Thank you for standing by, and welcome to the Woolworths Group FY21 Q1 Sales Results Announcement. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Brad Banducci, Managing Director and CEO. Please go ahead.
Good morning, everyone. Thank you for joining us for the Woolworths Group's First Quarter Sales Results for Financial Year 2021 . Joining me this morning are Stephen Harrison, our Chief Financial Officer, Amanda Bardwell, Managing Director of WooliesX, Steve Donohue, Managing Director of Endeavour Group, Claire Peters, who has taken up the new position of Managing Director of B2B and Everyday Needs, Natalie Davis, who has recently come back from New Zealand and has stepped into the role of Managing Director of Woolworths Supermarkets, and Dave Walker, who you would have seen last week, has recently been appointed as our Chief Risk Officer. It has been a pleasing start to FY 2021 , with all of our retail businesses delivering strong sales growth and customer metrics remaining solid.
We continue to focus on operating COVID-safe during the quarter and rolled out team wellbeing initiatives under our COVID Care Plan, including additional leave entitlements, to encourage our team to take a break ahead of a busy trading period, as well as extending our team discounts. I want to take this opportunity to acknowledge our Victorian customers and team members for their resilience and efforts over the last few months and their contribution in slowing the spread of COVID and taking care of each other. Turning now to our results for Q1 of FY 2021. Total group sales were AUD 17.9 billion for Q1, up 12.3% on the same quarter last year, with continued strong momentum across our retail businesses despite the ongoing impacts of COVID.
COVID-related costs remained material in the quarter as we continued to prioritize the safety of our team and customers, but are tracking materially below Q3 and Q4 of FY 2020. Customers' demand for e-commerce services shows no signs of slowing, with group e-commerce sales of AUD 1.5 billion in the quarter, representing growth of 87%, which was supported by further capacity increases across our network as we worked to open up more home delivery and pickup options for our customers. Australian Food sales for the quarter increased by 12.9% on the previous year to AUD 12 billion. Comp sales increased by 11.5%, with two-year average comp sales growth of 9.1%. Sales benefited from customers continuing to consume more at home, growth in e-commerce, as well as our successful Disney+ release campaign.
While sales growth was boosted by Victoria, with growth of 20% in Q1, other states continued to grow strongly. Excluding Victoria, Australian Food sales increased by 10.6%. Customer metrics were generally up on the prior year, but lower than Q4 of FY 20, where scores were at record highs as our customers recognized the efforts of our business to provide a safe and convenient shopping experience. Ease of pickup and queue wait times were impacted by sustained high trade volumes during the period, and improving in these areas remains a focus for us in the run into Christmas. Average prices for the period increased 1.2%, which was below recent run rates. Excluding tobacco, average prices declined by 0.2%, with lower inflation across grocery, food, health, beauty and baby, and household and pet.
Promotion activity during the quarter was closer to pre-COVID levels, following lower average levels in Q4, given our availability challenges. WooliesX e-commerce growth accelerated in the quarter, up 100% on the same time last year to AUD 961 million. E-commerce penetration increased to 8% of sales, compared to 6.3% in Q4, following increased demand and significant increases in capacity. A further 44 home delivery stores and 92 contactless delivery services were rolled out in the quarter. Digital engagement across Woolworths websites and apps continued to grow, with average weekly traffic up 76% year- on- year, as customers look for meal inspiration, greater convenience, and smarter shopping lists and value by our personalized offers. New Zealand Food's total sales for the quarter increased 6.9%, with comp sales growth of 5.8%.
Market growth rates slowed in the quarter following the substantial easing of restrictions in New Zealand in Q4 of FY20. There was a temporary spike in sales in August after new COVID cases were identified. However, growth quickly moderated with lower inflation. Despite the easing of restrictions, transactions continued to be materially below the prior year as customers maintained their habits of shopping locally and using online services. E-com sales growth was 50.5%, with penetration for the quarter at 11.9% sales, which was in line with Q4 of FY20. During the quarter, we also opened a third dedicated e-commerce fulfillment center in Wellington. Big W's total sales increased by 20.4% in the first quarter, with comp sales growth of 22.3%. Excluding the 22 stores closed in metropolitan Melbourne, comp sales increased by 28.5%.
Comp sales growth was mainly driven by customers putting more items in their basket, and if we exclude the closed Melbourne stores, comp transactions also increased in the quarter by 5.3%. E-com sales were up 175% on the same time last year, with record e-com penetration of 9.3%. E-com growth was boosted by the 22 Melbourne stores that adapted to fulfill online orders while closed to in-store customers, as well as improved availability across the board. Last Wednesday, all 22 Big W stores in metropolitan Melbourne opened, reopened to the public. Endeavour Drinks sales also benefited from increased in-home consumption during the quarter, with the Victoria state trading performance a highlight. Total sales increased 21.4% in Q1 to AUD 2.7 billion, with comp sales increasing 20%.
Comp sales growth for both retail businesses remained strong, however, Dan Murphy's continued to outperform. Digital and e-commerce momentum was strong in Q1, with e-com sales increasing by 58% compared to the same period last year. E-com penetration across Endeavour Drinks increased to 8.6% during the period. The My Dan's Loyalty Program ended the quarter with 4.8 million members, with more than a million new members added since its relaunch in Q1 of last year. Hotels trading during the quarter continued to be impacted by the closures in Victoria, with total sales declining 33% to AUD 313 million. All ALH Victorian venues will reopen on the 9th of November, but will continue to operate with applicable state government restrictions. Despite the Victorian closures, Hotels were profitable in Q1, but materially down on last year. Turning to current trading.
Comp sales growth in October has been in high single- digit growth, with a moderating trend over the month for Australian Food, and New Zealand has continued to slow relative to Q1 as well. Endeavour Drinks and Big W have, however, continued to perform strongly. For the remainder of the calendar year, while the experience of every business will be different, we expect that sales and costs will remain elevated as customers travel less, spend more time at home, embrace e-commerce, and shop in a COVID-safe way. Christmas will be very different to previous years as we adapt the ways we shop and celebrate, and given 2020 so far, it would be surprising if there weren't some challenges that lie ahead.
However, we have made good progress during the year to ensure that all our businesses provide our customers the opportunity to celebrate Christmas and the holiday season in a safe, enjoyable, and affordable way. I will now turn the call over to the operator for questions, and may I ask that you limit your questions to two per person.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question comes from Shaun Cousins from JP Morgan. Please go ahead.
Thanks. Good morning, guys. Maybe just a question around online growth. It's obviously been sort of very strong. I'm just curious around scale advantages. Do they help reduce the extent of EBIT margin dilution relative to a store-based sales? And maybe could you talk a little bit about what the proportion of same day versus next day sort of delivery is, and why the customer has that attraction to same day, please?
Thanks, Shaun. Obviously, this is a sales announcement, so I'll keep most of our questions to sales. But in answer to, I think, a very good question, you know, obviously, we've seen continued growth in e-commerce. The key trend for us is really we're more supply constrained than demand constrained, i.e., when we add additional services, we see those services fill up very quickly. And that's true for all of our services, but in particular, our same-day services. And so we've still got a lot of capacity which we need to open up in same day. So, it is probably the most demand-constrained portion or supply-constrained portion of our offering.
And it's what customers want, and there's a, you know, great saying that says, "Today's convenience is tomorrow's friction." The more convenient you become in what you provide, the more customers demand those services or reinvent what they demand on them. I should add, like, that our Drinks business, Endeavour Drinks, leads in our group on the topic of same day. And I'll throw to Steve Donohue in a moment to talk about where we are on same day in Endeavour Drinks. But it's been the standout for us, not only through the piloting work done by BWS, but in the last six months, the work done by Dan Murphy's to provide a truly great on-demand drinks delivery experience.
So it is growing, but it hasn't yet hit its right balance, and that's because we haven't provided enough growth into the sector. We'll continue to open up growth there, and it's just been a challenge for us, of course, just as we try and keep up with the overall market. In terms of e-commerce itself, while we won't talk to profit in this meeting, given it's a sales call, it is fair to say that the more scale you get into it, the more efficiencies you get. And, you know, if you think about your key costs, it's actually the items you pick per hour, whether in a CFC or a store, and that is definitely improving continuously for us.
We've redefined what capacity is in our manual CFCs, and you may have been, I think, Shaun, to one of our stores on a prior occasion, which would be one of our manual CFCs. But if you haven't, we found that we can actually drive almost 100% additional volume out of that CFC as we're just smarter in how we lay it out and how we route it. And we're continuing to benchmark ourselves and improve our in-store picking in parallel. So the overall picking speed is going up, going up across the group, irrespective of where we go with automation and Takeoff and other forms of automation, which, of course, give you another step function. Then in terms of delivery, that's true as well, and we found as we get more route density, you get more drops per hour.
We see that particularly in New Zealand, which has got the best density inside the group, and you start driving yourself up to the four or five drops per hour. We don't do that everywhere, but we actually can see it working. Very important in drop density is also the routing software, working very hard on having an AI predictive routing software in the business, which we're rolling out. Where we do roll it out, we start seeing a lot of benefits, with it. So scale is coming. It is helping us improve our business, all the time, and as I say, we truly believe that in an unconstrained world, we will find that same day will be bigger than next day. That is not true yet today, but, that is because we are still in a transition period.
But Steve, it might be worth just to me, the highlight of the half has been the way drinks, and particularly Dan Murphy's, has really followed BWS with same-day delivery.
Yeah. So Dan Murphy's numbers, total e-commerce is fifty-fifty, just about pickup and delivery, and on that delivery number, about half of that is same day, and it's growing exponentially higher than all other elements of e-commerce for Dan Murphy's, so it will quite soon be, I think, the largest element of delivery or e-commerce, I should say, for Dan Murphy's.
Thanks, Steve. So, hope that makes sense. Shaun?
Yeah, no, no, absolutely. Thank you. And my second question is just really around supply availability, just in terms of, I guess, Australian Food and Big W across both, any of the impact of Victorian lockdowns on manufacturing and then in Big W, particularly around port, restrictions that are going on. Just curious around how you're thinking about availability of supply leading into Christmas, please.
Look, I'll make some comments, and I'll ask Dave on Big W, perhaps Claire, just on supers, just to add to those comments. We had our moments of availability, as you know, during the height of the COVID challenge. As we stand today, availability across our group is actually in a good position. And so we don't feel exposed on availability today. There are, of course, legitimate questions on import volumes, which Dave can talk to in Big W, and some of the stone fruit challenges which we have with seasonal workers, you know, as we go into stone fruit season in Victoria, we're transitioning in at the moment into that. So there are some availability challenges going forward, but I wouldn't want to overplay them.
Our in-stock position today is very strong. Dave, I don't know if you'd like to just elaborate on where we stand with Big W. I mean, obviously, we've had our with the demand levels we've had, we've had some availability issues, where we stand going into Christmas.
Certainly, I mean, you know, feedback from our customers through Voice of the Customer is we're now back to pre-COVID levels, slightly higher, in fact. Inventory is actually in a really healthy position. There are a number of gaps, but they're relatively minor and very much in the same areas that we see. You know, fitness is an area that is really driving quite hard. As we get into moving into the Christmas period, we're actually pretty comfortable with our inventory position. We're working incredibly closely with our suppliers, and really working very collaboratively with them, and we're getting great Voice of the Supplier feedback. The port has been a challenge, but again, the teams are really prioritizing and managing that, and we're seeing that winding through into Christmas.
Not to say Christmas won't be a challenge for us, but it is an area that we are very close to and actually feeling pretty confident at the moment. But again, there's lots of unknowns that could hit us.
I think from a supermarket point of view, Shaun, as you said, during Q1 in Victoria, we would have seen some availability challenges when we did have some positive cases in our DCs and our restrictions on meat manufacturing, but pleasingly, as Brad has said, we are very much back pre-COVID levels on availability, which our customers are telling us, and that's our e-com customers and our customers who shop our stores. On the specifics around, stone fruit, and fruit in general, we're working very closely with the relevant bodies and government to work through those product mixes.
You know, delighted to say that the mango season is gonna be fantastic coming out of Northern Territory, and we're looking at product by product over the days and weeks to come, but have the right support from the right body to minimize any of that impact at all. I'd probably conclude by saying we are putting through about 1.5-2 million cartons more, same time as we were last year, to maintain that demand and to get ahead of any concerns that there may or may not be at ports, et cetera, so we are in a comfortable place on being pre-planned for the next 50 days.
So I mean, Shaun, it's the right question. We're always nervous at this time of year on availability, irrespective of the fact that this will be a bigger Christmas than, you know, than usual. So it is the right question. We do remain anxious, but we are in a good position as of today. In terms of COVID costs, I should just call out that some of the COVID costs in our supply chain relate to, of course, the COVID cases we had in Mulgrave, in our NDC and RDC, but also, with us taking quite a, hopefully a sensible but cautious approach to having additional warehouse capacity available, for Christmas.
And so you see that reflected in the numbers today and also in the numbers, going forward, where we've just made sure we've got some bulk warehouse capacity available, particularly in Victoria, but not solely in Victoria.
Great. Thanks so much, Brad and team.
Thank you. The next question comes from Michael Simotas from Jefferies. Please go ahead.
Good morning, everyone. Look, I know it's a sales call, but you've given us an update on COVID costs, and Brad, you just touched on them then. Can we talk about that a little bit more? Looks like you've seen some moderation in your costs in the last six weeks of the quarter, but it looks like it was probably all driven by those supply chain costs that you spoke about. Can you just sort of give us some color on your expectations for that going forward? And maybe it would be reasonable to benchmark relative to Coles, which seems to have seen a much larger moderation in its COVID costs from a base that was already quite a bit lower.
Michael, you-- that was a very nice non sequitur on today, a very important political election, so, you can do well in that space, to pull out COVID costs into profit forecasts. But, on COVID costs in a more serious manner, it's hard to benchmark ours versus our competitors. So let me just talk to ours, and, you know, what we've tried to do at Woolworths is take a very conservative approach to the way we manage this issue. We still believe, Christmas customers-- many customers will choose where they shop at Christmas based on where they feel most COVID-safe, and we intend to be that place, and we're working very hard to be that place, which is why we're taking a conservative setting.
The costs have come off, as you see in the back of our release, from sort of the 2% to the 1%. You know, and when you look through those numbers, I think you get a good sense of them. I've really just talked to the supply chain one, which was actually up in Q1 as referenced, partly through the issues in our supply chain, primarily driven by Mulgrave in Melbourne, but not totally, and of course, we would expect that to continue to be material, but unwind somewhat as we're assuming we don't have any more COVID cases in our warehousing going forward. The rest, I think, are pretty straightforward.
The one difference for us, I should call out, is we have the size of our team discount, and we are running an extra 5% team discount for our team, and we'll run that to the end of Christmas. We feel good about that. We think it's the right thing to do. It is perhaps different to how other people count these things, but that's well, you can see that AUD 25 million there. Once you wash through recognition payments, they're slightly up from where we were on Q3. But that is I suppose you could say a more discretionary investment, but one we think is really important for our team at this stage. But you know, we feel in a good position on those costs. We feel we've got the right settings for Christmas.
You know, and if, if we continue to see limited, you know, community transmission, we do have some options to reduce that ever so slightly, but we'll take a very cautious approach to it.
Okay, that's fair. Thank you. And then my second question is on inflation. I mean, everyone's numbers are different, but to be fair, we've seen a similar moderation from you, from Coles, as well as ABS Food CPI. Can you just give us some color on what the biggest drivers of that, you know, deterioration, if you like, in inflation are? I mean, you've mentioned promotion, you've called out a few categories. I guess I'm just a bit surprised that in this environment, on your measure, inflation, ex tobacco, has gone negative again.
Yeah, look, I'll make some comments and I'll get Stephen Harrison to make some as well. It would be fair to say in the markets that we're operating with at the moment and the volatility, it is probably as messy a series of analyses as you can do, and we've pored over it, as I'm sure as everyone else, but it is incredibly volatile what is going on. So, I think that's an important caveat to make. Clearly, one of the most important issues is we have full promotional programs back in place inside Woolworths, and we started to put that back in June, but you're seeing that now run through the business, and we thought that was important.
We're conservative, concerned about delivering value for our customers, so that's been, you know, a big issue for us. Interestingly, as well, some of the lines that we were very short on supply, we now have sufficient and we can go back into promotional plans with the particular call out, you know, the whole hand hygiene sanitizer. We can all of a sudden start promoting products that were very short supply before, so we are rotating back into promoting those, which we think is legitimate, and there was a point in time where, you know, where we couldn't do that.
Clearly, as you see in our numbers, there were some benefits of tobacco, not only in the excise increase, but the fact that we had a decent tobacco sales, in particular in Victoria, with the closure of the tobacconist. So there's been a lot going on. On the inflation side, there has been inflation in fruit and veggies, as you know, and that has then been somewhat offset by some deflation. In particular, I would call out impulse and then health and beauty, which is where we've got the sanitizer example I called out. The fruit and veg increases really are just basic supply and demand. The item that had the highest cost increase for us in an inflation sense was actually in avocados.
The WA avocado crop was large avocados, as it turns out, but at a limited number, and therefore, there's been a bit of price pressure that we'll work on for the rest of the year. The impulse one actually has just been a success on our promotional programs, have been very strong and very successful. We actually had a very good Halloween in impulse as well. So there's been a lot going on, and I'll talk to health and beauty. But Steve, it is a very messy science, in truth, at this time, given everything we're cycling. I don't know if you would want to add anything.
Just a couple of small builds. Firstly, I think our RED program, so our Drop the Noise program, you know, as we came into better stock availability, we did see some improved penetration on those relative to prior periods. And I think, you know, the other thing we look at, you know, quite closely is our promotional metrics. And interestingly, you know, promotional count was down year-on-year. Promotional depth was pretty consistent year-on-year, but actually the percentage of sales in promotion was, you know, increased certainly versus Q4, you know, partly due to that increase in promo count.
But just the effectiveness of promotions actually, and I mean, some of the impulse numbers are a bit messy, but we're cycling some lower impulse penetration last year, and they came back pretty much to normal levels. Those would be my adds.
So, yeah, I mean, you can see that it has softened, but I think there's just been a lot of noise, and I think, you know, we'll get a much cleaner read of it as we trade through the rest of the year. As we said in the last quarter, there has been cost input pressure in general across the business. In general, that has been passed through in the form of shelf prices, and I think what you're just seeing is a lot of mix and promotional noise around that at the moment.
That's very helpful. Thank you.
Thank you. The next question comes from Aryan Norozi from UBS. Please go ahead.
Hi, team. First one for me, just around what you guys are doing to retain shoppers post your collectibles program and how successful you've been, particularly for the bigger basket shoppers, please?
So post which program? Wish or-
The collectibles, the Disney one.
Yeah, sure. Let me make some comments and then, Claire, if you wanted to jump in. I think what's quite important when you look at our results is to remind yourself what we did last year. And in essence, last year we had quite a unique Q1, where we ran almost back-to-back collectibles programs with Lion King, which at the time we talked about as our most successful collectibles program, Lion King. And then with a one-week break, we went into Discovery Garden, just the time of year when people needed to get pots to grow plants. And so we had two in Q1 last year, and they were both very strong. One more sales than the other brand, but in aggregate, very powerful.
And in fact, last week we were just cycling the final wind out of Discovery Garden. This year we did one program, which was Disney+ Ooshies, and really that one. And when you look at aggregate numbers, and particularly when you look at our two-year comp numbers, we sort of use that to cycle the two very powerful programs of last year into. So sort of a, in the parlance of the industry, it was a two for one. So it was a like for like and very much a wash.
In terms of customers, one of the issues with every collectible program, and that's no different to Lion King or Disney +s, where that's not a brand within one like a Discovery Garden perhaps is, is how many of those customers you can retain, going forward. That'll be the question really, that we'll need to- that we'll challenge ourselves now, given that Victoria only just came out of Ooshies. So it's still very early days in that journey. But, you know, Claire, any insights from you?
Yeah, I think my two builds would be obviously we know the particular campaign overindexed, particularly to young families, and we set ourselves a goal that for going into Christmas, knowing where it was gonna be around affordable, wanting to ensure that our value customers still got a great deal. We do in fact have another collectibles program, which we'll launch to market next Wednesday, which is an ability for customers to collect tokens and be able to participate in the glass containers. Which we know actually from when we talk to our customers, whether it's the themes we're trying to focus on, it, it is that budget consciousness, it is that festive season, it is about the food waste, and it is about summer entertainment.
So we feel that, that will encompass that same group of customers that we did see participate heavily into, our Disney + program. And probably the last umbrella I'd say is, Save for Christmas being very relevant for this year, particularly for our rewards customers and where we launched Save for Christmas back in July. Again, we're seeing pleasing results for the number of customers who have switched into Save for Christmas, ready to, be able to obviously spend that, across all of the banners come December.
Thanks, Claire.
Perfect. And, and second one is, yeah, I mean, in August, you mentioned, for the sort of cost out and Simpler for Stores program, there was no sort of, plan there, given you guys were busy with COVID. How, how have you sort of tracked with that? Is that - have you started any programs around the Simpler for Stores?
One of the highlights for me as the full year, and I think it's a good, it's a good question we called out, and it continues to be an internal highlight for us at Woolworths, is we have continued to be able to hopefully keep focused on the customer and trading, but also progress our broader set of strategic initiatives. They're not perfectly on track, as you might imagine, given all the, you know, the risks and challenges we've had, but they continue to progress. And that's no different on simpler. For us, it's not quite where we would have budgeted it to be, but it's actually progressed materially.
And I think, you know, the fact that we've managed to progress it in parallel with everything else, I think is a real positive for us. So, you know, we're very cognizant that this is a 12-month game, and the second half will be particularly challenging as we get into cycling the numbers of last year. And so we're continuing to progress our simpler program, and it's something we will talk about at the half year.
Perfect. Thanks, guys.
Thank you. The next question comes from Bryan Raymond, from Citi. Please go ahead.
Thanks, guys. My first one's just on the COVID costs as well. Just looking at the profile from the first eight weeks that you gave at the result for the last six weeks, it looks like the overall costs have come down about 20%. But I've just noticed in terms of the composition of that, staff costs are up a fair bit, and cleaning and PPE are down quite a lot. I would've thought cleaning had been pretty sticky, and staff costs would be moderating. I just wonder if there's anything going on with the Victorian lockdown and more staff needed there. Can you just help us understand that? And then maybe just the outlook into 2Q 2021, whether we would expect that to continue to fall.
Thanks, Bryan, and I'm gonna use my prerogative to ask our CFO to talk to that question. They have continued to step down, and there are clear reasons. The PPE one, I just call it, we put in a lot of cost up front on things like masks and things like that. So, you know, we've costed, we've expensed those kinds of things, so you would expect that to step down. Our cleaning regime is certainly not stepped down, and we are continuing to invest materially in cleaning. Steve could talk to the team cost, but some of the work our Victorian team have applied in South Australia around Health Ambassadors has been really powerful for us and Health Marshals . And we like that program.
We think it keeps our team safe, so we're looking at continuing with those and finessing them. Perhaps not having them all the time, but at peak times of day and night, that'll be a big driver. But Steve, any points?
Yes, so just on your point on cleaning, Brian, at a store-by-store level, it's pretty consistent, but I think the thing that drives some spikes is if there's any hotspots. And so, you know, you would've seen slightly higher costs on cleaning in that first eight weeks associated with the closure of our CFC in Melbourne and with Footscray. Some of the stores where that were in hotspots and also the Mulgrave DC, which would've seen some spikes in cleaning costs in that first eight weeks. And I think more generally, on all the costs, and this applies to team costs as well, you know, it won't be surprising to you that a lot of those costs are driven by Victoria.
And so, you know, we're constantly looking at what is the appropriate setting in terms of the right team to manage customer and team safety. And where we can, we look to wind those costs down and reduce the hours, but it is very much on a store-by-store, case-by-case basis. But you know, I think the general point, and you know, consistent with Brad's comments up front, you know, our goal you know unashamedly is customer and team safety. We will look to mitigate the cost as we can, but not to the point that we would compromise that customer and team safety.
Right. So just to follow up on that, so the staff measure that weekly run rate of staff costs, now that Melbourne has sort of reopened and things are hopefully for all Victorians on the call starting to get back to normal, would we expect that staff component of the COVID cost to moderate into 2Q 2021?
Yeah, as said, Bryan, I think one of the key things to me is we're still gonna run Health Ambassadors, depending on, with the volume of trading we expect between now and Christmas. We are still gonna have a lot of interventions in our store on a whole series of additional roles that we provide. You know, whether it's we have to do, the count to make sure we've got the right number of, capacity of team members in the store, or we have, making sure we help direct, team, customers through the checkout and so on.
So, those costs will become more volume- related to make sure we are COVID-safe in our distancing in our store and more flexible, but will be driven by our view of how big Christmas trading can be and the risks that that could pose for us if we don't continue to be diligent. Steve, anything else you'd-
No.
No. That's great. And then just my second question-
Are they more under control? Yes. Is it more forensic? Yes. Are we getting more automation and more learning on the way through? Absolutely.
Excellent. And then just my second question is just actually on Hotels. I noticed you didn't give a like-for-like fee or a comp number this time. I understand there's more closures there, but just interested in how the hotels that are open are trading. I used to like just to get a feel for how that might progress going forward, given we're starting to see some early reopenings now in Victoria and things, I think, picking up over the next from the ninth of November. So are we seeing sort of positive like-for-like growth in those hotels that are operating?
Yeah, look, I'll make a high-level answer, and then I'll get Steve to elaborate. But given every state has different rules and we've had different hotspots and up and down, it has been, it is incredibly complex to actually just distort. But in aggregate, actually, Queensland has held up very well, which is not surprising. And New South Wales has been a bit more challenged, which again, is not surprising given the waiting in Sydney and some of the COVID hotspots we've had and the different regulations we've had. WA has continued to motor along through, and we've had an up and a down inside South Australia. So that has been sort of the broad trends.
When we open on the ninth of November in Victoria, the issue we've got is the capacity constraints we still need to operate in, not only in terms of number of people allowed in the venue, but then only a quarter of them are allowed into the gaming room. So there's sort of a double capacity constraint in the process. So I until it opens, it'll be hard to tell. One thing I will say, when we reopen venues, say, in New South Wales, you get a real bump, as you might imagine, in the first couple of weeks anyway, as everyone just is so you know happy to get out and about, and then it sort of does tail off. So there is an up and a down that also needs to be factored in. But Steve-
There's probably not a lot to add to that, Brian. I think you've covered it well. Other than to say, for example, in Queensland, when-
the COVID rules shifted from everybody having to be seated to consume a drink versus being able to consume a drink standing. It does make a material difference to bar sales. So it's every little incremental change of COVID rules that make a difference to the performance of hotel.
But, you know, we do find that people, if they have a choice, would like to go out to a venue. We do find our venues are, as with, you know, freestanding supermarkets, tend to be more suburban with a lot of space around them, in particular our, you know, our beer gardens and our outdoor drinking areas. So we do find that it can work if you have the right series of restrictions lifted on you.
Okay. Excellent. Thank you, guys.
Thank you. The next question comes from David Errington from Bank of America. Please go ahead.
Morning, Brad. Question I've got is sort of like a very broadish type of question. But you've highlighted consistently now over the last six, 12 months, that you continue to increase capacity online in, in I suppose, response to the very significant increase in demand. Can you talk about what you actually mean by that increase in capacity? What do you actually do? Is it variable capacity that you add? Like, is it more drivers? Is it more picking ability? Or is it actually more efficiency type, or is it more opening more CFCs? What actually do you mean by increasing more capacity, and how easy is it to continue to increase capacity?
I suppose where I'm going to is where are you at in terms of, you know, in capacity utilization and how easy it is to add to capacity? You know, sort of where do you think you could get to? You know, you're at 8% of sales. Could you comfortably go through 10% of sales before you need a monumental step change again? Where are you at, actually, in terms of that capacity?
I think it's a great question, David, and I'll start, and then I'll get Amanda and Natalie to add. But essentially, just if you think about capacity, which we do, which is windows that you can place an order in, either to do a pickup or get a home delivery or do an on-demand delivery. So you just look at theoretical windows, and I think we've gone from 250,000 theoretical windows a week to 750,000 windows a week. Now, they're not all taken because they're not always at the right time or day or week or particular service, and certain days or time of day or same day tends to be sold out.
So there's still a lot of noise in that, but it's sort of essentially we've tripled our capacity to our customers, but we're still sold out in certain very key pinch points, and we're working hard to resolve them. And that's pretty amazing in really twelve months to have done that. That's a year-on-year comparison in number of windows. Now, what we found within that from where I sit, and Amanda and also Nat, because New Zealand has really led the way for us and shown how much can be done by our existing assets, is that we've managed to square our existing assets more than any of us could have anticipated twelve months ago.
If we talked about what we said we could have done via our existing stores 12 months ago and what we're managing to achieve, it's orders of magnitude higher. That's just because I think we're becoming smarter on how we route, how we manage the in-store customer and not and make sure they get a great experience inside the store and so on. So it's been a whole series of learnings that have been forced on us by the fact we've needed to use our existing infrastructure and not rely on investing outside of the store in a manual CFC or an automated CFC.
That said, our three manual CFCs, which we've been operating for at least a year, which are, you know, Brookvale, Mascot, and West Footscray, have all we've proven to be able to essentially double the capacity out of those two. As we've just become smarter at thinking about how we route them. That's gone up and down, depending on COVID safety practices, of course, but on a like-for-like basis, we've just become much smarter at operating those. So it's been a massive learning for us of what you can do when you need to do it. But, you know, Amanda, I don't know if you want to talk about Australia, and then, Nat, come back into the New Zealand experiences.
Yeah. Thanks, Brad. Look, I think that's exactly right. So I think COVID taught us that there's a lot more opportunity in our stores, and that was one of the really, frankly, exciting unlocks of the last four or five months, has been to say that each of our stores, we went back and reviewed very carefully with the supermarket team, and really on a store-by-store basis, can work through how many additional orders can we actually serve to those customers. And so that's been one area of unlock. Then actually you overlay that with a whole series of different rostering approaches that the team have taken as well. So rather than it being two picks a day, it can be three, et cetera, and so that's unlocked another level of capacity.
You start to also think about the time in which a customer's placing an order. The faster turns that you get in terms of turning those orders around, you can actually get more capacity out of your existing store units, and the same applies for CFCs. The only other add I would include there is also, of course, we're looking at variable components to this, so there's team, there's fleet, but then also the crowd for us has been a really great unlock as well, because that's another way that we're servicing our customers out of our existing assets.
And then, yes, the Takeoff unit for us will be a really interesting exercise in efficiency and a new way for us to pick orders, very much attached to that store experience as well. So, there's a whole series of things happening. One is around capacity, the other is around efficiency, and then the third, I'd actually say, is around the way that we're thinking about partnering and providing that last mile is important as well.
Thanks, Amanda, Nat? Is there anything you'd like to add on New Zealand?
Yeah, I think, as Amanda and Brad have said, we've definitely been looking at how we increase capacity in our stores, and that's largely around staging. And then also, when customers come to pick up their orders, where do we have the orders for the customers to pick up, so that it's easy for our team to actually get that to the customer quickly? So in New Zealand, we've only just opened our first dedicated eStore in Auckland just during the first wave of COVID. So we've heavily penetrated our store network in terms of home delivery capability, and we continue to look for opportunities to do that in New Zealand. I know we've looked at Lotto rooms at the front of stores, which we've turned into pickup rooms.
And I know I've seen in the last few weeks in Australia we've looked at meat preparation areas, locker rooms, and tried to convert those into e-com capacity. So I think we'll continue to do that on both sides of the Tasman, and then obviously in parallel innovate our service proposition. And it's really exciting to see the acceleration in Drive in Australia and all the work that's been done on same day on both sides of the Tasman. So there's work to be done and more opportunity on both capacity and service optimization.
So, David, you normally lead off with the CapEx question, and I look forward to that, of course, after the half year. We are spending CapEx in this area, and essentially what our format team are doing is going back to every store, looking at the back of house, as alluded to by Natalie, and looking at how that back of house can be repurposed. And as I say, when you don't-- we no longer have meat preparation areas have proven to be incredibly valuable, as space for us to stage our chilled product, in particular for home delivery. And invariably at the back of our stores, in many of our stores, there's additional space that we can either rent or we're not using today, that we can repurpose today.
So, we've learned a lot through it. There is CapEx involved, but in a relative sense, it's relatively capital light if you're using your store network to open capacity. And that's why it's our first port of call. And then, as you would be aware, and where we can't do that, that's when we move into having manual CFCs, and we have the three that we are, you know, doing a much better job of operating, but we actually have had to stand up another one, another two, hopefully will get stood up before Christmas. We're taking the learnings out of the manual ones and putting those into the other manual ones when we open them, which is really terrific.
Then, of course, the third leg is automation, which is a longer-term play, which is more capital intensive, but we'll learn a lot out of our Takeoff units. You know, the first one is two weeks in. Hope that makes sense.
Yeah, I love that phrase, "sweating the asset" with what you've got, Brad, and driving increased efficiencies. And I love that phrase, and please take on notice for February, because I won't ask it now, but I'll be asking the question. There shouldn't be much dilution in margin, given what your team has just really, you know, wonderfully put forward there. So please look forward to that question in Feb. The second question I want, this one will be a quick one. In terms of Big W, you highlighted leisure and toys as really stand out, and I think the big performer here, Big W, and even liquor, 20% up, they're fabulous growth. Are they sustainable? What's going on in those areas, particularly, so let's just target Big W, leisure and toys.
Is that because of COVID lockdown that people are buying up ? Cause it, it looks like it's continuing even post-lockdown. Is it just fantastic execution of your team? What's going on there? Because it's a really pleasing number.
Yeah, I'll make some comments and allow Dave to walk the talk to the detail. I would say , i t is leisure and toys, but also hard and soft home. And I think that's really important because it's basically there's not one category that's driving our business, there's a range of categories, and I think it's really important for us. And hard and soft home is a really important categories, you know, if you think about how the shopper will shop at a discount department store. So it's very broad and multifaceted, which is the pleasing thing. The highlight to me is the number we called out, which is more people are shopping us than have before.
You know, the first stage of our turnaround at Big W was to do a better job of holding on to our existing customers who we found were leaving us, and we've talked about that before, and we managed to stem that. Of course, once you've done that, then the question becomes how you get more people back in to see all the hard work you've done to improve your business. People who were non-core Woolworths or Big W shoppers had a very negative NPS view of the business, a lot of non-core detractors. If there was one benefit that happened to us in COVID, it is that a number of people who hadn't shopped us came back, and what they found was something they liked, and they started to shop us again, and that's why you see transactions grow.
And so if we continue to provide a good experience, we're hoping that a lot of these non-core shoppers, of course, will become core shoppers again, and that will give us sustainability to what we're doing.
But so that's a very macro view, Dave. You'll have a much more precise view of it.
Thanks, Brad. I mean, David, we run our business thinking about our different categories and how they perform in different levels. You know, we think about a number of our categories being destination categories, which give our customers a reason to come and shop with us, to walk through the front door. Then from there, it broadens out in terms of what they can get, because you know, we're effectively a one-stop shop for a lot of things related to kids, families, and home. You know, certainly through COVID, we've seen customers adapting their behaviors and their needs, and you know, we really fit that well. It really comes down to you know, over time, will that focus on kids, family, and home change? I think it'll take some time.
I don't think it'll diminish quickly, but we'll see how we perform in time, but it's certainly, you know, the categories we called out, toys and leisure, but frankly, it's anything to do with kids, kids' apparel, books, and anything to do with home, as Brad says, all the, you know, soft furnishings, kitchen, you know, small appliances, it's reasonably consistent growth, right through our whole offer. There's a number of areas that aren't going so well. We're not selling travel as much as we have done, for obvious reasons. But certainly anything that's kids and home related are performing strongly.
The other point I'll make from Big W is it's striking how consistent the growth rate is across the network. And of course, Big W didn't benefit from what happened to Victoria in the lockdown. It's had the converse effect as with our venues, but there's really good, strong, consistent resonance across all states and both urban and regional. So that's been a highlight to say that actually something more systemic is happening in the business. That's been the case.
Yeah. Thanks, Brad, and well done to Dave on turning that business around. You know, two years ago, we were. It was looking pretty dire, so well done to Dave for doing such a great job. Thanks, Brad.
That's why we thought he could be the Chief Risk Officer. He,
Yeah. You know, I'm not sure about that one, but anyway.
Thank you. The next question comes from Grant Saligari from Credit Suisse. Please go ahead.
Good morning, Brad. Just want to circle back to Hotels just quickly, if we could. Just in terms of the performance of Hotels at the moment, are Hotels operating at practical capacity given, you know, the various constraints they've got in different states around Australia? And so I guess what I'm asking is, is this as good as they can get without further changes to some of those operating constraints? And just also interested in the performance of gaming. You called out food and beverage being relatively stronger. I was just a bit surprised that gaming wasn't perhaps ahead of food and beverage.
Thanks, Grant. And look, again, I'll make some comments, and Steve can get into the detail. It is a very hard category because the restrictions vary quite materially by state, and then they're continuing to change over time. And Steve made the point that, you know, when you're allowed to stand up in a bar tomorrow, you know, you just get more sales because we're social, you know, being forced to sit down, you know, causes impact. And so it is moving around a lot. Look, it isn't as good as it gets. We think we can operate our venues COVID safe and have a materially better performance than the one you see today. We can see that very demonstrably in Queensland, where we're certainly not being cavalier in what we're doing.
We intend to lead on being COVID safe. And so, no, we don't think we're at that, you know, level yet, and that applies across all aspects of the venue, Grant, whether it's, you know, bars, food, accommodation, or gaming. So we think there's a long way, but it all requires these definitions around COVID safety. You know, when it strikes me at the macro level across our business, one of the challenges is when there are very, very crude rules put on you, which are maximum capacity numbers and all that, which we've had on our warehouses or our stores or in our venues. These are understandable, but they're the most draconian of all because they're not about COVID safety. They're just about, you know, a rule of numbers.
And so those ones are very challenging. When you get to more just applying COVID-safe practice, with whether it's distancing in store or, how we manage our shifts in a warehouse, then you get into a much more sustainable rhythm. And when you get there, the economics can look a lot better than they do today. Although, as we called out, ALH was profitable in Q1, despite the very draconian situation we had on Victoria, which is actually a very strong performing part of the business, as you would know, including in gaming. Steve, any comments from you in particular on the gaming front?
I'd excuse me give you the example of in Queensland, we can only have one person in every two square meters, whereas in New South Wales, we can only have one person in every four square meters, and there's a stark contrast in the performance of those two hotels in each jurisdiction. In Victoria, from Monday, we'll be able to have 40 people in the hotel, and we have some quite large hotels in Victoria. As that evolves over time, as it no doubt will, that will change the performance. The only comment on gaming is it was a relatively marginal gap between food and bars and then gaming. So it's not a massive step to gaming as the third category.
Yeah. They're all very pretty proportional actually, when you look at it, Grant, in truth, when you wash out different weeks and months, you know, you look at it over a quarter, you know, traffic is in a venue just like it is in a store, is monetized pretty equally across for me.
Okay. That's helpful. And just secondly, on Hotels, do you still have significant numbers of people stood down across the network given the lower operating rates? Or are basically your staff back to being employed on full-time or part-time basis?
There's a difference to what we've had in the venues, and which Steve can talk to, when they've been shut in Victoria, which is later than using the rest of Woolworths. The rest of Woolworths, we have still had a series of at-risk team members that we've paid to stay at home, and we've you know, we've given our team the option of doing that. Please, someone correct me. I would have said there were probably about 250 of the Woolworths team that have still elected to stay at home. And we encourage them, and we're certainly not gonna pressure them to come back to work if they feel uncomfortable or vulnerable. I think that's the number. I think that's the number.
It started at 2,000, and it's come down over time to, I think, about 250. That's a very different situation to the one we've had in Victoria until, of course, the month of September, which Steve can talk to.
Yes, so we've had in excess of 2000 team members stood down in Victoria for Hotels, but obviously there's a lot of team in the venues at the moment getting reorganized to open this coming Monday. I think we'll need to regroup next week and understand what the net impact has been on that 2000+ people.
Yeah. Okay, that's helpful. Thanks, guys.
Thank you. The next question comes from Ross Curran from Macquarie. Please go ahead.
Hi, team. Thanks for taking questions today. I was wondering if you might be able to unpack, on a state-by-state basis, the sales performance of Australian Food. Are you seeing WA and South Australia return back to sort of pre-COVID levels of comp growth?
Thanks, Ross. There clearly has been a sales, you know, we don't obviously break out our state performance. There clearly has been a differential in growth rates by state with Victoria in the lockdown. You know, we were called out at the 20%, and then you step into, you step down. But what has really struck me as I look at the quarter is we've had elevated levels of growth, strong elevated levels of growth across all of our states. And of course, each one will have its own slightly different narrative to it, but that's been one of the highlights that always in our business. I feel like our business has been very consistent across the quarter, and that includes in supers and across the state.
So clearly, more elevated in Victoria and in some parts of New South Wales with the lockdowns, but actually quite consistent, but at a slightly lower, a slightly lower level. So we'll see how it all steps down going forward. It's still very early days in the unwind of the Victorian lockdown and, you know, everyone, whatever the right expression is, was a bit demob happy last week. So, you know, a lot of people understandably probably went out and about, so we'll see what it steps down to. We think in aggregate, as we called out, we, we stepped down into the high single digit, but, you know, that is a, it's a very imprecise science, as you might imagine.
Thank you. And then just secondly, around voice of supplier, I was wondering if maybe if there's any performance gaps between, say, the food business and Endeavour, over the quarter?
Voice of the Supplier, one of the highlights, which we don't call out in a lot of these documents, but in general, our Voice of the Supplier scores across Woolworths Group have been incredibly strong. They have record scores, I think, going back to 2007 in supermarkets. Big W just had the best scores we've ever had. Endeavour had actually quite split scores, actually, interestingly enough, Steve, if you don't mind me mentioning.
Our support for smaller suppliers, I thought we did a very strong job, but some of our bigger suppliers felt slightly less so, and there were learnings that we've taken out of it. So it was a bit more of a two-speed series of Voice of the Supplier feedback. But, you know, as always, they help us calibrate where we are, and Liquor has traditionally led in Voice of the Supplier, so it's been quite a good experience for us to find, you know, take the learnings out of that.
But records across the group, some lessons inside Endeavour, and I think I'll just call out that we find the food ones have been very important to us, in particular, as we look forward to the review that is gonna be in the new year with the ACCC in the fresh categories. So it's really nice to be in the right place there.
Thank you.
Thank you. The next question comes from Andrew McLennan from Goldman Sachs. Please go ahead.
Good morning, everyone. Look, I have a couple of quick ones from me. Just in relation to the timing of the Endeavour Group demerger. I know, Brad, you had aspirations, I guess, for a potential demerger mid-2021, and then immediately after your results, we had the extended lockdown in Victoria. I'm just wondering, is that time horizon possible at all now?
Well, you know, Andrew, as if most things are imprecise, and this one is particularly so. Our plan of record is still to explore it in calendar year 2021. Of course, it will all be dictated by community transmission of COVID and what happens at a state level. So, you know, that is our plan of record. You know, but from where we sit, we are just focused on opening up our Victorian venues, trading Christmas in a responsible and COVID-safe way, and then we'll review in the new year. So no more information. As you know, the creation of Endeavour Group was a three-step transaction. A lot of work has already been done to create a separate entity to merge together ALH and Endeavour Drinks.
A lot of the work done to explore the demerger is already in place, but, you know, we'll just have to wait to see how things play out in the next couple of months.
Sure. Okay, thanks for that. And, I'm not sure this is gonna be a tough one to unpick, but, the shop local trend looks like it's been beneficial for your network outside of the metro stores immediately. Now, when we think about the progress or, or the, the expectations for the second quarter, I think for at least part of the second quarter, you were impacted in your regional stores, et cetera. I'm just wondering if you could just sort of explain where the ± are likely to be from a store network perspective in the second quarter?
Thank you. There, as you rightly pointed out, there are always ± , and the stores that we most impacted for us are our city stores. We've got some big traders, as you know, with Town Hall and, and Queen Vic in Melbourne, and then all of our small metro stores, which have really been on the transportation hubs. So those have been very negatively impacted, and hopefully, at some point will come back. In terms of our broad supermarket fleet, it would be fair to say, based on the analysis we do, that we're slightly more indexed into freestanding or neighborhood stores than, say, Coles. But we're way less indexed there than Metcash would be and the independents, and in many cases, Aldi.
It's not clear that we are, you know, that this is a major source of strategic advantage for us or what strikes me is we've got balance across our fleet and where we are. So, the neighborhood and freestanding stores have clearly grown more than our mall, whether it's regional or super malls, but we're slightly seeing that adjust actually, and we expect that to adjust over the rest of the half, and we expect to see a little bit more balance in there. But I think it comes out in the wash, as I say, for us. And specifically on resort stores, we called out last year, and that one really was a Q3 issue for us, very indexed into resort stores, in particular in New South Wales.
You know, the challenging bushfires clearly impacted us there. We'll get an opportunity to cycle that this year, which I think is good. We'll see what the weather's like, by the way, which is very inclement, as I'm sure you know. So that might give us a little bit of advantage. Claire, I don't know if there's anything else on the Metro stores you think is worth?
No, I think we're looking very carefully at accommodation, rates, et cetera, and it would be safe to say with obviously, you know, a significant more proportion of customers remain in Australia, there is clearly a net positive there for us. And, you know, our replenishment teams will be looking very carefully at those sellout rates for accommodation. We learned a bit during the September school holidays around where people did go, even with all the closures. So we would expect from a relatively weak last year resort store season to have a stronger one this year.
Thanks. Can I just follow on with that, if possible? Are you using sort of, data analytics in that regard when it comes to your locational analysis, screen scraping, accommodation sites, or how are you getting your information?
Yeah, no, we do link in on accommodation and also weather. So our replenishment system will be linked to weather forecasting, because degree does make a significant difference in some of those key categories. And then we do work very closely with a number of key accommodations to understand sellout rates, et cetera, so we can then again, obviously move that stock around where we need to.
Gotcha. Thank you.
Thank you. The next question comes from Ben Gilbert from Jarden Group. Please go ahead.
Morning, Brad and team. Just a question from me. Just interested in, as you're looking at the strength of sales and presumably generating good cash for the business at the moment, are you using this an opportunity to accelerate some investment? And I ask this because you've obviously given some pretty good color around things like COVID costs, sort of halving in terms of rate of sales. So intuitively, should be a lot of leverage coming through. You know, I'm just thinking back a few years when we've had similar rates of strong sales, but there's been other periods of investment that we just didn't know about. So how are you thinking about that sort of through this period in terms of driving leverage to the business as opposed to reinvesting for the long term?
Ben, Steve here. Brad, Brad's just stepped out of the room momentarily, so I'll take the question. Look, I think the topic we've talked about in terms of where we want to and see the opportunity to invest is in e-commerce and both the customer experience but also capacity. So Brad's talked a lot about capacity. But I would say e-commerce and digital are the places where we've been consciously investing. Those were in our base plans at the start of the year. I don't want to comment on profitability or flow through, but I think that's the clear space for us where the opportunity exists.
You know, actually across each of our businesses, that digital engagement, digital interaction as the front door, I think, is what the U.S. retailer calls it to our store, because it drives traffic into the store as well as traffic into the e-commerce side. Those would be the two spaces. Brad or Amanda, I'm not sure if you'd add anything. Ben's question was, you know, where are the places we think that we may be investing in light of our strength of sales? I mean, I think Amanda can talk to it's a capacity that we just need to kind of keep pace with, but it's in our plans, I would say.
Yeah, and I think, the only thing I'd add to that is to say that, and Natalie touched on this, as we're going through and looking at format development in each individual site, actually what we're doing is taking another really hard look at how we're utilizing capital in each one of our stores. And then if there's over and above investment needed to supplement that, then we consider it. But really, the big move has been on utilizing that capital as we're going through the refurbishment process.
And I think, Ben, we called out, you know, a capital outlook, as part of our full year results. And so what we're talking about is within that envelope and that step up on e-commerce investment.
Yeah, so a lot of those costs are intuitively sort of embedded in the base. And I think, too, Brad talking about sort of Mascot, the dark store, you can start to fractionalize that more. So there should be some leverage coming through, I suppose, for the first time in a while?
We look forward to telling you about it at the half, then.
We're very sensitive to showing a bit more detail on our e-commerce business and our profitability, and that's something we're working on. We can't commit to it, but we would be looking to show a bit more detail as we go through the half on the economics of that portion of our business.
Okay. Thanks very much.
Thank you. The next question comes from Phil Kimber, from E&P. Please go ahead.
Hi, guys. Just a question on the adjacencies revenue. I think it was up 6% in the quarter. You know, last year, it was up 10%. Was that in line with your expectations in the first quarter? And maybe, is there something that's a little bit weak within that area that's moderating growth?
Phil, you know, we're still working through how we categorize, you know, everything at Woolworths. But no, t here's nothing really there. The major thing that slowed down for us really was our export business. And I think that's for understandable reason. You know, ourselves and others are relatively. Well, there's been a lot of growth, and, you know, we've had a decent size meat export business, and that's just been a much more challenging quarter, given the pricing of Australian livestock relative to the US and South America and so on. So, no, really just mainly around the international business. But there's nothing else I'd really call out.
In fact, you know, if you looked at our insurance business, actually, you know, there's been quite a big change in mix. You know, pet, car, home, actually, not doing badly. Travel, of course, has disappeared, so there's been a kind of a bit of a mix, but actually, call it out as not been in a bad place. So no, no, nothing profound I wish I could say.
Sure. And then secondly, just, I mean, you mentioned specifically in your outlook, Hotels was profitable in the first quarter, but materially down on last year. I'm not sure if you can give any more color. I mean, is it barely profitable at the moment 'cause last year, I think in the first half, you made AUD 250-odd million bucks or something. Sorry, AUD 224 million. So I just wanted to get maybe some direction as to whether it's, you know, you're doing your best, but it's barely profitable at the moment, or it, you know, it's just a lot down on last year, but it's still a decent amount of profit. In dollar terms.
I don't think we can give a lot more detail. I mean, Steve, Stephen Harrison, did you wanna?
Yeah, Phil, I think the reason we called it out was twofold. Obviously, we were loss-making in the fourth quarter, and it was a big drain on earnings in the second half, and so we did wanna highlight that with the reopening of most states, with the exception of Victoria, we had moved back into profitability. But, you know, as you'd expect with a 33% odd decline in sales, there is a degree of deleverage that occurs in our Hotels business. And so it's fair to say that earnings is down more than sales are down, and we just wanted to signal that shift into profitability, but just, you know, manage some expectations there.
Yep. Perfect. Thank you for that.
Thank you. The next question comes from Scott Ryall, from Rimor Equity Research. Please go ahead.
Oh, hi there. Thank you very much. I was wondering, Brad, if you could just comment about, sorry, you've given a lot of really useful detail about sweating the assets and yeah, getting the most out of the capacity that you've got. Could you just look back and say, what do you think has actually allowed you to do that? If it's just, you know, great staff doing good work. But are there systems or technology that you really leaned on more during this last six-month period than what you've done historically?
I mean, I'll take a crack at it, and I'll let Amanda Bardwell add some detail. No, I mean, we've been continuing to invest in all of our systems at Woolworths, including in our digital and e-commerce side. Our ability to scale up for volumes in terms of having enough capacity in a system sense, never mind in a physical sense, has probably been the key highlight. You know, we've been breaking up our systems, putting them in the cloud, trying to make each part of the system scalable. You stop finding a series of bottlenecks, as you find in a physical sense; you find the same in the software sense.
So it's been this ongoing investment over time that pays dividends when you really need to rapidly scale. I think Amanda Bardwell pointed out a very important point. One of the things we've been trialing and had learned a lot from Endeavour Group was the use of crowd to do deliveries for us. And there's a difference between crowd and on-demand. Crowd can be used for on-demand, but crowd can also be used just to do a normal delivery. So it can be used in two different ways. And crowd has really helped us a lot, and we had sort of worked hard to get crowd integration, so we could really ramp it up, perhaps more than we thought.
Because it takes delivery off a back dock to the front of the store, and a lot of our stores have got back dock constraints, so you can push from the back to the front, and that has really materially helped us in a way that we would never have anticipated, but we always knew at some point we'd want to have a crowd capability. We just never knew how big. Now 550 stores, I think, whatever it is. So I think that's been a particular highlight. The other one, which I think is very important, is the continued reinforcement in our own mindset and in our own team's mindset on the digital platform. To us, that's the key, because digital is much more important than e-commerce.
And so, you know, the traffic you drive through this only partly monetized. We're trying to drive that. And last one from my, I guess, where I sit, would be, you know, clearly the apps are starting to work for us, and even the Woolworths green app, we get a very different experience in the app world than we would in the physical world, and we've seen that in liquor as well. But Amanda.
Thanks, Brad. I think you've covered it all. I'd just say we've been investing for three years now in our capability around digital and e-commerce. And so, you know, we came into 2020 with a much greater level of maturity, whether it's systems, whether it's our team, in terms of the way that our store teams and our WooliesX teams work together to unlock that capacity, whether it's with our partners and how we've worked with our various technology partners or crowd partners. And so I think actually it was a whole series of things that it wasn't just that overnight this happened. I think this has been a very long investment over the last couple of years that's given us a very solid platform.
Quite frankly, I think it's been some really great creativity from the team to think differently about how we unlock that capacity.
I mean, the good news is, and we've just done all our global benchmarking. There are so many things we can improve, which is very exciting. We're not gonna try and improve them before Christmas, but
Thank you.
We know we're just starting, really, and it's just wonderful to see the learnings that can be applied. You know, routing software inside stores is as important as it is for truck deliveries and how you actually can help it pick up be most effectively routed, how you can do smart substitutions to address the availability issues and many, many things that we still haven't managed yet to unlock in the technology sense in our e-commerce.
Just following on the comment you made about the Woolworths brand learning from Dan Murphy's. Is that still possible if you pursue a demerger of the Endeavour Drinks business and, you know, are attempting to effectively help them through your platform? Sounds like it was the other way around for quite a material piece of, you know, capability in the last six months.
Well, I mean, there's a difference between capabilities and learnings, you know, and the learnings from every business in Woolworths, from what Big W does in online, what we've seen New Zealand do to really open up capacity in the stores. To what we've seen with Dan Murphy's, that in particular, I called out, Scott, just in on-demand and BWS and on-demand and how you really leverage on-demand, or crowd, sorry, to do on-demand and other things. So those lessons and learnings are still all available to us if we continue to work in partnership, and that would be, that would be the hopefully what happened going forward, irrespective of across shareholding in the event we demerged.
All those lessons, learnings, capabilities are still very accessible. Requires a partnership mindset, but that's something we're working very hard on.
Thank you. The next question comes from Richard Barwick, from CLSA. Please go ahead.
Good morning, Brad. My two questions, one, one's on the COVID costs again. I just picked up on one of the points you mentioned. You said that you thought you know COVID-safe stores would be particularly important for customers come Christmas time. So what exactly are your customers telling you? And are you expecting to see some market share benefits on the back of this COVID-safe spending? Or in other words, do we think about this as just you know a sunk cost, or is this actually an investment in market share?
Well, I mean, we think everything is an investment in reputation and customer advocacy and team advocacy, and it ultimately all comes together. That's, you know, a fundamental belief. Our research from customers, and we'll see what happens at Christmas, I might add, is only a very small percentage of customers are looking to pull their purchases forward for Christmas in the categories in which we operate. It'll be very different for other more discretionary retail categories. Christmas is always a very busy time for us, but in the current market, it could be even doubly so if there's not enough pull forward, so we need to be ready that our stores can be as safe for our customers to come into when they're ready to shop, as possible.
And so, you know, we've done some really interesting things, you know, with our. We've got Q- Tracker, which helps you figure out how many customers are in a store and which store to go to, how busy they are. We're automating right now, customer counting in stores, so it can come up on a screen at the front of the store, so we can help you know whether there are, too many people and how many people are in the store, whether we need to just more regulate things. So we're investing in a whole series of, technologies and team expenses that we can dial up or dial down, but they mean that we can be COVID safe. So, we think that's key.
Now, we have deliberately, through the whole period of COVID, tried to take out the downside risk. You know, if we don't have any community transmissions, maybe a number of these investments will prove to have been us, been unduly cautious, but it's the right setting, we think, at the moment to say, particularly given what's going to happen at Christmas, particularly given customers say they're going to shop late, particularly given customers still say, at the margin, they will select the most COVID-safe place to shop.
Are your customers actually saying that? Are they recognizing that Woolworths is more COVID safe than the alternatives?
T o me, this isn't a competition issue. We know, but yes, our customers do see us as a very COVID-safe place to shop, and we want to continue to maintain that image in their mind. So that is certainly true.
Okay. And the second one, Brad, just on online, obviously, with you- you've talked about the increased capacity. Clearly, the sales are booming up 100%. You must be attracting a lot of new shoppers or new customers to shop online. What else can you tell us there, just in terms of is it led by, you know, actually new customers? Is it about existing online people who are shopping more frequently? How now that it's been in place for, you know, a number of months, this sort of elevated presence or elevated sales in online, how loyal are the people that you've attracted to shopping online?
Yeah, I mean, it's, as we said, with everything in the first quarter, it's been incredibly noisy, given all these moving factors, to really be very precise. What happened in the first wave of COVID, you may recollect, is a whole ton of people who have never used online started to use it. So a whole ton of new people were introduced to online, and what you're seeing in our growth is us being able to maintain key components of those people, as well as get back the team, the customers that we had unfortunately had stopped servicing as we serviced new customers in that first wave. So it has been through more people using online and it becoming more of many families' day-to-day way they shop.
We do know that they don't stop shopping in store, but it's just how it supplements it. So that's what's happened so far. If we do a good job online, customers can be more sticky. You get to know them better, you get to help them populate their shopping list better, you get to know more details on where to drop the groceries at the door, to make substitutions, and so on. However, the converse is also true. If you don't deliver effectively online, it's easier to lose the customer because they are more reliant on that experience. So it's a two-edged sword, in truth. But conceptually, more sticky, but requires a lot of hard work from the team to execute against it.
Thank you. At this time, we're showing no further questions. I'll hand the conference back to Mr. Banducci.
Thank you, everyone, for your interest, as always, in our business. It is 50 days to Christmas, and I hope you all feel the spirit of Christmas as much as we do. We're very focused right now on trying to make sure we have an affordable, safe, and enjoyable Christmas for all of our customers, including hopefully many of yourselves. Thank you very much, and speak to you soon.
Thank you. That does conclude our conference for today. Thank you for your participation. You may now disconnect.