Thank you for standing by, and welcome to The Woolworths Group F23 Q1 Sales 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.
Good morning, everyone. Before we start the call today, I would like to acknowledge the traditional custodians of the land on which we meet today, the Gadigal people of the Eora Nation, and I'd like to pay my respects to Elders' past, present, and future. Thank you for joining us today for Woolworths Group's first quarter sales results for the F23 financial year. Joining me this morning are our Chief Financial Officer, Stephen Harrison, Pejman Okhovat , Managing Director of BIG W, Amanda Bardwell, Managing Director of WooliesX, Spencer Sonn, Managing Director of Woolworths New Zealand, Natalie Davis, Managing Director of Woolworths Supermarkets, and Guy Brent, Managing Director of the Woolworths Food Company, which as we recently announced, comprises our own and exclusive brand food business together with PFD Food Services, Greenstock, and Australian Grocery Wholesalers. Turning to our results.
Our Q1 F23 results reflect the cycling of two consecutive years of COVID-related impacts across our group, as well as the transition to a more predictable trading pattern in the current quarter. Pleasingly, both store service levels and team absenteeism continued to improve over the quarter, which was reflected in improved customer scores in Q1. Group sales increased 1.8% to AUD 16.4 billion in Q1, with sales from our Australian and New Zealand B2C food businesses below the prior year as we cycled COVID-related growth in F22. This was offset by a solid sales performance from both Australian B2B, driven by PFD and BIG W. As our customer mobility increased during the quarter, e-commerce sales for both Australian Food and BIG W were below the prior year, resulting in a decline of 14.5% in group e-commerce sales in Q1.
Digital engagement remained strong in the quarter with weekly average traffic to our digital platforms at 20.2 million weekly visits. Turning to Australian Food, total sales for the quarter decreased 0.5% to AUD 12.2 billion, with Woolworths retail sales down 0.6%, impacted by declining items as the business cycle, higher in-home consumption in the prior year, combined with fruit and vegetable availability challenges in the current year. This was partly, but not entirely offset by price inflation. On a three-year compound annual growth basis or CAGR, sales in Australian Food increased 5.3%. Woolworths Food Company's own and exclusive sales declined 2% in Q1, largely driven by fresh, with sales growth impacted by supply challenges in some categories.
Long Life sales were in line with the prior year, outperforming total sales growth with categories such as frozen foods, drinks, and personal and baby care benefiting from their strong value proposition. Inflation continued to accelerate in Q1, with average prices in Australian food increasing by 7.3%, driven by continued input cost pressures in Long Life, double-digit inflation in fruits and vegetables, and ongoing increases in meat. We continue to see some signs of customer purchasing habits changing, but it remains unclear how much of this relates to cost of living pressures compared to COVID normalization. During the quarter, we continued our focus on delivering value through our Get Your Woolies Worth platform, with Prices Dropped and a Low Price Freeze resonating strongly with customers, resulting in incremental volume growth across these lines.
WooliesX B2C e-commerce decreased 10.8% to AUD 1.2 billion as customers returned to shopping in-store following elevated e-commerce sales during last year's lockdowns with sales penetration of 10.2%. During the quarter, Everyday Rewards total members increased by 200,000- 13.9 million, with record levels of weekly app users and members activating member boosts supported by continued enhancements to the Everyday Rewards app. We continue to enhance our Everyday Rewards member value offering following the completion of our transition to a new real-time loyalty platform, which unlocks more one-to-one promotions and relevant content in real time for Everyday Rewards members. Australian B2B total sales for the quarter increased by 26% to AUD 1.2 billion, driven by a 36.1% increase in B2B food.
While all B2B food businesses grew sales in the prior year, PFD contributed to most of the dollar growth as it benefited from a normalization in trading conditions with strong growth across all customer channels, new customer acquisition, and higher inflation. Woolworths Food's total sales declined 2.5% to AUD 2 billion in Q1, impacted by the cycling of the prior year's Delta outbreak from mid-August, including a level 4 Auckland lockdown that continued until late September. On a three-year CAGR basis, sales increased by 4.7%. E-commerce sales growth and penetration continued to increase, with sales up 5.9% in the quarter and penetration of 14.2%, up from 13.1% in the prior year.
Turning to BIG W. Total sales increased by 30% to AUD 1.2 billion, driven by strong trading as customers returned to in-store shopping and the reversal of store closures in New South Wales, ACT and Victoria in the prior year. All categories performed strongly in the quarter, with a mix shift back towards everyday and home and apparel compared to the lockdown shopping behavior we saw in the prior year. BIG W's e-commerce sales declined 51.8% in the quarter, primarily due to the cycling of COVID-related online purchasing in the prior year. E-commerce sales over the past three years remain strong, with a three-year CAGR of 43.7%. Finally, on current trading and outlook.
In October, year-on-year sales have improved in Australian food as we cycle out of the New South Wales and Victorian lockdowns of last year, with three-year sales growth broadly in line with Q1. In New Zealand, we are seeing signs of stabilization in the trading environment. However, given the combination of lower sales and materially higher wage inflation, we currently expect H1 F 23 EBIT of NZD 100 million-NZD 130 million. At this stage, we expect H2 F 23 EBIT to be above H1 this year and H2 last year, but with uncertainty on the trajectory of the improvement. A focus on value and making sure our customers get their Woolies worth remains our key priority in Q2.
On Tuesday, we announced our plans to deliver value this Christmas with a selection of seasonal favorites and entertaining essentials to be the same price or less than they were at Christmas last year. We also announced our Prices Dropped for Christmas program, covering 150 items, which will be in addition to our low price weekly specials and personalized member boosts through Everyday Rewards. There are 51 days to go until Christmas, and we are very focused on delivering a much-needed inspirational and affordable festive season for our customers. Ongoing supply chain volatility and the possibility of another wet summer will be a key challenge to navigate. We are seeing strong early sales through our seasonal lines, and we remain cautiously optimistic for the period ahead.
In closing, I'd like to thank our team for their amazing dedication, our partners for their resilience and agility, and our customers for their ongoing support and the feedback they provide to help drive better experiences. I would also like to especially acknowledge our team, our customers, and communities impacted by the recent floods in Victoria and New South Wales. I will now turn the call over to the operator for questions. To give everyone a chance, can I please ask that you limit it to one question per person and then rejoin the queue with any follow-up questions. Thank you.
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 Shaun Cousins with UBS. Please go ahead.
Thanks, and good morning, Brad and team. Just curious around your comments on a more predictable trading environment. Is this trading environment one where you can manage your costs better, given that was quite a problem this time last year?
Sean, thank you. Yes is the answer. You know, when we look through the volatility of COVID, we see a remarkably stable operating pattern, and we are increasingly adjusting to it. You know, predictability is the friend of the retailer. It is important that we get back into this predictable shopping pattern, which, as I say, we've seen happen over the course of the last four months.
Thank you. Your next question comes from Michael Simotas with Jefferies. Please go ahead.
Good morning. Can we talk a little bit about volumes? I know looking at the difference between sales and inflation is a bit problematic, but you disclose item growth. If we sort of look on a three-year basis to remove the noise of COVID, it looks like in the first quarter you sold maybe 1.6% less items than what you sold pre-COVID. Firstly, I'd be interested in, you know, whether you agree with that assessment and what sort of items are you selling less of? Is it relating to consumers responding to inflation, or is it more around availability of fresh or something else?
Morning, Michael. Thanks for the question. I think it's a great question. You know, underlying items is important, but you do need to look at it by part of shop, and it really does come back to availability on fruits and veg and then just some of the price elasticity in particular we see on fruits. So, you know, that is where the distortion happens. Actually, if you look at our Long Life categories, you see positive item growth over the three years, which is what you would have expected to see. So I'm sorry we only give you the average item growth figure, but that's essentially what's driving the number down over the three years. For the quarter, really, it was about this, you know, materially about the normalization.
Thank you. Your next question comes from David Errington with Bank of America. Please go ahead.
Hi, Brad. Can I ask you to give a bit more of a detail as to what's actually happening in New Zealand? That seems to be the one area that seems to be deteriorating. I look at your three-year CAGR for sales. I mean, they're up nearly 5%. I notice your EBIT down. When you look at the underlying earnings, and I know it's not a sales call, I'm aware of that, but your underlying earnings, where you're dictating the market, there's been a huge deterioration in the earnings.
Can you spend, you know, a couple of minutes on just telling us what's going on over there and because it just appears to me that that business has step changed backwards. That's my opinion, and I'd just like to know whether that opinion is on sound foundations or whether there's room to be a bit more optimistic for that business over there, please.
Thanks, David. This is a sales call, but we did actually give some outlook, as you know, towards New Zealand and for the reasons as outlined in the announcement. I think there are a lot of reasons for us to be positive about the long-term outlook for New Zealand. We need to follow, as we've done with supermarkets, BIG W, a very structured approach to actually realizing those outcomes. You know, I remain positive and we as a team remain positive on New Zealand and the 22,000 hardworking team members and millions of customers we have there. If you look at where things are at though, this is sort of almost a microcosm of what happened in Australia, but on steroids, David.
You know, it's on my mind that it wasn't that, you know, it was a year ago that we sort of came back and talked about some of the challenges we had in Australia. You see a version of that in New Zealand. A combination of the elevated COVID volatility and the cost that it drives into the business, together with investments in much needed supply chain assets. That's happened earlier in New Zealand, the rise of inflation all come together and make for a very challenging environment. You know, what we need to do in those situations is take our time, be very organized, very structured, and work our way through it, and that's what we're doing.
None of us like the numbers that are there, but I can tell you that the business is improving on a day-to-day basis. It has positive momentum, but we need to be very thoughtful and careful as to what that trajectory looks like. It's always a very nervous time for us because we're sort of, you know, two months out from Christmas. You know, the proof will be in the pudding in terms of when we come back in February as to how much of the trajectory is translated into the bottom line in the next three months versus the next three years. I can tell you, however, our store renewal program is working very well in New Zealand. We just haven't got enough of them on the ground yet.
Our new store program is likewise, with our Belfast store opening being very successful, just like a couple of weeks ago. Our new multi-protein facility with Hilton can really step change the meat proposition we have in New Zealand and in a relative sense to our competitors. Likewise, with our new Melbourne Fresh, Auckland Fresh DC. There are many things to be positive about, but we need to work our way through and get back into the stable operating environment is the challenge. As I say, we don't like the numbers any more than you do, David, but you know, we wanna be authentic and transparent and that's what you see in this result today.
Thank you. Your next question comes from Tom Kierath with Barrenjoey. Please go ahead.
Morning, guys. Just a couple of questions on COVID costs and productivity initiatives. I think before you'd said that the COVID costs were coming out, you're happy with the productivity kinda side. Can you maybe just provide a few comments on, like updating us on how that's tracking at the moment?
Yeah. Thanks, Tom. Recognizing it's a sales announcement, but I'll start. I'll just go at a high level, if you don't mind. You know, the narrative from our side is we have transitioned into this post-COVID operating world. That happened over the last, you know, three-four months. It was always something that we were all worried about. How would we transition through? Well, I guess if there's a positive story, it's that we have transitioned through. We really have diminished COVID-related costs in our business. In fact, we don't look at it that way anymore. We have transitioned through them. We are still very committed to keeping our customers and team safe.
No compromises, but no direct costs I would point at in that world. In terms of productivity, the biggest issue, and I think we've mentioned this to everyone on the call before, is getting our core operating productivity back to where it was pre-COVID. That is still our focus and the team are making good progress on that. This was always gonna be particularly challenging in a quarter where you've got negative item growth, but you wanna get item productivity up. You know, it's not like you've got a tailwind behind you, but a headwind. We have made good progress on that. That's our focus for Christmas. The second half is not core operating productivity, but all the additional initiatives that we layer on top of that.
We do have a good program there. I think, again, we've been pretty transparent that a number of those initiatives were delayed during the time of COVID just for good practical reasons. We hope to go back to those in the new year and really try and deliver results from them in the second half, but in particular as we get into F24. Yeah, so far so good, I would say, Tom.
Thank you. Your next question comes from Bryan Raymond with JP Morgan. Please go ahead.
Good morning. Mine's just around your views around market share. At the moment, clearly, you're coming up really big numbers from last year and below industry growth year-on-year. Even on a three-year CAGR basis, that may have dipped below. We'll see the [inaudible] numbers tomorrow. I'm just wondering how you're thinking about defending that market share that you won over COVID. Things like Coles is being a little bit more on the front foot around market share and ALDI's coming off a low base. Independents don't wanna give too much back either. I'm just wondering how you're thinking about that in the context of gross margins and sales trends, you know, looking forward. Thanks.
Yeah. Thanks, Bryan. There's a short-term answer to this and a more strategic answer, so I'll get to the short term. I mean, in the last four months of the normalization, you know, there's a lot of moving parts there. When you've had the share we've had in e-commerce, then it goes back to a more normalized view. You know, you see that translated through it. If you could, you would look at store share and online share, and you would look at them both and have a look at how we performed in the context of both. I think you see a slightly different answer to what you see when you add the two together.
You know, 'cause the online growth rate's come back materially, and if you run in a 60 share in that, you know, you can see how those adjustments come through. In addition, we've always been very strong in New South Wales, and as that normalizes through, you'll see a little bit of that wash through as well. As hopefully you're aware, they also have changed the way they measure market share, which only happened in the last couple of weeks, so there's a lot of volatility there. Also, very importantly, actually, if you look at our numbers excluding tobacco, you see a much stronger growth rate. There's about 100 basis points of impact of our slowing growth in our tobacco business, which is not a bad thing in the long term.
You know that we all report including, but if we highlighted what it looks like ex tobacco. We think underlying momentum looks better than the top line number, I guess, is the point we would make. In the long term though, our focus is not market share. Our focus is customer share, customer resonance, and brand resonance with our core customers and driving more advocacy with our customers. When you look at it through that lens, actually, it was a pleasing quarter. The areas that we wanted to drive our brand with our customers has worked. We can see the resonance. We can see demonstrable leads on the areas for the first time that we wanted to see it from a brand perspective.
I always say that with a lot of hesitancy 'cause we need to maintain it. This is a critical quarter. Actually, for the first time, I've seen material movements in brand relative to competitor on the areas we would like to have seen it. When we look at our core customer and our share of core customer, we actually see that growing as well. It is all. For us, it is about customers, share of customer, the right customers, growing resonance with them, delivering value for them, and so on. In those areas, actually we feel we are very well positioned on the go forward.
Thank you. Your next question comes from Grant Saligari with Credit Suisse. Please go ahead.
Thanks. I just want to come back to New Zealand, if I could. The first half guidance, should we view that as a reset lower for the New Zealand business, or is this mainly one-off costs? I guess just related to that, do you expect the wholesaling business in New Zealand that's been set up to materially affect the numbers?
Thanks, Grant. Look, it's a very hard question to answer, as you well know. It's a great question. We do feel we're at a low point in terms of you know our performance given all the disruptions we've had in the business. We don't think that this is a structural reset, but we do have some uncertainty on the performance trajectory from Sam, which is why we've been broad in terms of the guidance we've provided. We can see that in a very limited sense in you know in the first couple of weeks in October. Our experiences in Australia applies to New Zealand, where the sales profile they have very.
It's very calming.
We love [inaudible]. Hello?
Please go ahead.
Sorry, Grant, where did I get to?
Open question on the trajectory.
Open question on the trajectory. Can everyone hear me okay? Hopefully. It's an open question on the trajectory and what our experience has shown in Australia, which I think applies equally to New Zealand, once we get predictability in the sales pattern of our customers, good things happen. Too early to call it, but we are seeing much more predictability in our business in the last couple of weeks. In terms of the wholesale business, look, I think this is an important thing to do. We committed to the New Zealand government we would do it. Actually, if you look at our franchise business, I think there's lots of important lessons we can take out of the wholesale business to improve that. I don't think any of us would say that that's a top quartile business.
I think there's lots of areas for improvement for us in wholesaling and franchising that I think can be good, not only for New Zealand consumers, but if we execute appropriately, will be a good capability for us and an important, maybe growth platform for Woolworths New Zealand. I don't see that as a negative.
Thank you. Your next question comes from Ross Curran with Macquarie. Please go ahead.
Hi, team. I'd just like to ask a quick question about BIG W. It looks like some pretty good numbers cycling obviously lockdowns from last period. We've seen over the year a couple of department stores internationally get caught with the wrong inventory at the wrong point in time. Just given it is a volatile sort of period at the moment, are you able to take us through the inventory risk around BIG W into Christmas?
Yeah, thanks, Ross. It is a big issue, especially when you look internationally at some of the results we've seen, and you can imagine our board is asking exactly the same question as you are. Inventory is actually down year on year, but I'll turn over to Pejman just to give you a bit more color to that.
Thank you. As Brad mentioned, our inventory position, we are pretty pleased with it. We finished the financial year down on the previous year. We had a pretty clean inventory and quite a fresh inventory coming into this financial year. As we cycle quarter one of last year, our inventory positions are in really good health. We brought our Christmas
Inventory early into the country due to not wanting to get caught up in any international shipping issues. We've seen great early sales of those with our customers. Looking into next quarter, you know, we've got the right level of inventory behind us, particularly as we go into summer and Christmas period.
Yeah, I mean, my only context would be, you know, if you look at those international comparisons, their inventory levels are up 30% and 40%.
Yeah.
You know, we're up in the single digits at the end of the first quarter, and that's all to do with bringing our Christmas stock in early so that we have it and are not at any risk on international supply chains.
Yeah. I mean, it's, you know, it's something we need to continue to watch and work on. Rest assured of our focus on this particular topic. Which by the way, you know, we're trying to be very strategic on the issue. In the media call, we talked about for some of our key Long Life categories, being quite thoughtful of where we position product in the context of DCs and stores given the upcoming inclement weather. That's very different to any risk exposure we might have on seasonal lines, which is primarily inside BIG W.
Thank you. Your next question comes from James Leigh with Goldman Sachs. Please go ahead.
Hi, Brad. Thanks for the update. Just a quick one from me on shortages. You mentioned shortages for that first quarter. Do you have any maybe some color on heading into the Christmas period and any potential shortages there? Yeah, particularly in the fresh food area would be great.
I'll give a high-level answer, and then I'll turn over to Natalie to provide some more color, James. I mean, there have been some structural longer-term challenges that we're still all collectively working to overcome. Obviously, there's progress, but not as much as we would like on the topics of, you know, toilet paper and tissues. Pet food is another area that's just been structurally very challenged for all of us. In particular cat food actually. If anyone has any answer, please respond to me separately on why we see structural shortages of cat food across the globe. Also, it's also true on dog and dry dog food at the moment. Pet food and tissues and toilet paper have just been challenging.
There is product in our stores, but our stores aren't full to the level we would like, and we don't provide the range, the consistency of range of brands that we would like, in particular in those two categories. We all need to work hard to fix them, but they won't be perfectly fixed for Christmas. Outside of that, the one that I called out in the media interview was just, you know, the again, in the Long Life category, just the growing season impact in frozen, in particular some shortages around corn and potato in frozen, that are very hard ones for us to structurally get back into the perfect position for Christmas. That's just due to poor growing seasons in Tasmania and in Europe.
Those are, you know, more structural long-term ones. Nat can provide more color to the more dynamic seasonal ones that we have. They do tend to go up and down but are quite important because we just need to be very agile on how we adjust to those.
Yeah, I would start by saying that overall, if you look at our outbound service levels or our store service levels, they continue to improve throughout the quarter and into this month. We are continuing to see an improvement and a lot of teams doing a lot of work, replenishment and supply chain with our supplier partners to make sure that we get product through our supply chain and into stores and in particular, build up our stock in Cairns in Far North Queensland to make sure that we have some resiliency in our stock levels. In terms of fruit and veg, this really was a significant impact on item growth in the first quarter, particularly in July and August. The supply just wasn't there because of the poor growing conditions.
Our service levels for fruit and veg were down at around the 80% level that recovered throughout September to be in the kind of mid-90s again. We did see a very strong recovery in our service levels on fruit and veg as supply conditions improved throughout September and into October. The team's just working through at the moment with our Victorian suppliers around the impacts of the most recent flooding and particularly around the Shepparton and Swan Hill area. I'll be actually out in the field this week and next to really ascertain the impact, but stone fruit is likely to be impacted. Most of it from the eastern states comes from that particular growing area.
you know, we'll be working with our growers around the right timing and the right balance around quality to get that product into our stores. The other one we've mentioned this morning is around cherries and again, the cherries aren't fully mature, so we're still working with the suppliers, and we expect a bit of a delay to the cherry season to come through. Lastly, field grown tomatoes. Field grown tomatoes out of Shepparton likely to be delayed into January, early February. We do have good volume at the moment of other types of tomatoes, so truss and snacking tomatoes in our stores.
We're working very hard to make sure that, you know, everyone has a great Christmas with lots of fresh food on the table.
Thanks. Thanks, James.
Thank you. Your next question comes from Ben Gilbert with Jarden. Please go ahead.
Morning, Brad and team. I'm gonna ask the same question I think I asked you last time, Brad. Just in terms of the grocery market in aggregate, how are you thinking about volumes? 'Cause obviously volumes are tracking down quite significantly. Appreciate we're cycling a couple of lockdowns, but how do you think about the trajectory to move towards, say, a flat volume scenario and what do you need to see? I think specifically I'm keen on things like eating out.
Share of return to cooking at home. There seems to be some early signs it's coming back, but is it a bit slower than you thought, or how are you feeling about that trajectory moving towards flat volumes again?
Yeah, I think it's the key question, Ben. We've seen that flow through as things normalize. You know, that's positive for us. Actually, if you just looked at our setting aside the point that Michael made on the three-year growth rate and the discombobulation that can come from fruits and veg item growth, because it actually is not a standard size either, so it's quite a hard one for us. You'd almost rather do it by kilos or something because it does ruin the item growth number. If you just abstract from that, actually, overall items have been incredibly predictable in our business over the last, you know, four-eight weeks as we've come in and out of the post-COVID world.
That gives us the ability to plan because we do wanna plan everything we do to items or, you know, grow that up to cartons or, you know, pallets or whatever the case may be. We're seeing we think a good, pleasing underlying predictability in the number of items. You know, we sound excited. That's key. Actually, the percentage is all based on cycling out of COVID. Just to remind everyone, it's in the back of our documents, the New South Wales lockdown was weeks one- 15 last year, and the Victorian lockdown was weeks 16- 17. Actually we are now out of both of those. You're starting to get back to a more normalized growth rate.
As I say, the underlying number's stable, but the growth rate looks better. It's kind of a weird. Probably not communicating that as effectively as I should. We feel reasonably positive about that then. As we go forward, and we listen to our customers, as they talk about Christmas, the way they talk about it and entertaining with families and friends is at home. It is about going back to the home. How quickly they're rotating to the home, we can't tell you. You know, celebrating at home over the festive season with family and friends is a very powerful and very clear narrative that we're hearing from customers. You know, we'll see how much of that comes back into the home.
As we look at, funny enough, growth rates, we know we break our stores into core value and up. You know, we're starting to see that in our core and up value stores. We haven't yet seen that in our up stores, but we'll wait and see how they come through. Our up stores have a slightly more premium customers, so they might be eating out a bit more. You know, we'll wait to see as we go through. Indications are that it is at home. Indications are that, you know, hopefully, that could be good for retailers going into Christmas.
Thank you. Your next question comes from Phillip Kimber with E&P Capital. Please go ahead.
Oh, g'day, Brad. I just had a question around your thoughts on the discounters, obviously, where we're at, you know, higher inflation environment, cost of living pressures. If I look overseas, particularly the U.K., there's something to be done, you know, there's a lot of price matching policies and things like that. I just wanted to get a sense of, you know, where you see Woolworths relative to the discounters and, you know, are any of the programs comparing specifically to their prices or is that not something that you're doing in Australia?
Phil, we're always paranoid on this issue. It's just a question of our level of paranoia. You know, we need to deliver value to every customer if we wanna succeed as a group. We're paranoid about delivering value everywhere, and particularly in our value stores, with our traditional and saver customers who are at risk of cross-shopping into alternative retail propositions. It is a big one for us. We don't advertise the competitor in our store, which is something we'll scratch our head on, but a little bit in the U.K. with price matches with the competitor's name there, which feels like free advertising. You know, I wouldn't pay much attention to that.
Our indexes are set against all of our key competitors, Coles, ALDI, Chemist Warehouse. We're very focused. In fact, we are keeping a much tighter focus now on Amazon, and particularly in long life products. It's something that has been quite noticeable for us of how they've sharpened competition in that space. Our indexes run against all of them. We have guardrails in those indices, and we look at it across the shelf against the blended basket and against the essential items that we wanna sell in our business.
The indexes are all in good place, but it is a risk, and we need to continue to work on delivering value, as I say, at a headline rate, and then obviously through Everyday Rewards for our members to give them that little bit of extra value.
Thank you. Your next question comes from Craig Woolford with MST Marquee. Please go ahead.
Morning, Brad. Just a follow-up, it might relate to that. Your inflation went from 3.6% in the June quarter to 7.3% in the September quarter. Can you clarify what the inflation was excluding tobacco and fruit and veg? I know there's differences in methodology, but my second part of the question was really the acceleration was a lot more than Coles over that same time period. I'm just wondering whether there was any change in the price index versus Coles between those two quarters.
Craig, look, Paul's just given me the number, which I could tell you I've forgotten. It was 6.8% excluding tobacco, fruit, and veggies. Is that right, Paul? It was lower excluding those two. There hasn't been a major change in our price index relative to Coles. We measure inflation slightly differently. You know, as per our full indices relative to Coles, ALDI, stores Chemist Warehouse and others has remained relatively constant, and we continue to work on it. There hasn't been a major change in that. This could just be different weeks and timing and different measurement methodologies. Paul, you spend more time on this than the rest of us. On how they report the differences.
Yeah. Nothing else to add, Brad. I think that is observable. I think you answered it correctly.
Rest assured, this is a Monday morning report we all get and we all look at and engage on.
Thank you. Your next question comes from Scott Ryall with Rimor Equity Research. Please go ahead.
Hi. Thanks very much. Brad, I was just thinking about, I guess, the second quarter but also the medium term, if that's okay. You know, this was always gonna be a challenging set of numbers to look at, right? Given the reversal out of COVID, the inflation, the supply challenges you've talked about. In terms of thinking about your business going forward, we've just been through 2.5 years of, you know, unprecedented trading and operating conditions. You've talked about getting your productivity back to where it was pre-COVID. You've talked about supply challenges in fresh and other. On historical calls, you've talked about the need to get your operating rhythm back with predictability, which you mentioned before.
You've got a macro environment that's in the process of changing quite dramatically with interest rates going up and inflation high. How do you get comfortable in your business that you over that timeframe as you emerge haven't lost competitiveness? I know you've picked up competitiveness over that time. It was part of an earlier question, but I guess what is the data that you've got internally that gives you comfort that you're you know you will emerge from all this weirdness and you know be extra strong going forward?
Yeah. Thanks. Thanks, Scott. Strange as it might seem when you look at the sales number, I think we had a relatively positive quarter in terms of the way we managed the business, the way we positioned ourselves, the way we engaged with our customers. Work we've done with our team, there's still more work to be done just given the inherent fatigue. There was always gonna be a some form of hangover after COVID, and I think our team have managed it remarkably well during the quarter. Much more to do as always, but it was always gonna be a painful adjustment period. It came a bit more quickly than perhaps we had thought. I just would like to call out the credit to the team of managing through that and managing through the item growth adjustment and so on.
Scott, I need to give you the same answer of the long term as I gave a little bit earlier to I think it was Brian, which is, you know, we are very positive over the midterm and executing our plan and consistency of execution for us of the plan to us is always key. You know, we want to win across all segments in terms of customers and provide them with the value they need, and that requires us to continue to very thoughtfully segment our business, whether it's our stores into core value add or our members into the behavioral segmentation of [C-Gest] and work very hard on doing the right thing for each one of those customer segments.
Backing that up then with our strategic investments into our supply chain, into our store renewal program and into our store opening program. You know, we continue to see a very positive trajectory on all those strategic aspects of our business. To us, that's the key. You know, share of customer, lifetime value of customer advocacy are the metrics that we look at. They have been trending positively and continue to trend positively, very importantly, actually materially so in the first quarter. You know, many potholes on the way through, many challenges on the way through, but I think our strength is when we continue to hold that true north, adjust with agility to what's thrown on the way through, but not compromise that true north. We haven't.
That gives me. Yeah, I'm always positively optimistic, but I certainly am in the midterm.
Thank you. Your next question comes from Shaun Cousins with UBS. Please go ahead.
Thanks, Brad. Further to the question sort of on costs and managing, I think in answer to Tom's question, you indicated productivity initiatives. You seem to suggest they might be more second half 2023 skewed. I thought in August you said that many of the productivity initiatives actually started in the fourth quarter. Should investors expect productivity initiatives to help the first half 2023, or are they a calendar 2023 issue, please?
Now, Shaun, we're on a sales announcement, so let me clarify my previous comment without getting into the detail of the earnings of this. The most important thing I think we said at the full year was, and we continue to say, is core productivity and then the underlying processes are always where the action is. No matter what you layer on top, if you don't get your core process productivity right, whether it's items you pick in e-commerce or, you know, the number of cartons you do in, you know, in long life in your inventory routine or, your, you know, your carton pick rates inside of DC, nothing will ever offset degradation in core productivity.
Our number one priority has been, continues to be lifting core productivity up to where it was pre-COVID, and we're making good progress in that. In addition, we have a number of very material productivity programs that we are putting on top, and the question has been how we scale them. We have had them underway in the business. We would have talked to RT3 and how that is enabler of many of them. We continue to scale those. The point I made was going into Christmas, core productivity is the most important thing. On top of that, then we continue to scale those additional ones and then try and get our accelerator down in the second half of those additional ones so that we can really get a good wraparound in F24.
you know, as I say, nothing offsets core productivity.
Thank you. Your next question comes from Michael Simotas with Jefferies. Please go ahead.
Thanks for taking a follow-up. I just wanted to continue on the discussion around volume and just sort of tie it back to productivity. If volume trends do remain weak, you know, if out-of-home consumption stays stubbornly high and consumers do respond a little bit to inflation, can you actually deliver on the productivity agenda that you're trying to achieve, or do you need to see item numbers back in growth?
No, we can't, Michael. I mean, stability of items is our key and getting a forecast accurate item count right is the key for us. Our underlying item count is very stable right now. That gives us stability to predict within the context of seasonal variations and so on. Stability is the key. It's why I think our team did a good job in the first quarter when you've got the negative number of just 8% or 8% in the bush or whatever, we reported 8.6% inside Australian Food. Much more than that inside e-commerce. You know, getting that right is the key. You know, we got good variable costs on that last 5% of items.
You know, we are locked and loaded within, you know, three-four-week periods, you know, in terms of our planning. You can't adjust down very quickly. You can easily adjust up. No, predictability of item count is key, and it's been amazingly predictable. It's quite remarkable if you look at just the underlying items we've had. Hasn't been true necessarily by store or by category, but overall, it's been predictable, and that gives us confidence on the go forward. Our team are becoming very good at adjusting to item-based resourcing.
Thank you. Your next question comes from Sean Xu with CLSA. Please go ahead.
Morning, Brad. Morning, team. Thanks for the update. I wanted to talk about shopping local. According to Cost Management last week, they told us the supermarket sales momentum is improving as the shopping local trend unwind. Well, this is very different from the message Metcash gave to us two weeks ago. They say the shopping local trends continue. I was just curious to know from your perspective, what's your view, and could you please give a bit more context on that? Thank you.
I'll split the difference between the two narratives, Sean. We've seen a normalization in terms of how people shop. The big difference has always been, and I'll come back to the local comments, has been between standalone stores and regional malls. We've seen that normalize, actually. We've seen a normalization, which had been. We're pretty balanced across everything we do, so it blends itself out for us. If we look through our numbers, we do see a normalization that happened there. That's undeniably true. In terms of shopping local, it can be quite a tricky one, and I don't know how those questions were asked in the context of our competitor.
Actually what you'll see as we call that our metro business and the growth we've had there, we're starting to see a lot more balance in terms of where people work and how they live. Depending if you included your more commuter stores in there, you would see quite positive numbers, and you might say they're shopping local. I can't really talk to the specificity, but we've seen much more balance come back into convenience and particularly into our city stores, and so we see a positive number there. There's some truth in between those two answers, I think, if you know what I mean.
Thank you. Your next question comes from Craig Woolford with MST Marquee. Please go ahead.
Yeah, hi, Brad. Thanks for the follow-up. I think in your food business, it does sound like you're quite confident about the rhythm and the improved performance. If we do try to look through COVID, you know, from 2019 through to now, store growth's been fine and online's been very strong. But the bricks and mortar per store sales does look a bit soft. Maybe it's just tobacco. Do you think there's anything else there around in-store execution, whether it be absenteeism at store level or on-shelf availability that's led to what looks like soft results from a bricks and mortar per store sales performance?
Yeah. Thank you, Craig. I never like the word confident. Cautiously optimistic is my preferred phraseology. The tobacco business isn't really in online, so you see it all in stores. It materially adjusts the store level number, and we think we actually had quite good store level growth during the quarter. It was in our online business that we really needed to make some painful adjustments. I just like to call it out and say the 1.1 goes up a little bit higher, if you sort of add back just over, it's about 110 basis points or something like that. You feel a lot better about the store level sales.
The other point, which I think is a really important point to make, as you look at our numbers, is 90% of our e-commerce business is fulfilled through our stores. You always need to look at the network growth. This we think is a really important strategic, deliberate strategic decision which we've made, that we use the stores to do a lot of online picking for us, in particular for pickup or point-to-point e-commerce. When you look at the two together, you do get a positive outcome. What was very interesting, we haven't had any e-commerce questions actually, in either call, which is kind of an interesting observation to make.
Actually one of our businesses that grew most in the quarter, which it goes a little bit to Sean's point on local was our point-to-point, our home delivery business. And that is really fulfilled out of stores, and you need to fulfill point to point, which is, I guess you can call it crowd, but it's same day home delivery, sometimes in a two-hour window, sometimes a bit longer. That really grew quite strongly and will always be primarily a store-based business. We think there's lots of reasons to be positive about our stores. The conversation which we'll come back at the half, I'm sure, and the full year will be, we do need to continue to reimagine our store. However, think about what it is we fly items.
What kind of service experience we're trying to have and so on. A topic for another day.
Thank you. Your next question comes from Scott Ryall with Rimor Equity Research. Please go ahead.
Thanks for the follow-up. Brad, could you just clarify, how do you measure those customer metrics you were talking about before, customer share in particular? How do you actually measure that?
Thanks, Scott. In many ways, pardon me, if we just start at its most basic fundamental level, it's what we call voice of the customer, which is the customer's experience on the transaction they have on that day, and they rate us. We get a store VOC, which is really important. We also overlay on that a brand NPS, which is not only what their last transaction is, but how they feel about Woolworths over the correlation of transactions they've had in that period.
We do a store VOC, we do brand NPS, and then of course, on top of that, we layer in a reputation score by RepTrak, which gives you an even broader correlation of how people feel about us even more broadly, not only on the shopping experience, their overall experience with Woolworths over time, but also a number of other aspects on how we treat people and so on. It's VOC and brand NPS. We do a store VOC as well, by the way, and then reputation. We do that for stores, by the way, and also for e-commerce. It all sort of, you know, layers up. That gives you a sense of how the brands go in and how people are feeling about it.
We break that down, by the way, between core shoppers, non-core shoppers, promoters, non-promoters and so on. In addition to that, we're lucky enough with Everyday Rewards in our member program, which is close on 14 million people, to have a good sense of how our members are shopping us and what their shopping experience feels like with us. We can have a look at our members, understand if our members are shopping more or less, and we can understand by our member program what our share of wallet is of those members. We can therefore start tracking share of wallet for members, either very active members or non-active members. We can do that across not only food, but across the group, all with incredible privacy protections associated with it, please rest assured.
I can tell you the customers' annualized quarterly value of what they shopped across the group, and we're starting to track that as well. There's a whole lot of measures that go there, and we look at them all. The interesting thing in the quarter was that they were positive across all of them in a trend sense off Q4 of last year, not off Q1 of last year. This Q1 of last year was just as we were going into this incredible Delta challenge. I hope that gives a sense of the rigor that sits behind what can sound like a bit of an off-the-cuff statement, which I made earlier.
Thank you. Your next question comes from Bryan Raymond with JP Morgan. Please go ahead.
Thanks again for the follow-up. Just on the real-time loyalty platform you guys are ramping up with one-to-one promotions. I noticed Coles launched super Flybuys pricing, so direct discounts in store on Flybuys for certain products. I'm just interested in how you see the evolution of loyalty in driving value. I mean, your method is obviously quite nuanced and targeted and probably quite high ROI. Theirs is potentially a bit more blunt and something that's gonna have a bit more of a short-term impact. Just wanted to understand how you see that part of the industry or at the moment in terms of loyalty driving value for shoppers. Thanks.
Yeah. I mean, thank you, Bryan. I think it's actually a great question. Things are changing a lot in the space. Firstly, the RTL or our real-time loyalty platform is a replatforming of our loyalty business that has taken us close on 3.5 years to go from a legacy system that had a number of constraints in what we could do for our members to a system that is real time, obviously. It's right in the title. It's Eagle Eye for those of you interested in the tech behind it. Group of guys who came out of Tesco and then built a next generation loyalty platform.
It can be instantaneous, it can reconcile full history, and it's not constrained in terms of the offers we can provide or how we can repurpose it. We have an incredibly powerful platform. The question is how we use it going forward. I guess watch this space in how we use it, because we're still working through how we wanna activate the platform going forward. The most obvious use case, by the way, we did was people wanna know that they got their points, and so now your points are instantly credited to your account. It was one of the biggest queries we had into our customer hub, and I hope that one's behind us, Amanda. That is a platform and a capability. How we use it is a question.
The question you alluded to is the topic of member prices, and do you go above the line in member prices or below the line? We provide a number of boosts, which are essentially member specials or prices, which we do in a much more curated way to audiences, not to one to one, Bryan. But you do see retailers now taking member pricing into store, which is not something we've historically done in Woolworths Supermarkets. We actually do it in New Zealand with Onecard and club prices in New Zealand. As you would be well aware, it's one of the great success stories at Dan Murphy's with My Dan's and the member prices that they moved into the store. You do see a lot of member prices now being rolled out in the U.K.
There's a whole lot of conversations around member prices, their pros and cons and bringing them into stores, because you can, at risk of alienating the non-member in doing that, how you fund it, how you execute it, how you make it meaningful. I think there are a lot of questions there, but that is a big strategic question on the go forward. I do think seriously, we're sitting in the next generation of loyalty, or membership, you know, and there's a mega trend going on globally right now, and it's really is primarily enabled through apps and capabilities like Eagle Eye or RTL. It's a space that I think will continue to evolve, and we need to continue to evolve with it.
You know, we don't feel that we're badly positioned, as I say, with 13.9 million members now in our program, with a new platform that we can deliver off, and we'll just continue to learn and iterate as we go. By the way, we just can't tell you how that program's gone since it launched on Tuesday. Even if I could, I probably wouldn't, but it's just far too early to see how successful it is.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Banducci for closing remarks.
Thank you everyone, as always, for all your questions. We're always very nervous as we write our Q1 sales announcement because it all lies ahead of us, as everyone knows, with these critical, you know, 57 days to Christmas, so 51, sorry. It all lies ahead, which is why we need to be cautious. We are cautiously optimistic. We feel our team did a great job of adjusting to the post-COVID realities that we experienced in the last months. We think we've got a good plan for Christmas, and we just need to be focused, deliver value for our customers, but also recognize that every Australian and New Zealander really wants and deserves a really sociable, inspirational, affordable Christmas at home with friends and family. I look forward to speaking to you all soon.
That does conclude our conference for today. Thank you for participating. You may now disconnect.