Leah Weckert: Good morning. Thank you for joining us on the call. We would like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri peoples of the Kulin nation. We acknowledge their strength and resilience and pay our respects to their elders, past and present. I hope you have all seen the materials we uploaded to the ASX a short time ago. I will make some brief comments and then we will open it up for questions. Today, we are pleased to report growth in the first quarter of 2.2% in group sales revenue to AUD 11.2 billion. In a competitive market, we achieved supermarket sales growth of 3.6%. This was bolstered by strong growth in supermarkets eCommerce of 22.9% and online sales penetration reaching 15.7%.
Leah Weckert: In liquor, our convenience portfolio remained in positive growth, and we saw a moderation in overall sales decline to 1.3%. Our integrated food and drink proposition continues to gain traction with customers, and we have had encouraging early results from our expanded grocery impulse and entertaining ranges and cross-shopping activity. Across the economy, supply chain cost pressures continue in many key business inputs. For example, we do expect increased fuel costs in H1. Australian households remain under sustained cost and pressure. Our research shows us that customers are becoming more cautious and are responding by shopping deliberately for value, particularly through specials, loyalty, and cross-shopping. That reinforces the importance of delivering compelling, trusted value consistently. Supermarkets price inflation, excluding tobacco, has remained broadly stable at 1.1% in Q1, driven by cost price increases in dairy and meat.
Leah Weckert: However, customers can get great value prices on a number of items currently in deflation, including grapes and berries, tomatoes, corn and baby broccoli, eggs, and vitamins. Further, we have sharpened our offer where customers need it most, which includes a deliberate investment into value and lower prices. We now have more than 4,000 products on Every Day low prices alongside thousands of specials every week. That includes some of our more popular items for budget-conscious shoppers, small and large packs of Coles chicken breast or thigh fillets, bread, cheese, and coffee. We have made it easier for customers to spot dependable value with the introduction of new, lower everyday prices. Customers can count on six months of price certainty from when a product is placed on Every Day, and we are already seeing encouraging signs since we launched.
Leah Weckert: In loyalty, in this month's Shop, Scan, Win offer, any customer who spends AUD 20 or more and scans their Flybuys card has the chance to win a brand-new all-electric Mazda and a year's worth of groceries valued at AUD 15,000. We have already had six Coles customers win this life-changing prize, and we have another four to give away before 3 November. With Halloween tomorrow, we are helping families make the occasion special while keeping their budgets front of mind. There is plenty of choice across a range of price points, from half-price share packs to 10 times Flybuys points on eligible Halloween confectionery. We will continue to be disciplined in how and where we invest in value, focusing on the areas that matter most to customers.
Leah Weckert: As we fast approach Christmas, customers are telling us they want to spend less time in the kitchen and more time with family and friends without compromising quality or value. We are focused on giving them more choice across Coles and Liquorland, with a combined 371 exclusive Christmas food and drink products, including 158 new additions. We have more than 200 Christmas products which are priced at AUD 10 or less. While the Coles Finest Christmas range has grown by 40% to 49 products this year. Our Coles Single Smoked Beechwood Half-Leg Ham remains at AUD 8 per kilo, unchanged now for the fourth year in a row. We know the Coles Christmas range will bring a lot of joy, as well as time and cost savings to countless families this year.
Leah Weckert: In closing, we are pleased with the consistent growth over several periods and are confident of continued sales momentum with our focus on value and lower prices. Thank you, and I will now take your questions.
Operator: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you are using a speakerphone, please pick up the handset to ask your question. We ask that questions be limited to 1 per person. Please rejoin the question queue for any follow-up questions. The first question today comes from Eli Greenblat from The Australian newspaper. Please go ahead.
Eli Greenblat: Eli and the team there. Just in your release, there is an admission there that you need to do better on prices and accompanying what looks like a profit warning or a downgrade on your profit for the H1. Why do you think that for the moment, shoppers are not seeing the value that you think you are putting out there, and they are choosing Woolworths? Why is it, do you think, they are not seeing the lower prices that you may have, and what can you do better? I am sure it is more than just the Ooshies campaigns from Woolies. So where were those missteps, do you think?
Leah Weckert: Well, I think it is worth noting that we have actually had very consistent sales growth now for a number of periods, and we have posted another very consistent sales for Q1. And that is despite the collectibles campaign that happened in the quarter. What we are very conscious of as we head into this period ahead of Christmas is that customers are really feeling the pressure on their household budgets. Alongside that, we would like our sales momentum to be stronger than where we are. So we are moving to take some deliberate steps as we move forward to really strengthen that momentum. And we think that is the right thing to do for customers in the current environment. But it is also the right thing to do for business. So we are really looking to double down on value and step up our price investment.
Leah Weckert: We have got really three big areas that we are looking to focus on to strengthen momentum. The first one is stepping up that value, but also strengthening the way we communicate value to customers in store. We have got over 4,000 products now on Every Day, which gives customers great price certainty for 6 months at least. Last week, we relaunched our Every Day program. You will have seen a new ad in market, new point of sale in store, and we have introduced a new mechanic, which is lower everyday prices. We have seen some really great early response to that from customers. We are also looking for other ways that we can also step up the value proposition as we come into Christmas.
Leah Weckert: Flybuys is definitely one of those, and you would have heard that I mentioned the Shop, Scan, Win Mazda giveaway that we have underway at the moment. We have also got the Curtis Stone summer entertaining range. That is all in that sort of value to the customer through the proposition. The second big area we are really focused on is delivering in the big moments that matter as we come through this period. If you go into stores at the moment, you will see that Halloween has really come to life in our stores. There is a lot of fun, and we have got some great things that can really make tomorrow a fun day for the family, including lots of pumpkins. There is also great value to be had on things like the share packs.
Leah Weckert: As we do the run into Christmas, we have got Diwali coming up, we have got Black Friday, we have got Cyber Monday, and then obviously Christmas being a big event as we end towards the year, which, as we have talked about with you before, Eli Greenblat, we have got our biggest Christmas range this year with 371 products, 200 of them less than AUD 10. We are also looking to do things like open up our online capacity to make sure that customers have a really great customer experience. That is on those big customer moments. I think the third area, which we are just going back and doubling down on, is this relentless focus that we have on availability and execution. This is really a forward-looking plan. We are actually very pleased with where we landed for Q1.
Eli Greenblat: Okay. Thank you.
Operator: Thank you. The next question comes from Carrie LaFrenz from the Australian Financial Review. Please go ahead.
Carrie LaFrenz: Oh, hi, Leah. Can you hear my questions?
Leah Weckert: I can, Carrie. How are you?
Carrie LaFrenz: Hi. Yes. I just would like to know if you can comment on the outlook for inflation. We just had the inflation number coming through earlier this week. Do you expect more suppliers asking for more price increases? What is the sort of the immediate outlook in terms of shelf prices and inflation?
Leah Weckert: Yeah. For Q1, the headline inflation that we had was pretty steady versus where we were at Q4. Although we have seen less deflation coming through in produce, and we are continuing to see inflation in areas like meat and dairy. We would expect that to continue to persist as we come into Christmas. I think from a request from suppliers for price increases, we definitely saw a large peak in Q4 of last year, and that was directly related to the conflict that we have seen in the Middle East. I would say the requests have significantly come off in Q1. The drivers that the suppliers are requesting now are a bit more varied. Fuel is definitely still in there, but we are also seeing wages, utilities, rent, insurance as reasons that suppliers are asking for increases.
Leah Weckert: Then we certainly have rise and fall mechanisms in our contracts for fuel for many of our suppliers. It is a little bit dependent on what happens with the fuel price as we come into Christmas, and I think it is quite volatile and uncertain at the moment.
Carrie LaFrenz: Can I ask just one more follow-up just on something you said before about the way you are communicating value to shoppers? Can you just really dig down and say what you are going to be doing differently? I just think that is an important component of what might be going on in the past quarter. Just divorcing from the Ooshies, because I know that is a one-off period.
Leah Weckert: Yeah. So we have got more lines now on Every Day, and Every Day is our trusted price mechanic where customers can have certainty that the price will remain at that point for at least six months. So there is over 4,000 products that are now on that mechanic. We have really brought that to life in store. So, you will see more prominent tickets identifying those products in store and more point of sale around the store. We are also putting new ads into market to help customers to understand that mechanic more strongly. Then we have introduced another mechanic alongside it, which is new lower Every Day prices, and that just launched last week. That is where customers can actually find a price drop, and then the price stays at that point for at least six months.
Leah Weckert: We have done big value bays in aisle, and big prominent displays at front of store to highlight those price drops that are going through.
Carrie LaFrenz: Thank you.
Operator: Thank you. The next question comes from Adrian Lowe from The West Australian. Please go ahead.
Adrian Lowe: Morning, Leah. Thanks for taking the questions. I wanted to ask, I guess, the value proposition that you are looking to drive. Do you expect to see that given we will have probably another interest rate rise next week and possibly more continued household budget pressure, that really sort of, I guess, is getting ahead of more of these sorts of things? Are you seeing any sort of early signs in changing customer behavior or more caution or those sorts of things ahead of another rate rise expected next week?
Leah Weckert: Yeah, you are exactly right, Adrian Lowe. We are anticipating that the environment for consumers is going to get tougher as we head into Christmas, which is why we are taking this opportunity right now to double down on value and step up our price investment. We know that is the right thing to do for customers right now. We know consumer sentiment remains cautious, and we know they are continuing to manage their budget carefully. We did see a step off in sentiment when the last rate rise came through. What we are hearing from customers when we talk to them through a lot of our surveys and our focus groups is, first of all, they are really seeking out value now by buying more specials. They are using their loyalty points.
Leah Weckert: You would have seen in the release today, we have seen some significant step-ups in our Flybuys swipe rates and use of points to pay for shopping over the last quarter. We would expect that to continue, but we are also seeing our customers shop more across multiple retailers. I think the other thing that we are expecting as we come into Christmas is that there will be more meals eaten at home, less going out, because that is a way to help to balance the budget.
Adrian Lowe: Thanks.
Operator: Thank you. The next question comes from Eric Johnston from The Australian. Please go ahead.
Eric Johnston: Thank you, and thanks, Leah Weckert. Just to extrapolate off Adrian Lowe's question, can I approach it a different way? Do you think the economy needs another rate rise at the moment, or how would you characterize the, because you talk a lot about the pressure on households. Are we in a so-called inflection point, a negative inflection point? Maybe you could just sort of talk about the picture there.
Leah Weckert: I'm sorry, Eric Johnston. The last part of that question just got a bit garbled in the queue. Can you repeat it?
Eric Johnston: Yeah, sure. Thanks. Two points. Does the economy need another rate rise? Is the economy at an inflection point, a negative inflection point, if one does happen?
Leah Weckert: Thanks for repeating that. Well, the first thing I'd say is I'm not an economist, so I'm probably not the best person to ask about whether or not a rate rise is needed. I can really only talk to what we are seeing from our customers at the moment. Certainly what we are hearing from them is that their budgets at home are stretched, and that they are very deliberately taking actions to seek out ways to lower the cost of pretty much every line that they have in a household budget. Of course, groceries is one of those lines. That's why we're seeing this behavior around seeking out value, making deliberate decisions around how much they treat themselves, and that can include how much they go out.
Leah Weckert: But it also includes things like, do they get a coffee from the local cafe or do they make it with a coffee pod at home, trading into more affordable options in terms of the ingredients that they use for meals. I think one of the interesting things that we've seen as a bit of an evolution in the last 6 months or so is the prevalence of consumers, particularly young families and the young demographic, using tools to do price checking. So we know a lot of our customers are now using AI tools, they're using price comparison apps, even using social media as sources to try and work out where is the cheapest place to buy things. So there's actually quite a lot of effort and time that people are putting into optimizing that budget.
Leah Weckert: Then I think that speaks to just the level of pressure that households are under. It is one of the reasons that last point that we need to make sure that our offer really stacks up every week so that when they do those checks, we come out as a place that they want to come and do a big part of their shops. That is a big part of the driver for what we have said today around investing more into value as we go into Christmas.
Eric Johnston: Thank you.
Operator: Thank you. The next question comes from James Thomson from the AFR. Please go ahead.
James Thomson: Hi, Leah. Thanks for taking questions. Obviously, you are doubling down on value and investing in price. Others are doing similar. Are you sensing the competition in the market at the moment is still rational? Are you not worrying so much about that competitive environment because you need to, I guess, meet your customers where they are and stay as the first choice in their mind for as many things as possible? Can you just give us a bit of thinking on the broader competitive position that you are thinking about?
Leah Weckert: It is a highly competitive market at the moment. I think there are two points that are leading to that. First of all, there are more players in the market playing in the grocery space than we have ever had before. That is the traditional supermarkets, but it is also non-traditional players like the pharmacies. We have specialist online players that are starting to play in some of these spaces. You have lots and lots of competitors that are really fighting for that customer dollar and the customer shop each week.
Leah Weckert: With the customer as cautious as they are, as I have outlined on a couple of the other questions, and actually engaging in a lot of price checking, it is putting, I guess, the onus on us as retailers to make sure that our offer really stacks up. That is why we think we need to move now to really double down on value as we come into Christmas, because we do not think that situation is going to alleviate. Actually, we think it could continue to get more intense as we go into Christmas.
James Thomson: Thanks, Leah.
Operator: Thank you. The next question comes from Millie Muroi from SMH. Please go ahead.
Millie Muroi: Hi, Leah. Thanks so much for taking questions. Similar question to Adrian's, but I am wondering what trends you are seeing when it comes to consumer preferences or purchases. I know you mentioned people are eating at home more, but are there specific categories or products people are disproportionately buying more or less of? Are there any changes you are seeing in terms of price sensitivity, especially for certain categories as people face higher interest rates and have to tighten their spending?
Leah Weckert: Yeah. It is quite an interesting time because you have a number of different changes that are happening in customer preferences all sitting alongside each other at the moment. So we are definitely seeing customers more interested in their own health. Anything in the store which has high protein is a strong seller at the moment. Meat has very strong sales, but also things like canned fish, so think canned tuna or canned sardines. Actually, we cannot even keep up with canned sardines demand at the moment. But also things like yogurt, they are really flying in terms of volume growth because of that leaning towards protein and that focus on health that customers have. I would say the other place that we are seeing that customer preferences really come through is with regards to convenience. That really plays out in two ways in the store.
Leah Weckert: The first one is just the strength that we are seeing with our online growth at the moment. So we had eCommerce growth of 22.9% during the quarter, which is a very strong growth rate. That convenience customers are still prioritizing even during this time of value focus because it makes their week easier. But we are also seeing very strong growth in our products, which help them to take some shortcuts at home. So products which are very easy to do in 10 to 15 minutes in the air fryer, products like our Made Easy meat products, which you can heat up and have dinner on the table in around 20 minutes. All of them are showing strong growth because they are helping families to take those shortcuts and get jobs that need to be done at home done faster.
Leah Weckert: I think the third one, which we have already talked quite a bit about is the value piece. What is interesting for me in this is that every family is a little bit different, and families will optimize within their own budget. So the areas that they want to be value-focused on and the areas they want to treat themselves. An interesting phenomenon that we have seen within our own brand range is that our Coles Finest range, which is our premium tier, that has been our fastest growing tier for some time in the brand space. I think really talks to the fact that customers are looking for great quality meal options that potentially can replace going out to eat at home. If they find good quality, then they are willing to buy into that.
Millie Muroi: Thank you.
Operator: Thank you. The next question comes from Hugo Mathers from Capital Brief. Please go ahead.
Hugo Mathers: Good morning. I was just going to touch upon the jobs announcement from August. Coles said it expanded its partnership with Accenture and would affect hundreds of corporate jobs. I was just wondering if, a couple of months later now, you can provide a breakdown of that expected impact on jobs, including redundancies and how many positions will be transferred offshore. Thank you.
Leah Weckert: Hi, Hugo. Thanks for the question. We are one of Australia's largest employers. We have around 115,000 team members. We actually announced in the full year a couple of components of strategic initiatives that we have underway. One was the establishment of the Coles Capability Centre with Accenture, which you rightly identified will impact about a few hundred jobs within the business. However, we also announced that we would be opening, over the course of the next two years, around 45 stores. Every store that we open has hundreds of jobs that are created as part of that. So over the course of the next few years, we actually expect that our team member roles that we have in our business will continue to grow over time above that 115,000 because of that new store rollout that we have.
Hugo Mathers: Thanks.
Operator: Thank you. The next question is a follow-up from Eli Greenblat from The Australian newspaper. Please go ahead.
Eli Greenblat: Oh, hi. Maybe two questions all at the same time, if that's okay. If you are investing more in better prices and all these actions you have spoken about, will that then further erode your profit for the H1? Is that a problem? Earlier this year, when you talked about fuel, you said that the extra fuel bill you had faced in the H2 was around AUD 10 to AUD 15 million. Can you quantify what that extra fuel cost has been this half?
Leah Weckert: Let me just cover off the profit piece, and then I have actually got Charlie, our CFO, here with me in the room, so I might get him to just speak to the fuel. We have actually given some guidance today in the outlook of where we expected to land from an EBIT perspective for the half, and that is inclusive of the actions that I have outlined on the call today. With regards to the fuel, Charlie, maybe you could just cover off.
Charlie Elias: Yeah. So Eli, morning, and look, as you know, we have seen global prices of fuel in the quarter rise. They have actually gone up from about AUD 2 to about AUD 2.80 if you look at the latest fuel price. We do actually have mechanisms in place. We do have lock-in prices for the best part of the Q2. We do have rise and fall mechanisms in place in contracts as well to deal with it. As you know, we did reference about AUD 10 to AUD 15 million for the H2 of FY26. I would say the impact this half is expected to be slightly higher than that.
Eli Greenblat: Okay. Thank you.
Operator: Thank you. That does conclude the question and answer session, as well as today's call. Thank you for participating. You may now disconnect.
