continuity. We're pleased that we are continuing to maintain positive volume growth, particularly in food. We have a strong plan to capture the opportunities that we have in loss.
We've already seen the improvements come through in waste and markdown, and happy with the level we're at there now. The operational and technology initiatives that we are putting in place to address Stock Loss, we expect to deliver improvements in H2, but we are undertaking other actions to offset some of this Stock Loss headwind in H1. Liquor is trading well, and we're very focused on the strategy we have around the black and white renewals, local ranging, and value. Finally, our large transformation projects are progressing to plan. So, in aggregate, we feel that we're in a strong place as we head into the back part of the year.
Thank you for all your questions today, and if you've got anything else, please feel free to follow up with the investor relations team, and we look forward to seeing you at the half year results.
That does conclude our conference for today. Thank you for participating. You may now disconnect.