Thank you for standing by, and Welcome to the Woolworths Group FY 2021 Full Year Earnings Analyst Announcement. All participant are on listen-only mode, there will be a presentation followed by a Q&A session. If you wish to ask a question you will need to press the star key followed by number one on your telephone keypad. I would like to hand the conference server to Brad Banducci, Managing Director and CEO of Woolworths Group, please go ahead.
Good morning, everyone, welcome to the Woolworths Group full-year results for the FY 2021 financial year. Given the current circumstances, we are conducting this call completely virtually today, so I apologize in advance for any technical difficulties we may experience. Stephen Harrison, our Chief Financial Officer, will be joining me in presenting our financial results a little later, and our other business heads are joining us on the phone. Today's briefing will include an update from me on our financial results for the year and our progress against our strategic priorities in FY 2021. Steve will present our financials in more detail before handing back to me to finish with an update on our current trading and outlook for FY 2022. Thereafter, we will be happy to answer any questions you have. Just focusing in on slide four.
Before I reflect on FY 2021, I would like to recognize the Woolies team and express my gratitude for their extraordinary efforts as we continue to be challenged by COVID and the more recent Delta outbreak. As I talk this morning, we have over 3,300 team members in isolation and three in hospital. Our team continues to work tirelessly to ensure we're providing a stable supply of food and everyday needs to the communities which we serve and continues to demonstrate real care for each other and our customers. I also want to thank our customers for their support and patience as we navigate an ever-changing set of challenges and for continuing to shop COVID safe. As a group, we remain firmly committed to operating COVID safe and ensuring we are doing the right thing for our team, customers, and communities, and by leading the way to make shopping safe.
We know how critically important vaccination is. I'm proud of the work we're doing to partner with the federal, state governments, and other food retailers to establish pop-up vaccination centers at our DCs, as well as increasing access to vaccines for our store teams. We've also revised our vaccination leave policy to ensure all of our team members can get vaccinated. We are clear that vaccination, supported by both PCR and rapid antigen testing and other COVID safe protocols, are essential to ensuring a secure supply of food and everyday essentials. Moving on to slide five and the summary of the FY 2021 financial year, which I must confess feels like a lifetime ago. FY 2021 was, however, a year of significant achievement for our business.
In addition to continuing to navigate COVID, we achieved a great deal during the year, with the most significant being the successful demerger of Endeavour Group in late June. We are now entering into a new era for Woolworths Group. With the caveat of the challenges of Delta in the next few months, I couldn't be more excited about all the opportunities we have in front of us. In FY 2020, we outlined plans to transform Woolworths Group into a more focused food and everyday needs ecosystem by building partnerships and delivering adjacent services and products for our customers. We've continued to make good progress on this plan, which I will talk about in more detail later on. The group's trading performance in FY 2021 was strong, with group sales growth of 5.7% and group EBIT growth of 13.7%.
FY 2021 was a tale of two halves, or more accurately, a tale of three-thirds, as we cycled the impact of COVID from late 2020 last year. H2 sales growth slowed as expected in our retail businesses, but all businesses reported sales growth in H2 and contributed to EBIT growth with the exception of New Zealand Food, which was impacted by subdued market growth. E-commerce was again a highlight in FY 2021 with continued operations, e-commerce sales growth of 63%. Sales penetration increased over 3% during the year to 8.5% of sales, driven by material investments in capacity and capability during the year. Moving to slide six. Operating sustainably is not only important to our customers and shareholders, but it is increasingly intrinsic to our business.
We launched our group sustainability plan 2025 with ambitious targets across the three pillars of People, Planet, and Product, focusing on areas where we believe we can make the biggest difference. There are too many things to call out individually, but I am particularly pleased in the progress we have made on diversity and inclusion during the year, including being voted the most diverse and inclusive company in Australia, according to Refinitiv. We have reduced Scope 1 and 2 carbon emissions by 27% since 2015 and removed over 2,500 tons of plastic from our products in FY 2021 alone. We recognize that there is much more to do, we aspire to act like a leader and speak up on issues that matter on the topic of sustainability. Moving to slide seven on progress against our three key strategic priorities.
I'll talk to slides seven and eight in parallel in tandem, which detail the progress against our key strategic priorities for FY 2021. I will call out some highlights which I think are important to reference. As we lived our purpose of being best together for a better tomorrow, we were pleased to be recognized as Australia's most valuable brand, according to Brand Finance, and Australia's most trusted brand, according to Roy Morgan in FY 2021. We also continued to support the community through direct investment of AUD 35 million, including support for The Salvation Army, Rural Aid, OzHarvest, Foodbank, and Lifeline. In FY 2021, e-commerce and digital accelerated at an unprecedented rate as our connected customers increasingly took advantage of our e-commerce services.
I have already mentioned our strong e-commerce growth and increase in sales penetrations, another highlight was the increase in average weekly visits to the group's digital platforms.
On average, 17.2 million customers visited our website and apps, up over 40% from the prior year, with most of the growth coming from app usage. As we continue to increase e-commerce capacity, we announced a new automated fulfillment center to be opened in 2024 in Auburn, New South Wales, in partnership with KNAPP, and now have four operational Takeoff micro-fulfillment centers operating, two in Australia and two in New Zealand. Despite the COVID interruptions, we worked hard to refranchise our food customer propositions and completed 75 renewals in Australia and New Zealand in FY 2021. We also continued to make progress in tailoring ranges for our customers with the tailored premium or app ranges, we call it, rolled out to 31 supermarkets, and a new community range launched in Cabramatta in Sydney based on the needs of that area's diverse Asian community.
I have touched on the successful demerger of Endeavour Group in late June, but again want to thank all the team across both businesses that worked so hard to bring this together. We look forward to working in partnership with Endeavour Group for many years to come. Turning to priority five, the performance of BIG W was one of the highlights of the year in FY 2021, with strong sales growth and an increase in EBIT of over 300%. Unfortunately, FY 2022 is shaping up to be a much more challenging year for BIG W, but I'm incredibly proud of the BIG W team and what we have been able to achieve. Finally, to conclude on our strategic priorities, we have prioritized the safety of our team and customers this year and will continue to do so in FY 2022.
We've made progress on the rollout of our new workforce management solution and continued to progress the modernization of our supply chain during the year, with work now underway at the Moorebank Intermodal. Just moving to slide nine in the Woolworths Group's food and everyday needs ecosystem. Slide nine is a summary of how we think about our ecosystem. It is organized into four areas. Those being, of course, our cornerstone retail or B2C food businesses, our growing B2B food businesses, more every day, where we want to deliver additional value and services for our customers, and our platforms and partners, where we add value to our customers and partners through building scalable retail platforms. I will touch on some of the highlights on various aspects of our ecosystem on slide 10.
As you will know, when we come to B2B Food, we completed the acquisition of a 65% strategic investment from PFD Food Services on the 28th of June, following ACCC approval. This investment and partnership with the Smith family will provide us with exposure to the growing food service sector in Australia and form an important part of our growing B2B Food segment. We also established a new business called Greenstock, our upstream meat business, and launched Wpay as a standalone retail payments business. In May, we increased our stake in Quantium to 75% and are establishing Q-Retail, combining Quantium and Woolworths Group's retail advanced analytics capabilities. Cartology, our retail media business, also continued to perform strongly with growth across all advertising channels. By year-end, we had digital advertising screens rolled out to over 1,200 stores. Moving to slide 11 and the F22 group priorities.
While we like to ensure that our group priorities remain broadly consistent, we refine them annually to make sure they continue to evolve in line with market trends and customer expectations. All of our FY 2022 priorities were initiated in FY 2021, and our focus in FY 2022 is to scale them effectively. I will now turn to Steve Harrison, who will present our financial results, and I will then conclude the presentation with an update on our outlook for FY 2022. Over to you, Steve.
Thanks, Brad, and good morning, everyone. I'll start today with the FY 2021 full-year group results summary on slide 14. Group sales increased 5.7% on the prior year to AUD 67.3 billion, with group EBIT before significant items increasing 13.7% on the prior year to AUD 3.7 billion. NPAT before significant items increased by 22.9% to approximately AUD 2 billion. Group NPAT after significant items was AUD 2.1 billion. On the 23rd of June, we updated the market on a number of significant items to be incurred in F21, which resulted in a post-tax gain of AUD 102 million.
These included estimated redundancy costs associated with the planned closure of our temperature-controlled facility at Minchinbury, the impairment c osts for 13 Metro stores, transaction costs related to the demerger of Endeavour Group and the acquisition of PFD Food Services, and a net gain on Quantium with our previously held equity interest remeasured to its acquisition date fair value. I'll discuss our dividend later in the capital management section. Turning to half two sales on slide 15. Before we get into the financial performance by business, it's worth recapping on the significant volatility in trading that we experienced in FY 2021, largely reflecting the ongoing impact of COVID and the cycling impact in our FY 2021 results compared to the prior year. In Q4,
New Zealand Food, BIG W, and Endeavour Drinks all reported negative or lower comparable sales than the prior year, given the elevated sales in Q4 of FY 2020.
Australian Food comp sales increased by 0.1% in Q4 due to stronger sales growth in June, as lockdowns again began to have an an impact. Two-year average growth rates remain strong across all businesses. This is important context for the next slide, which shows our EBIT by business. Turning to slide 16. In Australian Food, FY 2021 sales increased by 5.4% and EBIT increased by 9%, following a strong first half with 10.6% sales growth and 13% EBIT growth. In half two, EBIT increased by 4.5% to AUD 1.1 billion on flat sales, reflecting the impact of cycling COVID in the prior year. Growth was driven by gross margin improvements and lower COVID costs, despite material growth in e-commerce and ongoing investment in digital initiatives in the half. New Zealand sales were negatively impacted by low market growth and cycling of strict lockdowns in half two last year.
EBIT decreased by 4.6% in New Zealand Dollar for the year, impacted by negative sales, with half two EBIT down 13.3%. BIG W performance was a key highlight of FY 2021, with EBIT more than quadrupling to AUD 172 million. Half two EBIT of AUD 39 million was equivalent to the full year EBIT in FY 2020. Group costs for FY 2021 were AUD 176 million, up 23.6% from AUD 144 million the previous year. This included COVID-related costs of AUD 27 million, additional risk and payroll remediation resources, and higher insurance costs. While we have presented Endeavour Group as a discontinued operation, it was part of the Woolworths Group for the entire financial year of FY 2021.
A strong increase in Endeavour Group EBIT for FY 2021 and half two reflected the continuation of in-home consumption trends in drinks and cycling a period of closures in hotels in half two of FY 2020.
Turning to slide 17 and covering off Endeavour Group demerger accounting implications. While we're pleased with the success to date of the demerger of Endeavour Group, unfortunately, the demerger has led to some complex accounting at year-end. As mentioned, Endeavour Group is now recognized as a discontinued operation, and its assets and liabilities are now classified as separately held for distribution in the presentation of the June 2021 balance sheet. Following the shareholder approval of the demerger in June, we were also required to recognize a demerger distribution liability of AUD 7.9 billion in the year-end balance sheet based on the estimated fair value of Endeavour Group shares, calculated using the VWAP for its first five days of trading.
While the demerger distribution liability resulted in a material reduction in net assets and equity at the end of FY 2021, we will book a gain on distribution of approximately AUD 6.4 billion in Q1 of FY 2022 as the demerger was implemented on the first day of the new financial year. Turning to slide 18, and covering off some of our key balance sheet metrics. Average inventory days for continuing operations improved by 0.5 days from the prior year due to strong sales growth through the year and normalizing inventory levels. Group normalized ROFE increased by 143 basis points to 15.1% and was driven by increases in all business units aside from New Zealand Food, which was impacted by lower EBIT in FY 2021. Moving to slide 19 and our capital management framework.
On this slide, we've included a recap of our capital management framework and called out some of the key highlights.
As you can see on this slide, we've continued to generate strong operating cash flow in FY 2021. This cash flow has been allocated primarily to dividends and investments in the current year. We have also announced today an off-market buyback of AUD 2 billion to return excess capital and franking credits to shareholders, which I'll cover shortly. Moving to slide 20 and our cash flows. Cash flow from operating activities before interest and tax increased 1.7% to AUD 6.2 billion. Growth in EBITDA was somewhat offset by working capital movements reflecting a normalization of inventories and payables relative to the prior year, and the reduction of provisions following significant salary team member remediation payments made in FY 2021.
Lower interest paid was due to lower average net debt and lower borrowing costs. Tax paid increased due to higher installments reflecting higher profits and stamp duty associated with the Endeavour Group demerger.
Cash flow on investing activities increased 13.1% to AUD 2.2 billion. I'll talk about the increase in CapEx on the following slide. The increase in repayment of lease liabilities reflects the commencement of new leases and lease remeasurement. Our cash realization ratio was 97% and below FY 2020, largely driven by the reduction in provisions from the payment of salary team remediation costs during FY 2021. Moving to slide 21 and covering off on our CapEx. As a reminder of our capital classifications, sustaining CapEx includes areas of spend including maintenance, safety, store renewals, IT and supply chain spend, and investments in productivity initiatives to sustain and improve the efficiency of the business. Growth CapEx refers to spend in areas like new stores, e-commerce, digital and other projects that are expected to drive higher sales growth and increase gross margins over time.
Operating CapEx for the year was at AUD 2 billion, a little above the AUD 1.8 billion-AUD 1.9 billion we forecast in FY 2021. This was due to increases in sustaining CapEx, particularly in IT, supply chain and renewals, as well as growth CapEx, driven by our increased focus on unlocking e-com capacity during the year and driving digital traffic. We've also worked to identify how much we're spending on our sustainability initiatives to highlight our commitment to driving a better tomorrow. In FY 2021, we spent approximately AUD 170 million on capital projects with strong sustainability benefits, including areas such as refrigeration, lighting, solar and HVAC. FY 2022 operating CapEx is expected to be approximately AUD 2 billion despite savings related to the Endeavour Group. The increase will be driven by investments in supply chain, in particular our New South Wales supply chain project.
Increasing e-com capacity, including the commencement of our automated customer fulfillment center in Auburn, New South Wales, together with ongoing investments in digital initiatives as we look to support long-term growth of the business and drive sustainable long-term value for shareholders. Moving to slide 22. Today, the board has approved the final dividend of AUD 0.55, with the FY 2021 full year dividend of AUD 1.08, up 14.9% compared to FY 2020. Endeavour Group is also expected to pay a dividend of AUD 0.07 per share, reflecting its earnings for half two. Including the Endeavour Group half two dividend, the payout ratio represents approximately 74% of group NPAT before significant items.
It should be noted that one of our goals in determining the FY 2021 dividend was to ensure that shareholders received dividends from Woolworths and Endeavour Group that are broadly equal to the dividend that would have been expected if the demerger had not gone ahead. The Woolworths Group final dividend included approximately AUD 0.04 per share to achieve this. Turning to slide 23 and our off-market buyback. As mentioned earlier, the group today has announced an off-market buyback of AUD 2 billion. One September will be the last day that shares can be acquired on market to be eligible to participate and qualify for franking credit entitlement. The buyback is expected to release approximately AUD 840 million of franking credits for our shareholders. Further information is available in the buyback booklet, also released today. Moving to slide 24, covering funding and debt.
The group's sources of funding and liquidity remain strong, with good access to both bank and capital markets debt. We ended FY 2021 with net debt excluding lease liabilities of AUD 1.4 billion. On the 28th of June, the first day of the new financial year, Endeavour Group repaid AUD 1.7 billion of intercompany borrowings to the group, and Woolworths also deconsolidated Endeavour Group's cash of approximately AUD 440 million. We remain committed to a solid investment-grade credit rating and a significant headroom above the thresholds for our current ratings of BBB from S&P and Baa2 from Moody's. We intend to launch a debt capital markets transaction shortly with an estimated size of approximately AUD 1.5 billion to secure long-term funding for the investments in Quantium and the acquisition of PFD and to lock in long-term debt at attractive interest rates.
Turning to slide 25 and closing with a brief update on Primary Connect. MSRDC continues to increase throughput despite COVID disruptions over the past year, averaging 2.1 million cartons per week in Q4, with further increases in volumes expected in FY 2022. Melbourne Fresh DC opened ahead of schedule in August 2020. The development of a new 20,000 sq m fresh distribution center in Auckland is progressing well, with completion expected in 2022. In June, we announced a new 76,000 sq m fresh distribution center to be built at Wetherill Park in Sydney to consolidate the currently fragmented temperature-controlled network in New South Wales. We also began work on our new Moorebank National Distribution Centre, which is part of our overall ambient network project in New South Wales, with the two DCs opening in 2024 and 2025 respectively. Thanks, everyone, and I'll now hand it back to Brad.
Thanks, Steve. Turning to outlook. We know that COVID will continue to have a profound impact in FY 2022, especially in the next few months, and making any predictions about the year ahead is very difficult. What we do know is that our commitment to operating COVID-safe remains our number one priority, and our ability to respond quickly and effectively to disruptions is now just part of the way we operate. The ongoing impact of COVID has led to strong sales growth of approximately 4.5% in the first eight weeks of FY 2022 in Australian Food, as in-home consumption has increased, particularly in New South Wales. Two-year growth in New Zealand has continued to improve, with some sales benefits from recent lockdowns included in those results.
COVID costs have also increased, with AUD 41 million of COVID costs in the first eight weeks of FY 2022, equivalent to 0.5% of sales.
BIG W has been negatively impacted, with a number of stores impacted by some form of restriction and sales declining by 15% for the first eight weeks. As a result, and given the outlook in the next few months, BIG W's EBIT is likely to be materially low H1 of FY 2021. As Steve already mentioned, CapEx will be approximately AUD 2 billion in FY 2022, predominantly driven by supply chain and e-commerce investments. In summary, we are excited to be embarking on a new era for Woolworths Group and remain focused on our key strategic priorities in FY 2022. We're also focused on leveraging our core capabilities and platforms to grow our food and everyday needs ecosystem by expanding into complementary areas that deliver more value for our customers.
While we are excited by what the future holds, we are realistic about the challenges that lie ahead in the next few months as we work through driving vaccination rates and responding to the challenges and volatility of the Delta strain. I will now turn the call over to questions.
Thank you. The first question today comes from Michael Simotas from Jefferies. Please go ahead.
Good morning, everyone. The first question from me is on the outlook for CapEx. I guess AUD 2 billion is a big number, given it doesn't include Endeavour Drinks, and it's almost twice your asset depreciation. Should we think about FY 2022 as a peak year for CapEx, or is the investment likely to continue at a similar rate for the next few years?
Thanks, Michael. A very good question. I'm sure Mr Errington was hoping he would get that before you, so you are ahead on that one. I might turn to Steve to elaborate on where we are on capital so we can sort of preempt a few other questions that might come on this front. Over to you, Steve, to talk through what we see the capital profile looking like in FY 2022 and any thoughts you might have on the outlook more broadly.
Yeah, thanks, Brad, and nice to chat, or thanks for the question, Michael. Look, it's something that we think a lot about into the balance sheet settings and how we manage our capital and particularly how we allocate our capital. As we lay out in our capital allocation framework, we look at both how do we sustain our business and how do we grow our business. The next couple of years in FY 2022 we've called out specifically, but we have some specific investments that are really about enabling the long-term growth of the business and also maintaining and hopefully growing our advantage. That's in two areas specifically. Firstly, in supply chain.
As we announced this time a year ago, our investment in Moorebank, that is expected to drive increased spend both next year and potentially in the couple of years thereafter, with the opening in 2024 and 2025. We've also announced that consolidation of our fragmented temperature control network in New South Wales into a new facility we've built at Wetherill Park. The way I think about that supply chain investment is really we're at that point in the cycle where New South Wales, our most important state where we have our biggest market share, we need to reinvest back into the capacity for the next stage of growth. We think that those are investments that won't necessarily pay back in the next one to two years, but will set us up for the next stage of growth.
Certainly they are multi-year investments that we are making in the next two to three years. When it comes to e-com, that's the other place we'll be continuing to invest. You would've seen in our CapEx slide that we did step up our investment in e-commerce as we have been doing for a number of years. Actually that's holding its own pretty good stead right now if you think about the demand for e-commerce in this Delta world that we're living in. We'll continue to invest in e-commerce capacity, both in putting more drives into our stores, enabling capacity in the stores to allow them to cater for when e-commerce represents up to 20% of our penetration, which we think will happen at some point in the future. We want to make sure that our store network is an advantage and future-proof.
The other thing we're doing is we're making that next investment in our capacity for e-commerce and our sort of next step up in terms of our automation. We've obviously got the Takeoff units. We're now going and building an automated CFC in Auburn. Ultimately, the areas where we've chosen to step up the investment, and it's a conscious choice, are things that we think will give us both capacity for long-term growth, but also give us advantage and protect the advantage that we have in e-commerce.
Okay, thanks. It sounds like we shouldn't necessarily expect it to drop materially beyond FY 2022, is what I take away from that.
No, I wouldn't have thought so given the supply chain pipeline we have for the next couple of years.
Yeah. Okay. The question from me is around your margins in the Australian supermarket business. I know it's problematic trying to separate cost of goods sold from CODB, but if we look at the CODB line and CODB margin, even with pretty healthy sales growth and COVID costs falling, there was a little bit of deleverage and the margin expansion came from gross margin. I'd just be interested in whether you can continue to grow gross margin fast enough to offset that deleverage, particularly in the context of my previous question in that I would expect D&A to start to tick up through the Australian Food business as well.
Thanks, Michael. I think I may have expressed this before. My view on the efficacy of GP and CODB the way it's currently defined for our business, I think is questionable on a go-forward basis. One of the reasons actually our CODB has gone up certainly in the second half was related to the e-commerce costs and us picking for e-commerce orders in our store, which is in the CODB. Actually, the net delivery cost sits in the GP. As our business shape changes, the way we measure things is something we're going to have to turn our minds to in the next couple of months. Again, let me expand on sort of what happened in the P&L, just to provide context to what you've had to say. I might also then get Natalie Davis to elaborate on my comments.
On the GP line, it was a pleasing year, really primarily driven by our continued progress and improvements on the topic of stock loss. We've been working hard, as you know, on this for many years, and it continued to progress very pleasingly through a whole range of initiatives. There was a material benefit in the GP line for us and also then some changes in mixed business as actually the frozen category, in particular in the second half, has started to go quite strongly, as has the chilled category. We can come back and talk about the reasons there. On, in the CODB, the material growth in e-commerce has put a lot of pressure onto the business and making sure we pick and pack and dispatch the orders. You see that in the CODB line.
The highest growth role inside Woolworths in the last year was our personal shoppers. We have in the order of 25,000 personal shoppers in the business as I speak today, and it's become a material part of our business. There's lots of things we're learning and working on there to improve efficiency of the way we route our teams through the store. We've got pick to light and a whole range of very exciting initiatives, but it's still a work in progress. A large investment there. Also in addition, a slowdown in some of our productivity improvements. One of our anxieties right now is a team that is tired and fatigued, and a number of those, understandably, we had to slow down through the year, and that was a very conscious choice and decision. Then, of course, just in wage rates going up.
That sort of gives you a sense of where we're at. On the go forward, we do think, of course, and our aspiration is to continue to improve the overall performance of the business. We see ranges of opportunities, material opportunities in our GP line, as well as in how we improve using technology to improve the things we do in CODB. Natalie, is there anything you would specifically like to call out, in particular in the second half, Michael, where we're lapping what were material COVID costs in FY 2020, as you would know?
Thanks, Brad. I'd just like to emphasize that I do think we're constantly looking at our profit flow through and trying to make the right trade-off. We did have a very good year on stock loss, and we now have stock loss underneath 2.5%, and we're really focused on maintaining that going forward. We see further GP upside in areas like tailored ranging that Brad called out. Also really using data, so we're working on what we're calling next generation promo effectiveness, but really using data to help target our investments in promotions, so for maximum impact for our customers. We continue to see upside in CODB. We've called out some of the initiatives we're putting into store to leverage technology to make the processes much simpler for our store teams.
I think Action Centre was a really good example of this, where we effectively have created a number of different algorithms. Our team just gets one set of alerts. They're prioritized around what they need to do, whether it's a waste to markdown, whether it's replenishing the shelf, it's all in the one place. We've got, I think, a long programmatic approach there to really trying to remove paper from our stores, automate things, and make things simpler while we also invest in the future. Clearly, e-com growth is a priority, and leveraging our stores to provide that convenience that our customers are seeking is incredibly important for us.
There are definitely opportunities there, and we're just very conscious at the moment around the pressure in our stores on our team and just making sure that in the short term, we're looking after our team, which might mean that some of these productivity opportunities really are more of a focus in half two.
Thank you. Once again, to ask a question, please press star one on your phone. We ask that questions be limited to one per person to allow all parties to ask a question. You may join the queue again to ask any follow-up questions. The next question comes from David Errington from Bank of America. Please go ahead.
Hi, Brad. Hi, Natalie. Can I follow up on the cost question? When I look at the first half, your first half cost of doing business on first half increased, excluding COVID costs, by 5%. When you look at the second half on second half, your cost of doing business, excluding COVID costs, increased by nearly 9%. I know that you just explained well about e-commerce and the accelerator, there was a huge jump in e-commerce sales growth first half on first half. I think you went from about 4.4% sales penetration. You sizably stepped up in that first half up to about 7.7%. The second-half step up was there, it wasn't as big a step up in that second half. I'm just wondering, are you investing ahead of the curve with your e-commerce?
Because it just looks to me to be, I understand there's responsive costs, but there's get ahead costs, if you know what I mean. Have you invested ahead of the curve for further acceleration in e-commerce in this second half relative to first half? Because there is a significant jump in that second half cost of doing business relative to the first half.
Thanks, David. A really good and important question. I think if you just look at the second half and look at our basically flat sales profile for the second half, it's clear that all of our growth came through e-commerce, and essentially there was some negative operating leverage in the stores. If you look at store-originated sales, this is not uncommon to us would have been something that was true across most retailers. There's the issue of making e-commerce as profitable as it should be. There's also the issue, as Natalie talked to, of making sure that we use technology to simplify our stores to deal with the challenges of a negative operating leverage at a store level. It will be an ongoing conversation, I think, with Woolworths and virtually every other retailer in Australia in the next couple of years.
Secondly, to your point, David, we have continued to materially invest in an e-commerce capability and capacity. This has stood us in very good stead in the last eight weeks, in particular in New South Wales, given the lockdown. You can see the numbers, and we are committed to continue to invest ahead of the curve with our belief set that actually the more supply we add, the more it's taken up. We supply constraints more than consumer demand constraints, in particular in the time, of course, of COVID. There's a whole range of investments there that we've been upskilling the team, building more capabilities into WooliesX that Amanda can talk to making our stores more e-commerce-enabled in every case and so on. Clearly, and a very important part of what's going on there as well.
What I'd say about e-commerce right now for us is, and this will change on the go forward again, getting capacity out there has been our key. Actually making it efficient and effective is something that we still need to do a lot more work on. We're aware of the opportunities, but when you're in the middle of these COVID challenges, the number one thing is getting the customer served, getting the product to the customer, and there's quite a lot of engineering work that can be done on the back. As I say, how we route personal shoppers through store and get the right algorithm in place, how we cube out totes. We still ship a lot of extra air in our totes and so on.
I'll turn to Steve first, if that's okay, David, just to give you sort of a financial explanation of what happened in H2, and then perhaps back to Amanda first on e-commerce, and then Natalie, anything that you'd like to add at the back end. Steve, I know it's just useful for us to lay it out to everyone on the call, if that's okay, if we first start the financial side with you, Steve.
Thanks, Brad, and thanks, David, for the question. Yeah, we looked at exactly the same analysis you've been looking at in terms of that cost growth in the second half. I think there's a couple or a number of elements to it. The biggest one that we've called out is the cost associated with e-commerce and the picking and the mix impact that that has. There is a degree of additional costs that goes into our existing store network. If you think about we have flat growth in the second half, but all of our growth came from our e-commerce in effect, therefore, the store-originated sale, albeit a lot of the e-commerce is picked in the store effectively went backwards. At the same time, we continued to open new stores.
We continued to see some inflation on things like rent, where we get turnover rent that links to elevated sales in the prior year, interestingly enough. We continued to have some depreciation and timing impact. If you think about the lockdown in Victoria that you personally had to live through, we weren't able to execute things like training or the rollout of some of our productivity initiatives that then fell into the second half. There is some timing that we would probably have distributed across the year. I think probably the other one that's worth calling out, and Amanda may want to add some color on this, we have continued and consciously to invest in some of our digital capabilities and some of our ecosystems. We've continued to add functionality to our apps and our websites and enhancing those.
We've continued to invest in digital traffic generation, which has supported both sales into our stores, sales into e-commerce, as well as supporting some of the growth that we've seen in Cartology. We're also standing up some new businesses in our ecosystem that are embedded in those costs. Things like HealthyLife, Woolies at Work, WPay. I think probably just the other point, and it ties back to what Brad said right up front, we do have a tired team. The reality is our team didn't take the levels of leave that we would typically have done, and so there is a burden on our cost base throughout the year in terms of slightly higher levels of increase in our annual leave and long service leave provisions than what we would typically see.
Amanda, thanks, Steve. Anything you would like to add by way of color? I'm sure hopefully everyone knows Amanda is the Managing Director of our WooliesX business, which has the digital and e-commerce partnerships with Woolworths Supermarket.
Thanks, Brad. Look, I think it's been really well covered. I'll just add a couple of key points, if I could. Just on e-commerce in particular, we are seeing when we compare H1 to H2 an ever-improving performance when it comes to what we call out as directly attributable profit. We are pleased with some of the productivity measures that are starting to flow through, in terms of both logistics and the drop costs that we saw in certainly H2, which were an improvement on H1. Also in terms of our labor rate and just looking at the productivity, and as Brad spoke to, we've got a number of initiatives underway around picking efficiency, particularly in our store, which is absolutely critical given the important role that our store network plays.
The other comparison, just when we think about H1 to H2 is important, and that is that in H2, we were carrying some additional costs from some of the two CFCs that actually really didn't land until very late in the first half. You'll see that as a distinct difference between the two. Those CFCs are playing an absolutely critical role right now for us. We're really, really pleased with those investments. Frankly, those facilities are now running at almost full utilization, as you could imagine, in New South Wales in particular. Overall, I think, we're very pleased with the ever-improving productivity out of e-com. There is more work to do, of course, but I think that's the key comparison.
Of course, when you look at H2 last year, e-commerce, particularly in that March and April period, was deeply disrupted in terms of offering our services because of the supply chain challenges we had. Those costs won't have been as overt in the base for the previous year when you compare it. Yeah, a lot more work to do, but I'd say we're very pleased with the current trajectory in terms of ever-improving profitability coming out of e-com. Thanks.
Thanks, Amanda. Hopefully, David, that at least provides some color to the question you asked.
Thank you. The next question comes from Grant Saligari from Credit Suisse. Please go ahead.
Good morning, Brad, and thanks for the opportunity. I'd just like to have another shot at the investment profile question, if I could. I can understand you've unashamedly taken the business on a growth strategy, and that sort of comes through in a number of the initiatives. I think we all understand with that sort of growth strategy, the investment upfront is required and there's some impact on free cash flow. If I look fairly simply at the numbers, you're up the dividend, your free cash flow is slightly negative this year. Next year, about AUD 1.4 billion of EBITDA drops out with Endeavour not being present. The CapEx profile doesn't change a lot. The implication is probably, unless something else changes a lot on the profitability side, that the business does go pretty significantly free cash flow negative.
That could continue for a couple of years with the investment profile that you've got in mind. I just wanted to sort of cross-check with you to see that that is the sort of financial shape that we should be thinking about as you invest upfront and set this business on a growth trajectory. I'd be interested in comments on that, please.
Thanks, Grant. Again, I'll let Steve talk to that. I think the big difference in previous years is not actually investing in e-commerce and store renewals. We've been doing that for a while. As you know, we might be changing the balance there, but we're getting to that peak period in what is more our long-dated capital investments around supply chain. For reasons everyone on this call, I think, would understand, we've been trying to make sure we were comfortable with the performance trajectory, which we'll come back to on MSRDC before we move. Just given our capacity constraints in Sydney, it was just essential that we announced and started activating our Moorebank dual facilities, our national DC, as well as our RDC, and then our new fresh DC in Sydney as well in Moorebank.
That's what you're seeing come through on top of our normal profile. Steve, do you want to just talk to the details of what it means in a cash flow sense with, of course, the usual sensitivities around providing guidance?
Thanks, Brad. Will do. Grant, you sort of had an implied question on cash realization in the current year. Let me just quickly cover that off. As you know, we typically target to have a cash realization ratio of 100 or better. This year, we're slightly below at 97. I think the key driver there is actually the timing of payments against the salary remediation activities from the prior year. We had over AUD 250 million of payments in the current year. If you looked at our cash realization ratio across the two-year, I think we did 124 last year and 97 this year. We typically target at 100% or better. Just picking up Brad's point, we don't want to give guidance on cash flow as we don't on earnings.
We will typically target that 100% Cash realization ratio from operating activities there. That step-up investment will put pressure on that in FY 2022. It is something that we need to manage. That said, we also look at it in the context of the long term, and our goal is to create long-term shareholder value, and we think some of these investments are very much around creating long-term value. We believe that we do have the capacity on our balance sheet, we're well-positioned against our credit metrics, even after the buyback, to be able to fund a little bit of additional capital, not a little, but a fair amount of additional capital, around what are strategically important investments for us. We do believe that they will deliver long-term value.
Thanks, Grant.
Thank you. The next question comes from Shaun Cousins from UBS. Please go ahead.
Thanks. Good morning. Just a question on the first 8 weeks trading. Obviously very strong given what you're cycling in first quarter 2021 and even first quarter 2020 with issues. I'm just curious around online as a share of sales, how does that compare to the 8.5%? Maybe if you could quantify that. Any impact on availability. I'm just concerned around, you've got 3,300 staff in isolation, I assume because they were in exposure stores, and we understand merchandisers are struggling to get into store. I'm just curious around, are you even, dare I say, missing out on sales because availability and gaps on shelf might become a problem, please?
Shaun, thanks for the question. When you look at our growth in Australian Food of the 4.5% for the first eight weeks, 8.5%, as you rightly point out, on a two-year basis, it is materially driven by e-commerce. We've literally doubled our e-commerce capacity in New South Wales, in the last probably 12 weeks. Just an extraordinary effort by the team to put the capacity into the field, so to speak, and leveraging on the investments we just talked about with, in particular our Lidcombe CFC, which we commissioned in December last year, which has proven to be incredibly important and doing, I think, somewhere in the order of 17,000 orders a week as I speak. It really has been, for understandable, logical reasons, an e-commerce story, but a very good mix, actually, interestingly enough, between home delivery and direct to boot services.
It's got nice balance, which we think is important. On availability, actually, product availability has been not bad for us to date, but there are a lot of stresses and strains, as you rightly point out, in the supply chain as we speak today. These are partly driven by the fact that we have a number of our team in our DCs in isolation. Actually, we've got a material number of them coming back to work today, thank goodness. We're working very closely with New South Wales Health to adjust how we treat close and casual contacts with the vaccinated workforce and also where we're doing antigen testing. We've got a very detailed track and trace process in our DCs.
We're hoping we can address the issue, but there are some challenges right now, and I would expect those challenges to continue probably for the next seven-14 days. What it means right now, we're probably running an out-of-stock rate in e-commerce on average of 5%, and we can easily substitute against that. How things play out, in particular how we engage and how New South Wales Health properly engages with us in the next week, I'll say, will dictate whether that goes up somewhat. Are we potentially losing sales? I would say so, based on actually e-commerce capacity more than availability. Our customers at this point in time are willing to substitute products. It can take two days or four days in some areas, to get a delivery window right now.
One of the things I'm always conscious of when speaking to media or analysts is we all have personal experiences with Woolworths. I'm sure all of you, either directly or indirectly, know what our delivery window performance is. A very important thing to reference for everyone on this call, either media or on the analyst side, is we are saving capacity for our priority assist customers. This is critically important for us to make sure people who really need home delivery get it first and get it in a predictable way. We've got 900,000 customers on our priority assist schedule. We are actively adjusting and balancing as you might expect, as we go forward.
Sorry, Brad, you said you doubled capacity in online. Thank you for that answer. Would it be fair to say that you've got e-commerce double the share of where it was in the fourth quarter, or is it in the teens? Maybe if you could just sort of provide some direction there.
It's not to be disingenuous, but it is constantly changing. Our e-commerce penetration in New South Wales has gone up materially, Shaun, to be honest. On average across the country, it hasn't gone up quite as dramatically, but certainly in New South Wales, it's probably, if not double, gone up very close to double, just based on what I've just been saying. We will continue in working very hard between Natalie team and Amanda's team to add more e-commerce capacity in the upcoming weeks into the field.
Thank you. The next question comes from Bryan Raymond from JP Morgan. Please go ahead.
Good morning, Brad and team. Mine's just on inflation and the outlook from here. Obviously, you're cycling some pretty strong inflations. I can understand the numbers sort of remaining pretty negative at the moment. In terms of the outlook, there's a lot of price increases coming from suppliers. There's challenges around global supply chain. At the same time, we're seeing promotional activity bouncing back. Excluding fruit and veg and tobacco, how are you seeing the overall cost of the basket or the overall inflation measures looking over the next year or two? Do you think there's a bucket pressure on those metrics at the moment?
Hi, Bryan. Thank you for the question. I'll provide some context and I'll ask Natalie to add additional color. It will be quite extensive on the answer, because I think this is a really important question to provide a full context. Obviously you've seen Q4 deflation, and that really is as much a product of what we saw in the previous year as anything else. We'll come back to some elements of it. It's been incredibly challenging year to unpick all the moving pieces, but in Q4, and FY 2020 was a period where we had to stop our promotional program, and then we put it back in first online and then slowly back into a more full catalog program. You are seeing the cycling impact in Q4. The question then, the one you rightly point out, what is the outlook going forward?
As always at Woolworths, we look at the long life categories, which is the one you are asking about specifically, separate to our fresh categories and then tobacco, which has generally been inflationary, but will become less inflationary with the changes in the application of CPI to excise in September. Firstly just on the fresh side, it has continued to be a tale of two halves there with meat prices continue to go up, but we have had deflation in fruit and veg, in particular in fruit, just with banana prices coming down. We expect, we will see where meat goes. It will probably continue to be slightly inflationary. It looks like at least for the next half, fruit and veg will be deflationary.
Call out the great value sitting there in avocados for those of you who are interested in super fruit and there's a material oversupply of avocados, so we'll continue to see deflation. On the long life side, Natalie will talk in more detail, but obviously just on the indent side of our business, hopefully everyone is aware of the material pressure right now in international freight rates. They've gone up in the order of between 25% and 30%, depending on what ports we're looking at and what timeframe we're looking at. This has been somewhat offset by exchange rate movements, but not totally. The outlook on international freight rates is, it doesn't look like it'll be coming down, potentially going up.
There is pressure on international freight rates, never mind all the other pressures on input costs, as well as the disruption a number of our suppliers are finding in their own supply chains and manufacturing assets and what it does to cost there. We are starting to see more cost increases come forward, and we'll work through those on an individual case basis. You are starting to see certainly a lot more understandable engagement in that area. On that issue specifically, Natalie, I'll ask you to provide a little bit more color, if you don't mind.
Thanks, Brad. I think you've laid out the dynamics very clearly. We are cycling that reduced number of promos probably for the next couple of months, and that impact will begin to moderate. We are seeing a step up in long life in terms of cost asks by suppliers, and that's being driven by freight costs in some instances, but also by commodity prices in other instances. As an example, vegetable oil prices have gone up, and that's been reflected market-wide, in terms of vegetable canola oils. Also in products that rely on those inputs, such as frozen chips. We do expect to see moderate inflation emerging over the course of the year. A continued ongoing pressure on red meat prices in the short term.
As Brad said, fruit and veg, there's a number of different dynamics in play there, but certainly the avocado season has been a bumper one, and I'm sure Australians are enjoying their avocados for as low as AUD 1.50 or AUD 1 in some instances.
That's great. If I could just follow up very quickly. Is it still rational in terms of the market reflecting these genuine price increases and do you think other players in the market are seeing similar pressures? If so, is everyone passing these costs on as you'd expect them to?
Bryan, I think if I again just start more broad, because I think it's a key question for us on this matter is, yes, we have seen it as being relatively rational. One of the big issues for us has been making sure our price indices continue to track where we want them to be. That's been true for the whole of the second half of last year and then into this year. We are seeing a relatively rational industry and our price indices against our key competitors continue to be where we want them to be. Natalie, again, I'll pass over to you to add more color as you see fit.
Yes, I think we are seeing a rational market and for us it's very important that we balance the genuine costs asks of our suppliers with also the need of our customers to have value for their groceries. We continue to balance those two dynamics out. We're very pleased with our overall price index and the value we're providing for customers.
Right. Thanks.
Thanks, Bryan.
Thank you. The next question comes from Tom Kierath from Barrenjoey. Please go ahead.
Morning, guys. Yeah, just following up on Bryan's question on inflation. How long do you think it will take for the input cost to be reflected in pricing? I know the Grocery Code has kind of this 30 days that you need to respond to suppliers, for how long do you think it will take for it to be reflected?
Look, Tom, great question. I don't think we can give you a definitive answer. The way we measure it is with official methods, as you would know, sort of means that it's a more gradual slope that you get to. I reasonably would expect a very gradual process of moving back into inflation in long-life items over the first half of this year and into early next year. A lot of the numbers, by the way, I'll just caveat, in the first half of the year, just given all the challenges we have with the Delta strain and therefore substitutions and trading into large pack sizes and all that, I think it'll still be a very noisy half for measuring it. I think we'll see a much better version of it coming into H2.
As I say, a lot of caveats on that, if you don't mind.
Yeah. Okay. Understand. Thanks, Brad.
Thank you. The next question comes from Craig Woolford from MST Marquee. Please go ahead.
Morning, Brad. Morning, Stepehn. I just wanted to pick up on the topic around the negative operating leverage in store. That's sort of one of the inferences from the strong e-commerce growth you're getting and the costs that are coming through there. Can you just give us a sense on what costs the company is trying to reduce in-store, related to store-based sales? Is the company rethinking store openings in supermarkets given e-commerce growth?
Thanks, Craig. I think firstly, the way we are trying to think about it is sort of in the network economic sense. How do we drive a better store outcome for customers and economically? We're always trying to balance what the store does to support e-commerce together with what it does to support store-originated sales. You need to look at them together. I was just making the point that actually, when you look at the store, we've got the pressure of serving the e-commerce part of the business, as well as the fact that the store sales are going down. We try and look at them as one integrated unit, if you know what I mean. Where we are probably different to some retailers, in particular overseas, is our belief that stores have an incredibly important part to play in e-commerce going forward.
As most e-commerce moves to either same-day or on-demand, and in some cases, sub 60-minute. We are trying to recreate or reimagine our stores where they meet all these different needs and work through all the different productivity initiatives on the e-commerce side as well as the store side. If you then look at when trying to make our stores fit for purpose, how we use data and technology to improve all of our processes in the store is the key, and that's really where the work and initiatives are. We've got quite a lot of exciting initiatives underway, as Natalie talked to. The real issue, of course, is not whether they work, it's how we thoughtfully and sensibly scale them up in the context of COVID. That is where our challenge lies.
If you look at a store concept, it really comes down to how you manage your team and the hours and the processes underneath that. The number one opportunity, as always, there is getting the right team on the right day and giving them the right hours to do their job. That's our biggest individual initiative that we have underway going into FY 2022 and beyond. Then within that, really you've got to look at how you optimize your checkout processes and balancing between ACOs and Belted and the role that Scan&Go can play. Then it is really how you replenish the shelf and how you want to balance off what's happening there and using technology. I don't think there's an easy answer. We can see an exciting group of initiatives, and as I say, our smart store technologies are working very well.
In a normal course of business, we'd probably show them to you, whether it's one that Gregory Hills, which was our original one, two years ago, which is really delivering for us in particular or any of the other newer ones. We can't, unfortunately. If we showed them to you would see the fact that we've actually now got electronic shelf labels working for us, and we're rolling them out into a number of our stores as we speak. They not only, of course, take pressure off the ticketing process, but also they have pick-to-light capability to help accelerate the online pick for the customer. We could show you our computer vision scanning of the shelves to help us manage refill.
Natalie's talked about Action Centre and what's happening there, and a number of other initiatives, including automated temperature checking via our Monika handheld devices and so on. I think we feel optimistic that we can thread this needle. It's just the caveat on COVID that's the challenge.
Okay. Just in terms of store openings, just to clarify-
Sorry, Craig. I went on too long there. Apologies for that. Natalie, feel free to correct me. Store opening hours are actually just driven by COVID right now. Anything you've seen with us adjusting store openings is not to save money or cost or we think there's an efficiency play there. It is really simply driven by how we think through COVID curfews, getting the stock full for the customers and so on. We don't see adjusting store opening hours as a material productivity play for us. Natalie, feel free to correct me.
Yeah. I think, Brad, the question was around new store openings and will we continue to open new stores?
I'm caught up in curfews and
The answer to that is yes, because we're definitely still seeing high returns to our new store openings. Our new stores are also used to fulfill online orders, whether that's Direct to boot or delivery. We see the store network playing a very important role in our e-com offering going forward.
Craig, it's sort of in the realm we have now, the 15-20. We feel that's the right number. You'll remember well back in 2015 we got up to the 32-35 stores. We're kind of like where we are now, and as Natalie pointed out, actually, our new stores are performing very well. They're very fit for purpose. We've actually had a really good patch of new store openings, I should call them, both sides of the Tasman include from June and into July. We've got a lot more delays now. They've actually been a really high-quality portfolio that's been delivered.
Thanks, Brad. Thanks, Natalie.
Thank you. The next question comes from Phillip Kimber from E&P. Please go ahead.
Good day, Brad. My question was on BIG W, and I know there was questions before on the supply chain and freight costs. I mean, we're reading freight costs are three, four times higher for general merchandise. The question is really, first part, are you seeing that, and is that something we should be anticipating in terms of thinking about BIG W's results? Secondly, just actual inventory availability given supply chain issues. Putting that the price might be going up, can you actually get the stock at the moment?
Well, I think it's a great question, and I'm going to throw it to Claire Peters to provide more color on it. I just would make the point that the international freight costs are, there's a lot of pressure there. We are fortunate to have relative scale in this space and good long-term contracts and relationships with most of the international freight companies. Scale does give us some benefits here on a go-forward basis. Actually, the number one way we're leveraging right now is just to get capacity to get products into Australia, given what happened in China last week. We are anxious just more broadly on making sure we get all the products we need into the country for Christmas in food and BIG W.
Coming back to BIG W specifically, obviously some challenges in transitioning to our new DCs in Perth and Melbourne that have put a bit of pressure on availability into our business. You add that together with some of the challenges on getting the product landed on the stores, and there's a lot of juggling to be done. In parallel with the supply chain pressure is given we've got literally half our fleet either shut down right now or only authorized to do essential selling in store that is. We're having to work very dramatically through what products we actually want to bring into the country and how do we rethink our sales and inventory profile. Over to you, Claire, to add more color to that.
Thanks, Brad, and thanks, Phil, for the question. You're absolutely right. Global shipping in the GM market is in that more 30%-40%, predominantly, obviously, based on this time last year when U.K. and U.S. was closed. We are seeing that much more competitive market, which is driving some costs through. Wasn't a surprise coming into the year. The team have got some good productivity initiatives to offset what we knew would be coming through in this half. I think playing to Brad's point, we've got good relationships at port, and prioritization and heavily prioritizing what our customers' needs are for this next half is what the team are working very hard on with vessel prioritization at port. That would be, as you'd imagine, spring, summer, Halloween, and Christmas.
We know in BIG W how important these customer events are and would expect us to have a value promotionally driven digital Christmas. We can see already customers are searching for Christmas. I think only two weeks ago, Christmas as a word went to the number 1 search. Giving our customers that ability to plan early, to be able to budget, to see what's coming through is a way we've changed our way of working. I would be comforted by some of the more smaller events that we've seen. For anyone on the line who's got kids, Book Week Dress Up was still as big this year as it has been any other year because customers are adapting to how they do those events, whether it's via Zoom or whether it is actually just being done at home to bring a bit of joy into there.
We're very mindful of inventory. We're very mindful of the shipping. As Brad said, we have transitioned through our DCs. We'll be going into this Christmas with a network that brings the product closer to the customer, which also therefore means we can bring more vessels into port across Australia, which is what we are working through now to get the product that we need for our customers into the country and on sale for them to be able to plan and enjoy those special family events.
Phil, we very seldom talk about New Zealand. We're also very worried about port New Zealand getting the inbound stock into New Zealand, and Spencer and his team are working very closely with our primary freight inbound logistics team on the international freight logistics team on that as well. I think there are risks for every retailer in Australia and New Zealand in this space. Hopefully, we're relatively well-positioned at this point in time.
Thank you. The next question comes from Ross Curran from Macquarie. Please go ahead.
Thanks. I actually had a pretty similar sort of follow-on question on BIG W. The lockdowns in Sydney and Melbourne happened right during that sort of winter apparel clearance period. How are you thinking about winter apparel clearing, and is that accounted for in the guidance you've given us for the first half?
Thanks, Ross. Yes. Credit to Claire and Pejman and team for taking early action on that one. We've actually seemed to have managed that relatively well, and it is reflected in a high level, I guess, in our commentary. I don't know, Claire, if there's anything you wanted to add to that.
I think, as you said, Brad, thanks for the question, Ross. I think we're very pleased with how we've exited out of winter, rather than waiting to see what if. We're in a very strong position on winter clearance, in all states. As Brad mentioned in the release, 2,400 days impacted is pretty significant. I always look to a half glass full, and whilst our underlying performance remains still very strong, what's also encouraging is our e-commerce is penetrated up to 21%. Actually customers are shopping deals through e-commerce, including apparel. Actually there has been some really good sell-through on weekends, and weekday offers, in that space, which means we're ready to launch spring/summer in the 100 stores that are open and trading very well, and to the 76 stores when we are able to open them to our customers.
Thank you.
Thanks, Ross.
Thank you. The next question comes from Ben Gilbert from Jarden. Go ahead.
Morning, Brad and team. Just a question from me just around how you think about the business over the next few years in terms of what's core. Obviously Endeavour's demerged now, and you've launched the trial of the marketplace, up in the New South Wales coast. What do you guys see as your core focus now? Is it food, or would you think about looking at M&A or going more aggressively into other categories and really expanding, I suppose the BIG W type offer? Specifically there, I suppose, interested, Brad, if you're thinking about doing that organically or do you see M&A as a path to that as well?
Thanks. Thanks, Ben. Obviously, our focus right now through Christmas is all the issues we talked about on COVID, but our longer-term focus is activating that food and everyday needs ecosystem articulated in the presentation, and continuing to work through all the segments of that. If you think from a retail consumer back, we want to be quite focused on curating food and everyday needs, products and services for our customers and leveraging Everyday Rewards to make sure we offer the right product to the right customer, all with the caveat around privacy. We're not trying to be the everything marketplace, so to speak, of Amazon, but very focused on food, everyday needs and everything that goes to do with that. That's a very deliberate strategy of ours.
It is deliberately manifest in the partnerships we are doing with Everyday Rewards and also in the additional categories we may grow into through our marketplace strategy. It is a very curated 1P, 3P marketplace wrapped around by rewards, somewhat monetized by Cartology and obviously the overall sales mix we get. As I say, fair to say, there will be some delays, particularly in the first half on how we activate that strategy. On the topic of M&A, it is always hard to comment, to be honest with you, Ben. We can only control the organic things we can control. We will continue, of course, to engage with others as opportunities come up. We have had a mindset of at least making sure we manage our own destiny. The Everyday Market for those who have an address in the Wollongong, Newcastle area is up and running.
We're learning a lot from it. We'll gradually activate it across the rest of the country. Inside the Everyday Market is a consumer-facing proposition called Everyday Market. There is also a SaaS opportunity to build a seller capability, and we could, as we scale that, plug that capability into BIG W for that matter, or into other verticals if we so choose. We've kind of got to have a mindset, build it ourselves, and then look at other opportunities and balance them against the counterfactual. I feel, across a whole ecosystem strategy, what I feel good about is when you look at that slide, it's not a theoretical consulting construct. Everything that we need to do is underway at the moment, and our only challenge is what we scale up and how we scale it up, given, as I say, short-term imperatives and priorities.
That whole ecosystem is the new core of Woolworths Group, and our belief set is the total addressable market there is material and gives us a good growth profile for the next two-five years and beyond.
Thank you. The next question comes from Richard Barwick from CLSA. Please go ahead.
Good morning, guys. I just got a couple of questions on line. If I'm reading it properly, your online voice of customer looks like the score's actually down on the fourth quarter of 2020. Just a bit surprised at that because I would've thought you were scrambling in fourth quarter 2020, and you would've had things more under control in fourth quarter 2021, given it was sort of pre-current lockdowns, et cetera. Is there anything to call out there?
I think that's a really great question, Richard, and well picked up. The topic we actually talked about a lot inside Woolworths. I'll give a high-level summary and then ask Amanda to give some detail. Expectations of customers are changing all the time would be my headline. A year ago, they cut us some slack for unavailability of items or delivery predictability or speed. A year later, customers aren't going to cut you the same amount of slack. Expectations are just moving rapidly, and I think we've got to keep up with them, and that's a major insight to us. There's other bits and pieces that we've learnt, and I'll let Amanda talk to those. Expectation sets of consumers in digital and e-commerce, we said it, but it's been proven true, are rapidly changing. We need to continue to rapidly innovate to keep up with it.
Can I pass to you, Amanda, for a little bit more color on that comparison?
Yeah. Thanks, Brad, and you're right. Your description's exactly the case. I think when we compared quarter four last year, there was this In some way, I think we were calling it out as a halo of gratitude from many customers who were absolutely in need of particularly home delivery services. That's why there is that difference year-on-year. When we look at voice of customer across the year overall, we would actually say that overall, we've been improving in terms of our experience, and we're very pleased, and I think we called this out in the document shared with our perfect order rates, for example. Significant improvement there around complete basket on-time deliveries. That's, of course, a really important part of customer experience.
There has been this overall improvement, but there are patches where, for various different reasons, and usually associated with the release of new services. In quarter four, we released a lot more new capacity for things like Delivery Now, a two-hour service. Understandably, customers have very high expectations of a two-hour delivery service. They're paying a premium for it in terms of the cost of that delivery. As we launch these things and test and learn, there is inevitably a period where customers mark us down in terms of those voice of customer scores. You see that, too. There's a very significant difference between how a customer might rate us on direct-to-boot services, for example, versus home delivery as a same-day or a next-day service and the introduction of services like the two-hour service.
There's a big mix shift in there overall. Of course, if we now just look at how we've been tracking in the last 8 weeks when it comes to voice of customer. Unfortunately, there has been an easing of the scores we're seeing come through. Again, that's just reflected in particularly those COVID hotspots where there's big surges in volume and customers are not necessarily satisfied with waiting a couple of days for a home delivery slot, et cetera. It is a relatively volatile measure for us at the moment, but it's just reflecting the very volatile market conditions. On the whole, I'd say it's been trending overall on the improve, COVID and new services aside.
Thanks, Amanda, and thanks, Richard.
Thank you. The next question comes from Johannes Faul from Morningstar. Please go ahead.
Hi, Brad. It's my question. Given that NZ will be a bigger part of the group going forward, I just was wondering or hoping that if you could perhaps compare the consumer behavior in New Zealand versus Australia. Are there any differences that you've been observing over the last 12 months? Related to that, I've noticed that the online growth rates in New Zealand have been weaker than in Australia. Is that a function of the higher penetration rate in New Zealand or lesser investment in online or maybe a combination of both?
I missed your first, but I think I understand the question, Johannes. I'll do a high-level answer and then ask Spencer Sonn to provide some color. New Zealand and Australia have been on different paths in relation to COVID over the last two years until two weeks ago, and I guess that's when we welcomed our New Zealand colleagues into the club of dealing with the hard lockdown. There was a short lockdown in Q4 of FY 2020, which obviously we've just been cycling and is reflected in our FY 2021 results for New Zealand. Essentially outside of that, it's been a very different scenario in New Zealand, and therefore the way consumers have behaved has been relatively different.
That has changed, unfortunately, for all the wrong reasons in the last couple of weeks, and we're starting to see much more similarity. Now, specifically on the topic of e-commerce, New Zealand has led the group in terms of e-commerce penetration, and that has continued to grow, particularly if you take out the cycling of the impact of COVID in Q4 last year. We've seen that accelerate even more so in the last eight weeks as New Zealand has started to enter the same lockdown. We're starting to see relatively similar trend lines and behaviors across both in more recent times. In terms of the overall New Zealand economy, one thing that I've learned, and we studied all these numbers, is just the differences of tourism and immigration flows and what season they do or don't come into a country.
New Zealand has been more impacted by a lack of inflow of tourism actually over certain periods. That's reflected in the subdued growth rate we saw from New Zealand last year. We're starting to cycle that all now, though. That's positive for the business this year. There's quite a lot of moving factors there. We don't think the average Kiwi is any less to shop e-commerce and in fact, just as likely, and that's been all of our experiences. The rest of it has been just a function of where the economies have been through either net inflows of people into the country or where they're set in relation to COVID lockdowns. Spence, I know you've been in New Zealand now only since February of this year.
We've only seen you once given the various lockdowns, but any color you would like to add?
Thanks, Brad, and thanks for the question, Jock. I think Brad's covered it really well. Just at an overall level, we've certainly seen obviously a challenge second half in real terms as we cycled through the high base of last year. We've certainly seen in the first number of weeks of this year an improved performance in the overall business, up at 6%. Within that, our e-com growth has continued to be strong with a growth of 20% on a base of 30% last year. Whilst I think, as Brad says, it's been a leading light for the group, it's continued to growth, and we still believe there's significant growth ahead in our online operation. There's been investment devoted towards that over the last number of years, which we're starting to see the benefit of.
From a penetration point of view, obviously the last eight or so days have been unfortunate as we've tried to adjust to the lockdown that sprung on us Wednesday of last week. Just prior to that, we were getting up to penetration levels of around 14% in certain weeks in our e-com business. Our capacity within e-com, I think most of you will know, we're able to service most of our customers' orders within about 40% of our customers' orders within the same day. That certainly hasn't been the case in the last number of days, just given the massive demand that's been placed on our operation, which is starting to stabilize somewhat now as we get into a more, I guess, even rhythm dealing with what is now a new normal with the Delta outbreak in New Zealand.
Certainly from our perspective, a very similar behavior across both sides of the Tasman and a strong e-com business for New Zealand in the next number of years. Thanks, Brad.
Thanks, Johannes.
Thank you. The next question comes from Scott Ryall, from Rimor Equity Research. Please go ahead.
Hi. Thank you very much. I've come on a little late, so hopefully you haven't addressed this. I might ask two questions in one go, because the first one, you may need to look back to the first half. In the result releases under Australian Food, both questions, you give EBIT growth the first half of 13%, and then you've got a before significant items and after significant items in the full-year results. I'm just trying to figure out which is the comparable one with the first half. Sorry, that's a relatively simple one, hopefully. The second one is you have a metric now called plastic removed in tons, and I'm wondering whether that is a cumulative number or whether I should read that as you took out 2,100 tons last year and you've taken out an additional 2,550 tons this year.
What is the size of the prize, I guess is the ultimate question on that one. Thank you.
Thanks, Scott. I'll pass the question over to Steve Harrison to deal with. Steve, if you could. Pretty straightforward answers, I think there.
Yeah. Thanks, Brad. The half one EBIT versus half two, I would recommend you do your comparison before significant items. In terms of the question on plastic, actually we've got on page 28 of our investor presentation, we've actually footnoted it. I'll read it to you just for clarity. It's an annualized calculated value for each reporting period based on virgin plastic weight removed per unit times annualized sale volumes.
Scott, to your question of how much plastic we aspire to take out, that's a question we're working through at the moment. We're quite clear on our aspirations on Scope 1 and Scope 2 emissions, although we are planning to revisit our aspirations there as well in March next year when we revise all of our targets. We currently think what we're leading edge sustainability targets back in August, September last year now are slightly out of date. A lot more work to be done on target setting in the context of sustainability. We've actually set up an advanced analytics team within our sustainability chapter to review and recalculate all of the targets.
We can't tell you what our ultimate aspiration is for plastic, but we do intend to hopefully have that number early next year, and we'll then revise all of our targets, as well as in how we measure progress against them.
Thank you. That does conclude the question session. I'll hand back to Mr. Banducci for any closing remarks.
Thank you everyone for all of your interest in our business. I think it's fair to say we couldn't have presented to you a more complex series of accounts with changes in our portfolio, the impact of COVID, and so on. I really appreciate the nature of the questions asked today, and hopefully our answers helped you understand more about our business. As we said at the end, we feel very optimistic about the long-term potential of the group and the investments we're making. The short-term priority is around dealing with Delta and the challenges that will flow our way between now and late November. Thanks very much. Have a good day.