Coles Group Aktie

Thank you for standing by, and welcome to the Coles Group Limited FY '26 Results. [Operator Instructions]

I would now like to hand the conference over to Leah Weckert, Coles Group CEO. Please go ahead.

Good morning, and thank you for joining our full year results call this morning. Before I begin, I would like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri people of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders, past and present.

I'm joined in the room today by Charlie Elias, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Croft, our Chief Commercial and Sustainability Officer; Michael Courtney, our Chief Customer Experience Officer; and Claire Lauber, Chief Executive of Liquor.

Moving now on to Slide 3. FY '26 was another year of strong execution, where we strengthened our competitive position and grew market share in supermarkets. Excluding significant items, group EBIT increased by 9.9% and NPAT increased by 13.7%. Digital was again a standout with Supermarkets eCommerce sales increasing by 26.4%. And importantly, our customer fulfillment centers delivered positive EBITDA in only their second year of operation. We delivered $311 million of Simplify and Save to Invest benefits, helping us continue to invest in value and the customer experience. And what is particularly pleasing is that our financial performance was accompanied by further improvements in customer satisfaction and our highest ever team member engagement score. We have also announced targeted investments in our next phase of growth. This is across new stores, online and technology, coupled with a clear strategy to improve the performance of our liquor business, and I will talk to this in more detail in my presentation.

Moving on to Slide 4 and the financial highlights. We reported group sales revenue of $45.6 billion, an increase of 2.8%. As I just mentioned, excluding significant items, group EBIT increased by 9.9% and NPAT increased by 13.7%. In Supermarkets, sales revenue, excluding tobacco, increased by 5.1%. And Supermarkets EBIT increased by a very strong 12.2%, underpinned by top line growth and EBIT margin expansion of 43 basis points. Charlie will talk more to the financials in his presentation.

Moving on to Slide 5. The common thread through these results is the consistent execution of our strategy. Our customer proposition is resonating. We have continued to invest in value, Exclusive to Coles is performing strongly and customer satisfaction has improved. Our eCommerce business is scaling profitably with strong eCommerce growth, positive CFC EBITDA and continued improvements to the customer proposition. Our productivity programs are allowing us to convert that growth into earnings with EBIT growth significantly ahead of sales. And our strong cash generation and balance sheet gives us the capacity to reinvest in the business and pursue the next phase of growth. During the year, we refreshed our strategy for our flywheel to reflect the increasing importance of nonfood everyday essentials beyond food and drink and the growing role AI is playing across our business. The fundamentals of our strategy, however, remain consistent.

Let me take you through the progress we are making, starting with destination for food, drink and everyday essentials on Slide 6. We know value remains front of mind for Australian households and delivering value for our customers remains one of our high priorities. During the year, we continued to strengthen our value proposition in a number of ways. We expanded our everyday value range with more than 5,600 products now providing customers with consistent value whenever they shop. At the same time, we have been simplifying our promotional program around fewer, bigger and more impactful offers. This is about making specials truly special and at the same time, making execution simpler for our customers and our team members.

Our seasonal campaigns and continuity programs continue to resonate strongly, and we are increasingly using Flybuys and our digital capabilities to deliver more relevant and personalized value. Our Exclusive to Coles portfolio also remains a key differentiator for us, making shopping more affordable, and we saw growth ahead of the rest of store. Importantly, we're delivering value across all price tiers while continuing to offer the quality products our customers expect from Coles.

Let's discuss this in more detail on Slide 7. Exclusive to Coles delivered sales growth of 6.1%, with Coles Finest continuing to perform particularly well, with sales increasing by 9.2%. Exclusive to Coles plays an important role in both our value proposition and differentiation. We want to make shopping more affordable for customers, and we also want to create a range of products valued for their taste or functionality that are only available at Coles, providing a reason for customers to choose to shop with us. That means focusing our innovation where we believe we can lead and where there is an opportunity to offer something genuinely compelling. We see particular opportunities in health and convenience and saw strong momentum from our PerFORM high protein convenience meals this year. We also saw strong growth in our Ultra cleaning range in nonfood.

Quality and innovation remain at the heart of the portfolio, and it was great to see our products recognized with 40 awards, including 17 Product of the Year awards. We've also expanded our exclusive partnerships with leading brands, including M&S, Grill'd and Gami. These partnerships, together with our innovation, broaden our offer and give customers more reasons to choose Coles.

Move on to Slide 8. As I said at the start, one of the outcomes I was most pleased with this year was the improvement we saw in our customer satisfaction metrics. It is great to have seen a step up in all of the important metrics of quality, range, availability, price and store look and feel for the year. For me, the important takeaway is that customers are noticing the changes we are making. Our investments in value, quality and range, together with improvements in availability and execution in our stores are translating into a better customer experience. There is always more we can do, but the breadth of improvement across these measures gives us confidence that our customer proposition is moving in the right direction.

Moving on to Slide 9 and Accelerated by digital. Our eCommerce business had another very strong year with Supermarkets eCommerce sales increasing by 26.4% to $5.6 billion and penetration of 13.6%. We delivered double-digit growth across all our fulfillment channels and building a differentiated offer across the full range of customer shopping missions. Whether that be through our CFC, which provides our customers with our best online availability, guaranteed shelf life and a high-quality next-day and same-day delivery proposition and customers can even shop later at night now for delivery the next morning. Or whether it's customers looking for immediacy, our expanded partnership with Uber Eats gives them access to around 17,000 products. This is the largest grocery range available through an on-demand delivery platform in Australia.

We also continue to expand Windowless Rapid Click & Collect and saw strong growth in our Coles Plus and Coles Plus Saver subscriptions, and we've also seen some very good improvements in Click & Collect wait times. Importantly, our eCommerce business is not only growing strongly, but it is scaling profitably. We have delivered this through improvements in pick and last-mile delivery efficiencies as well as growth in our Coles 360 Retail Media business.

We are also really pleased to report that our CFCs are EBITDA positive, which I'll talk to now on Slide 10. Customers are responding positively to our 'Deliver More' proposition with strong volume growth and CFC NPS significantly ahead of total online NPS. Sales through the CFCs grew by more than 30%, ahead of overall eCommerce growth as we expanded catchments and introduced same-day delivery. We also continue to improve the economics with CFCs achieving positive EBITDA for the year. This was achieved through higher volumes, together with operational improvements, including on-grid robotic pickups, auto frame loading and auto bagging, which were all installed during the year. This is an important milestone in only the second year of operation, and it demonstrates that we can deliver a better customer proposition while at the same time improving efficiencies as the business scales.

Moving now on to Slide 11. Our digital assets and Flybuys loyalty program give us an increasingly powerful ability to connect loyalty, eCommerce and retail media. We know customers value offers that are relevant to them rather than simply receiving more offers. During the year, we continued to enhance our digital functionality and increase personalization across the customer journey. Features such as 'New for You' and 'My Weekly Specials' are making it easier for customers to discover products and value that is relevant to them. At the same time, our customer data capabilities are helping us create more connected experiences across our app, website and stores. Coles 360 is becoming a more important part of the business. We know that retail media in Australia is a large and growing market. In store, that might be digital screens, Coles Magazine or Coles Radio. On site, it is banners, tiles and videos in the app and on our website. Off-site, it could be YouTube and social media. The goal for us is to make the right value more visible and help suppliers connect with customers in ways that are useful, relevant and trusted. And this is an important area of growth for us.

Moving on to Slide 12 and our Simplify and Save to Invest program. Our Simplify and Save to Invest program remains a core part of how we operate. We delivered $311 million in benefits in FY '26, taking cumulative benefits since FY '24 to $876 million. And we remain on track to exceed $1 billion of benefits by the end of FY '27. If we look further back, we have now delivered around $1.9 billion of benefits since FY '20 through SSI and our previous Smarter Selling program. This demonstrates the consistency of our approach to productivity. These savings are important because they help us offset inflationary and other cost pressures while creating capacity to reinvest in value, our stores and our digital capabilities. And increasingly, data, technology, automation and AI are helping us identify new sources of productivity.

Moving on to Slide 13. AI is already well established across Coles and delivering value in many parts of our business. What has changed recently is the pace of capability and the breadth of where we can apply it. Coles has a unique combination of data and physical assets, millions of customer transactions every week, more than 1,800 stores, 8,000 suppliers, 115,000 team members and 10.3 million active Flybuys members. And we are increasingly bringing together those capabilities to improve outcomes for customers, our operations, and our team members. For customers, AI is helping us to improve personalization, product discovery and the relevance of our offers. The next wave is conversational shopping and agentic commerce. Over time, we see the potential for customers to engage with us in a much more intuitive way from discovering what they need through to transacting and receiving post-purchase support. Given the scale of our customer relationships, Flybuys and our digital channels, we think this is a particularly exciting opportunity for Coles.

Across our operations, AI is already embedded in our decision-making in areas such as forecasting, space and rent optimization, and inventory and store decisions. We are building towards end-to-end optimization across our supply chain, bringing together decisions across inventory, DCs, transport and replenishment so that increasingly, we can optimize the system as a whole rather than individual decisions in silos. And for our team members, we are using AI to make everyday tasks simpler and more productive. The next opportunity is to move beyond individual productivity tools towards function-specific agents and AI embedded directly into everyday workflows. This will help our team members spend less time on repetitive tasks and more time on the work that creates value. Overall, we remain disciplined about where we will deploy AI. Our focus is on areas where it can meaningfully improve customer experience, availability, growth and efficiency, and we're excited about the opportunities ahead.

Moving on to Slide 14. Alongside our financial performance, we remain very conscious of the role that Coles plays for our team members, suppliers and communities. We achieved our highest ever team member engagement scores during the year, placing Coles in the top quartile against the Australian benchmark for the third consecutive year. We continue to support our suppliers and growers with more than 97% of our fresh produce sourced from Australian growers, and we awarded more than $3.5 million in grants through the Coles Nurture Fund during the year. Our community partnerships also remain an important part of who we are. Coles contributed $45 million in community support in addition to the equivalent of 40.9 million meals donated to SecondBite and Foodbank. And we continue to make progress against our sustainability priorities, including an 82.6% reduction in Scope 1 & 2 emissions from our FY '20 baseline. These outcomes reflect the commitment of our team members right across Coles.

Moving on now to our strategic update. Over the past 3 years, we have invested significantly in transforming Coles. As we look back at the priorities we set 3 years ago, we can see tangible evidence that the time and resources that we have invested is delivering outcomes. And over the past 3 years, we have materially strengthened the business. Starting with our customer proposition. Exclusive to Coles has continued to grow and differentiate our offer, while Coles Finest has delivered particularly strong growth. We have enhanced value through the introduction of more everyday value products and reduced promotions, making it easier for customers to find value in store. At the same time, we have seen customer satisfaction improving across all key metrics. In digital, we have a significantly different business to where we were 3 years ago. eCommerce sales have more than doubled. Our 2 CFCs are now fully operational and delivering strong returns, and we have a market-leading immediacy offer and have made meaningful enhancements to our app and website to improve the customer experience.

At the same time, we have transformed our supply chain with our 2 ADCs now fully operational, which are delivering improvements in the availability and cost efficiency and an optimized store network. So when we look across the business today, we have a stronger customer proposition, a much larger digital business and a more automated supply chain and a more productive operating model.

Moving on to Slide 17. Importantly, the strategic progress that we have made has translated into strong financial outcomes and improved returns. Since FY '23, sales have grown at a compound annual rate of 4%. Over the same period, EBIT has grown at 7.7% per annum. Return on capital has increased by around 80 basis points to 17.3%. That is important as our objective has never simply been to grow the size of the business. We want to deliver sustainable earnings growth and attractive returns on the capital we invest. The combination of customer-led growth and disciplined productivity has allowed us to grow earnings faster than sales while continuing to reinvest in the business. And it has been underpinned by disciplined capital allocation, including consistent growth in dividends, which have increased from $0.66 per share in FY '23 to $0.78 per share this year.

Moving on to our capital allocation framework on Slide 18. Over the past 3 years, we have, on average, converted more than 100% of earnings into cash while investing around $1.1 billion a year in our core business across maintenance growth and efficiency. At the same time, we have maintained a strong investment-grade balance sheet, giving us capacity to invest through the cycle. That financial strength has enabled us to complete our major ADC and CFC investments, pursue strategic acquisitions, including our acquisition of MilkCo and several strategic property investments and progressively increase dividends while retaining flexibility for further shareholder returns. Looking ahead, our approach will remain unchanged: invest where we see attractive returns, maintain balance sheet strength and return surplus capital to shareholders.

Moving now on to Slide 19. With the transformation platform we've built over the past 3 years now well established, we're moving into the next phase of targeted investment. This isn't the entirety of our strategy, and we are looking forward to sharing more at our Investor Day later in the year, but I wanted to provide some insights this morning on where we are investing for future growth. First, our Victorian ADC. The $880 million development remains on time and on budget. Once operational, it will have capacity to process 4.6 million cartons a week and complete the automation of our ambient distribution network across the Eastern Seaboard.

Secondly, stores and technology. We plan to invest an additional $300 million by the end of FY '28, supporting around 45 new supermarkets, largely in infill locations and high-growth corridors and around 150 renewals. These investments will allow us to augment our store footprint, improve the customer experience, create more capacity for online fulfillment and make our stores more efficient. We'll also continue to simplify our technology and expand the use of AI-enabled capabilities.

Thirdly, liquor. FY '26 performance was below our expectations. We have completed a strategic review and have established a clear plan ahead. We will be focused on creating a more integrated food and drink experience across loyalty and eCommerce, optimizing the store network with greater emphasis on supermarket co-locations and simplifying the operating model.

And finally, the Coles Capability Center. Our expanded partnership with Accenture will give us access to world-class skills and technology at greater scale and pace. It will help accelerate technology delivery and create a more efficient operating model. Benefits are expected to begin in FY '27 and build to an annualized run rate of more than $100 million by the end of FY '29. Together, these investments are focused on improving our customer offer, creating capacity for growth and delivering productivity benefits and attractive long-term returns. We have a strong balance sheet, and we will remain disciplined in how we allocate capital while ensuring we continue to deliver a competitive offer that meets the needs of our customers.

I will now hand over to Charlie, who will take you through the financials in more detail.

Thank you, Leah, and good morning, everyone. I'll now take you through the group financial results in more detail. Overall, we are pleased with the financial performance of the group in FY '26. The result reflects continued sales momentum in supermarkets, strong operating leverage, disciplined cost management, while at the same time continuing to invest in value for our customers.

Moving on to Slide 21. We reported group sales revenue of $45.6 billion, an increase of 2.8%. Excluding significant items, group EBITDA increased by 7.1%. Group EBIT increased by 9.9% and NPAT increased by 13.7%. Importantly, earnings growth was well ahead of sales growth, reflecting the strong supermarkets performance, operating leverage and continued discipline across the cost base. The Board declared a fully franked final dividend of $0.37 per share, taking total dividends for the year to $0.78 per share. This represents an increase of 13% compared to FY '25.

Moving to the segment overview slide on 22. Starting with Supermarkets. We had a very strong year with EBIT increasing by 12.2%, reflecting strong top line growth, coupled with 43 basis points of margin expansion. Sales revenue increased by 3.7%, successfully cycling the impact of the competitor industrial action in the prior corresponding period and achieving market share growth for the year. Excluding tobacco, sales revenue increased by 5.1%. Our strong EBIT margin expansion was driven by improvements in both gross profit margin and cost of doing business as a percentage of sales. For the year, our GP margin increased by 37 basis points and CODB as a percentage of sales improved 6 basis points. The GM result reflected the annualized benefit from our ADC program and a significant decline in tobacco sales following the legislative changes at the beginning of the year. Both of these were weighted towards the first half.

Going forward, we would not expect to see material benefits to gross margin from tobacco given that we have reached a more stabilized level. We also continue to see benefit from strategic sourcing and SSI initiatives as well as the growth of 360 media income. Pleasingly, these benefits were able to successfully offset the meaningful investments we made in value throughout the year, including in red meat, as well as incremental fuel costs in the second half as a result of geopolitical tensions. In terms of cost of doing business, again, pleasingly, our SSI program went a long way offsetting our inflationary cost pressures this year with $311 million in savings and a majority being CODB related. And we also benefited from major project implementation, dual running and transition costs falling away, which assisted both GP and CODB. We are pleased with the continued strong growth in eCommerce sales, coupled with the ongoing positive margin outcome. Our ability to scale our digital business profitably is something we know you have been focused on, and we have continued to deliver on this.

As Leah mentioned, over the last year, 3 years, we have doubled our e-com sales and grown our EBIT margin by 90 basis points to 5.7%. This is a real achievement and reflects the significant benefits of our major transformation programs and continued focus on SSI have delivered. As we look to the year ahead, we will be continuing to work harder on SSI and continue to deliver the benefits from strategic sourcing and growing Coles 360. We know these programs are more important than ever with value being a key focus for our customers and inflation still coming through the cost base. We are also keeping a close eye on retail crime given the current pressure on consumers as we know this remains an industry issue. In addition to the above, we are really pleased we have announced the extension and expansion of our strategic partnership with Accenture to establish our Coles Capability Center, which will support the enhanced digital and technology capabilities, greater operational efficiency and improved outcomes for the business.

The strategic partnership is expected to deliver annualized cash benefits of over $100 million per annum by the end of FY '29 with one-off implementation and establishment costs of $190 million in FY '27. These costs are expected to be treated as a significant item. Importantly, this program is incremental to SSI with a really strong payback as this program will do much more than just save costs. It will accelerate our opportunities and strengthen our competitive position.

Moving on to Liquor, where sales revenue declined by 3.3% and EBIT declined by 47.8%. Sales were impacted by the cycling of the prior year benefits from competitor supply chain disruption, together with ongoing cost of living pressures and subdued consumer sentiment. Promotional activity across the sector was also elevated, particularly in the Big Box end of the market. Notwithstanding this, we completed our Simply Liquorland store conversion program and our convenience portfolio, representing more than 90% of our store network, delivered positive sales growth. Gross margin increased by 40 basis points, supported by strategic sourcing, promotional optimization initiatives, growth in Coles 360 Retail Media and a disciplined approach to price investment.

Liquor EBIT of $59 million was impacted by softer top line and a $20 million in one-off costs relating to Simply Liquorland conversions. In Other, revenue related solely to the Product Supply Agreement we have with Viva Energy. The improvement in the other EBIT line primarily reflected lower corporate costs, partly offset by higher net property losses.

Turning to operating cash flow on Slide 23. Operating cash flow, excluding interest and tax, was $4.3 billion with a cash realization of 101%. Working capital was broadly neutral for the full year. Higher receivables were partially offset by increased payables, largely due to the impact from inflation on cost of goods, while inventory remained broadly stable compared with the prior year. The movement in provisions and other primarily reflects the FWO provision, which is a noncash but recognized in EBITDA.

Moving to capital expenditure on Slide 24. Gross operating capital expenditure on an accrued basis was $1.2 billion, a decrease of $76 million compared to the prior year. As you know, capital expenditure falls into 4 areas: store renewals, growth initiatives, efficiency initiatives and maintenance. Within renewals, we completed 212 store renewals across our network, consisting 71 in supermarkets and 141 liquor stores. Within growth, we opened 13 new Supermarkets and 16 new Liquor stores while also continuing to invest in our e-com business. Efficiency initiatives included investments in-store front-end service transformation, liquor easy ordering and our Victorian ADC. Maintenance CapEx included ongoing refrigeration, electrical, store and technology life cycle replacement programs. We continue to optimize our property portfolio with net property capital expenditure increasing by $162 million due to an increase in property acquisitions and developments and lower proceeds from divestments.

Looking ahead, as Leah talked to, we are stepping up our capital expenditure this year to invest in a number of incremental strategic projects, including an additional $150 million in FY '27 and FY '28 in growth through opening 45 new supermarkets, delivering a net space growth well in excess of 2%, the renewal of 150 supermarkets, increasing online capacity, enhancing the customer experience and priority technology to both improve efficiency and accelerate AI capabilities. The increase is not an ongoing step-up in spend, but a very specific set of growth investments. We're also making excellent progress with our Victorian ADC and the project is both on time and on budget and we will complete the automation of our ambient distribution centers down the eastern seaboard. The FY '27 CapEx for the Victorian ADC is expected to be approximately $300 million. So overall, inclusive of our core CapEx program, we are expecting operating capital expenditure for this year to be around $1.55 billion.

Turning to balance sheet and liquidity on Slide 25. Our funding position remains strong. At year-end, our weighted average drawn debt maturity was 4.4 years with undrawn facilities of $2.5 billion, while our lease adjusted leverage ratio further strengthened to 2.3x. We continue to hold investment-grade ratings of BBB+ with S&P Global and Baa1 with Moody's. Combined with our strong balance sheet and cash generation, this provides the capacity to fund targeted growth investments, maintain financial discipline and continue returning dividends to shareholders.

As I said earlier, the Coles Board declared a fully franked final dividend of $0.37 per share, taking total dividend for the year to $0.78 a share, a 13% uplift. As you can see on this slide, we have a healthy franking credit balance of approximately $550 million after the payment of our final dividend. To summarize before I hand it back to Leah, FY '26 was a strong financial year for the group. We delivered earnings growth ahead of sales, strong cash generation and an improvement in balance sheet metrics. This puts us in a good stead to fund the next phase of growth for Coles.

I'll now hand it back to Leah to take us through the outlook and concluding comments.

Thank you, Charlie. So turning now to our outlook on Slide 33. We enter FY '27 in a strong position, with Supermarkets having gained market share and significantly improved customer satisfaction scores over the past year. Sales growth for the first 8 weeks of FY '27 was consistent with fourth quarter FY '26. In the first few weeks of FY '27, sales momentum was well ahead of fourth quarter FY '26 with a temporary moderation during a competitor's collectibles campaign in late July and early August. Following the end of the collectibles campaign, sales recovered quickly back to levels consistent with fourth quarter FY '26. Our differentiated eCommerce offer continues to be a significant driver of growth with penetration increasing to 15.7% over the period. In Liquor, the sales trajectory strengthened across the first 8 weeks relative to fourth quarter FY '26. Our convenience portfolio continued to deliver positive growth, while performance in the warehouse portfolio also improved.

And with that, I'd now hand back to the operator for Q&A.

Your first question today comes from Caleb Wheatley with Macquarie.

Just wanted to come back to the strategic initiatives you're calling out in the 4 major areas there. Appreciate clearly there's a fairly meaningful step-up in CapEx as you look to invest in those. But from a returns point of view, how should the market sort of think about the pathway for these investments and especially when we should expect these returns to start to be realized in a tangible sense?

Yes. Thanks, Caleb for that question. It's a great question. Let us unpick those very clearly. Firstly, the ADC. I think you're probably pretty well-versed on the ADCs going forward. As you know, that will come into train in FY '29, FY '30. This year's CapEx on that is $300 million. And then you know we've had a very disciplined way in terms of we allocate capital to those sort of programs. They are risk-adjusted returns on our cost of capital, and we're very clear how those drive benefits. If I think about the step-up in the store programs, we're talking about 45 supermarkets over the next 2 years. That is taking our net space growth to well over 2%. That's a significant step up in increasing in terms of our capacity. We love investing in our stores. They are some of the best returning assets that we buy, very strong returns on capital.

If I look at the renewals step-up to 150, we did 71 in FY '26. We are stepping it up to 75, but the nature of the spend is really important in those 75, the 150, sorry, that we're talking about over the next 2 years, is they're not standard. What we're looking at doing is increasing our online capacity and improving the customer experience in those stores. And we know, Caleb, if you recall when we actually took the next-day home delivery volume out of our Metro Melbourne and Sydney, when we freed up that capacity, it really did facilitate strong growth in our eCommerce business. So we're really excited about the growth that can unleash in eCommerce and in our stores, but also improve what we're doing. And what are we doing in those stores? Improving things like staging areas, refrigeration in the back of house, really ensuring that these stores can really deliver and cater things like Click & Collect more bays, et cetera, that are really driving sort of growth.

So again, we're really pleased with that growth. If you look at our performance on our capital, more importantly, we have been consistently investing at $1.1 billion ex the transformation programs. And what you can see over the last 3 years is our return on capital has improved over 80 basis points over that period. So I think a very strong returning set of CapEx.

Okay, great. And then I guess a bit of a follow-up. I appreciate this isn't necessarily kind of a CapEx item. But perhaps I'm a bit surprised that sort of Coles 360 or Retail Media hasn't been as much of a focus there. I appreciate it's not new, I appreciate income up 55% as you called out over the past few years. But just sort of operationally and the sort of benefit you see that driving on a go-forward basis, just keen to sort of understand where that's at, both from a capability point of view, from a sort of inventory point of view in inverted commas, and then sort of how you're thinking about that as sort of an investment on a go-forward basis?

Yes. Thanks for the question, Caleb. I'll start and then I might get Michael to give us a bit of color. I mean I think we were quite pleased with double-digit growth in the Coles 360 space. We've continued to bring on more assets. We've improved our measurement capability through the year and really focused on ensuring that we're really listening to feedback on how we can lift ROI. That has been some big focuses over the last 12 months. And I think we're feeling like the business is really starting to get some momentum behind it. But maybe, Michael, you could give a bit of color to that.

Yes, happy to, Leah. I think the key word that both yourself and Caleb used is capability because this has been a year where we are continuing to build capability so that we can keep scaling the business into the future. And Leah mentioned some of the areas where we're building, bringing capability from a product aspect of whether that's ad server manager, whether it's reporting and measurement capability that we're being able to offer to suppliers because of what they've been asking for. So we've made some improvements in that space. I think the other area where we've been building capability over this year that we haven't spoken a lot about is in the people space as well.

So back in September last year, we completed quite a big in-sourcing exercise of some capability that previously sat externally had helped us scale the 360 business through the initial phase of growth, but bring our capability in-house to have it closer to our planning. Our technology is going to help us accelerate in this next phase of growth. So just to finish up on that, I would echo Leah's sentiment that growing at double digit in a year where we're still rapidly building capability, I think, is a good result. I think it positions us really well for continued growth into the future in what is a large and attractive market for us.

Your next question comes from Peter Marks with Goldman Sachs.

My question is just on the July acceleration in the first few weeks. Is there a benefit from the Uber Eats exclusivity arrangement in that time frame? Or if not, what's driven that acceleration? If I can just touch on that? Because I guess if it's the Uber Eats benefit, that should continue into the second quarter is the way I'm thinking about that.

So again, I'll start and then maybe ask for a bit of color from Michael. I think actually, as we came into the back end of FY '26, Peter, we actually saw probably a strengthening in the market. So June picked up again a bit versus where we've been in May. And then actually going into July, we saw a further pickup again. So there's definitely strength in the grocery market at the moment. And certainly, that would align with some improvements that we've seen in consumer sentiment since April and May, where it sort of hit some low points, but also more and more customers telling us that they're eating more at home than they are out of home. So I do think that, that is playing a role there. That being said, as we've gone through these first 8 weeks, we have seen really strong strength in the online proposition. And I do think -- and you would have seen we've called that out in the outlook. But I do think that, that's starting to really highlight that we've got some areas of differentiation in there with regards to the Deliver More offer through the customer fulfillment centers, but also through the Uber partnership, which is growing very strongly for us. Michael, did you want to just make a couple of comments on the Uber partnership?

Yes, very happy to. We're very pleased with how the momentum in that offer continues to grow. Peter, if you're thinking about the sales impact of it, in terms of timing, I would think about it from the perspective of when we announced the deal, which was just prior to Christmas. Because what that means is that through the second half, really from the start of this calendar year, we've seen sales through our media offer and our partnership with Uber continue to increase steadily throughout the second half. And that's a really good achievement when you think about at the start of this calendar year, when we went from 2 platforms down to 1, we first had to recover the sales that we were losing from the second platform, which we did successfully very quickly and then continue to grow.

So throughout the first half of this calendar year, we've continued to see benefits. And I think that's a testament to what the strength of the partnership is because that expanded partnership with Uber, we think, gives us the market-leading offer in what is a very high-growth channel. Why is it a market-leading offer? Because from a customer perspective, we think we've got the largest range in that space with over 17,000 SKUs, we're the partner of choice on the largest platform in that part of the market. And this partnership that we've signed with them, we're already seeing benefits from being able to plan marketing and promotional activity more effectively. So really pleased with how that's going, see room for further growth, and it's certainly been a strong part of what's been helping us get to such strong growth rates in e-com as an overall business. And as Leah said, it's one of the differentiated offers that we've got in that space.

The next question comes from Shaun Cousins with UBS.

You've expanded your strategy to include everyday essentials, and I assume that appears to accommodate the interest that Coles announced about Greencross. Can you provide some indications of the capability that Coles has in everyday essentials in a stand-alone format, big and small rather than the supermarket format as investors reacted negatively to Coles' interest in Greencross suggesting a lack of confidence in that capability, and there appear to be a preference for capital management. So can you maybe provide -- hopefully, there's an opportunity to talk about the capabilities that in everyday essentials as a stand-alone, please?

Well, why don't I start maybe talking a little bit about the thinking behind Greencross. And then I might get Anna to talk a little bit about the focus that we've got in everyday essentials, which really for us is the nonfood component of our grocery offer. So Shaun, I think it shouldn't come as any surprise to anyone that we regularly assess opportunities which we think are going to complement or strengthen the business and ultimately create value for shareholders. And in general, we would be interested in looking at adjacencies that are quite close to the core areas of the business that we already run. And so something like specialty retail is a good -- specialty pet retail, I should say, is a good example of this because we already have a substantial pet business that we run with supermarkets.

And I think if you go to the Greencross opportunity, I mean, we were attracted to it as a segment because 70% of households have at least one pet. And so it does make it a real stable component of a weekly budget. And you're also seeing the impact of pet humanization and a focus on pet nutrition, which is really encouraging customers to shop at pet specialty where they can get access to a different range and they can get access to advice. And I think what many people don't appreciate about pet specialty is there's not a lot of overlap between pet specialty and grocery pet. About 90% of the range that you will find in a pet specialty retailer is not available in a Coles. And because of the supplier dynamics, that's unlikely to change. And so you've seen us do the Swaggle investments that we made. That certainly taught us a lot about how to play in that specialty space. It's an area we will continue to look at and assess opportunities going forward from an inorganic perspective.

But I think given we ultimately weren't able to reach a point of agreement on value around Greencross, we're now firmly focused on what we can do in the short to medium term around organic opportunities. And maybe I'll get Anna just to talk to that.

Yes. Hi, Shaun. Nonfood, as you know, remains a really strategic priority for us. And we have made some really clear progress on establishing strength in that area last year. That's really following on from the reset of the portfolio around value, better range relevance and much stronger execution. Importantly and pleasingly, we've seen a real change in the trajectory of those categories after more than 2 years of what I'd say is really consistent year-on-year pressure on share. We have returned to positive share momentum throughout half 2, which gives us increasing confidence that the changes we're making are working. And there are a couple of things that have really been driving that.

Health & Beauty continues to strengthen, and we've seen really good share growth across many of the core categories, be that hair, dental, vitamins, face and body wash. And that's been really deliberate around stepping up innovation in those areas and bringing in a much more differentiated range of both exclusive and different brands. And some of those in hair care might be Mimi or DoseTheory, and many others that we are working through. But also alongside that, we've strengthened our everyday value proposition, making it much simpler for customers to find dependable value. And actually, as we exited Q4, everyday value was the highest contribution we've seen out of those categories.

The other area I would just say is driving the performance is the strong results from own brand and the new bulk offer. So Coles Ultra, as Leah touched on earlier, delivered double-digit sales growth in the year and supported by very strong volume growth. And that was really about sharper value innovation in the core categories that matter most. And then again, I think kind of the core category, but toilet paper are a really good example where we've invested in value bulk and price investment of both quality into the own brand business, and that really is driving both improved offer and share.

But we're not stopping there on own brands. We're building on that momentum taking into new categories and key areas that matter most for customers. And an example of this has been the strengthening of the Cub brand in baby, and we've gone into food there in the last couple of months, and we've been really encouraged by customer response in that space. So I'd say overall, we're really pleased with the momentum. We're pleased with the positive share growth, but there is a lot to do. It is a very competitive market, and we've got a clear plan, and we've just got to execute against it.

Great. My second question is just around Big Box liquor sales. I think in the third quarter, you called out that they were down 20%. Can you just maybe quantify what they were down in the fourth quarter as trading still remains sort of difficult there? And more generally, would you consider an exit of Big Box, possibly maybe at the end of lease? As it's unclear that ongoing investment in that business is sound, and it seems as though convenience is the winning sort of channel certainly for your business there. So maybe some more detail on Big Box trading and sort of outlook, please.

Yes. So we did see the Big Boxes improve in Q4 relative to where we were in Q3. But overall, for the total year, they still were in decline somewhere between sort of negative 15% and negative 20%. We've done a full review now of the entire portfolio, not just the warehouses, but the entire Liquor portfolio. And what I'd say is whilst the warehouses have underperformed, the performance is not uniform across all of the stores in the cohort. And so what we've done in the review is look on a store-by-store basis very much at micro location, which makes a big difference here to performance. And what you're seeing in the strategic update that we've given today is on the back of that is the 30 store closures, which we're anticipating on doing in FY '27.

And I would say there is a disproportionate amount of warehouses that are in that group. However, for the warehouses that haven't got the closures coming, we have optimism around getting them into a growth position again. And actually, if you visited any of our stores even in the last couple of weeks, you'll start to have seen that there are some things that we are doing to really differentiate the range in the Liquorland Warehouse from the rest of the network, and we're very encouraged by the early performance of that.

Your next question comes from Phil Kimber with E&P Capital.

Maybe to follow-on on Liquor. I was just interested if I looked at the half, the GP margins have gone up quite a lot in the second half for Liquor, they're up 40 basis for the full year and 20-odd basis points in the first half. So sort of implying 60 basis points in the second half. At the same time, sales are still negative, arguably deteriorating a little bit. Just trying to understand the correlation there that in a market that we understand is incredibly competitive, why your GP margins will be going up at the same time as the sales are going down?

Yes. Thanks for the question, Phil. I will let Claire answer this one for you.

Look, our gross margin pleasingly increased by 40 basis points for a few reasons. Our strategic sourcing program has been really strong and improved in the second half. Promotional optimization activities and also growth in our Coles 360 media income has improved half-on-half and a really disciplined approach to price investment throughout the year. So they are the key reasons why gross margin has improved, acknowledging that sales are still challenged in some areas.

I mean what about your value sort of comparisons to the market? Have they weakened off at all? I know there's sort of 2 quite different trends going on in this business between the convenience side and the Liquorland Warehouse side, but just interested there as to whether you need to do a bit more work to further sharpen pricing?

It's a good question. I think we're comfortable with where our price indices are at the moment. As you can see, strategically, we're definitely moving to a stronger focus on the co-located stores with supermarkets. By and large, that's our Liquorland and Liquorland Cellars format. And they remain very competitive in terms of their competition that they have in the market. And as I said, with regards to Warehouse, what we are looking to do is to really start to differentiate the range there so that we've got an incremental offering for customers there.

Is that what you mean when you say grocery in the liquor stores?

It's a combination of things. There are definitely some grocery items that have gone into warehouses, and they make a great incremental purchase when you're buying alcohol. I think things like mixers, soft drinks, chips, even things like Berocca, Phil, which you obviously need the next day. But we are also looking at differentiating range within the alcohol offer as well at both ends, looking at what we can do from a value perspective, but also bulk sizes and the more premium end as well.

Your next question comes from Adrian Lemme with Citi.

My first question was just on the trading update in Supermarkets. It was better than we're fearing based on the supply feedback. Can I just ask, have you had to sacrifice some margin to sustain sales during this recent period, please?

Yes. So I think we're quite pleased with where it ended up given -- if you look at the 2-year stack in particular, I mean, it's an unusual shape. But if you take consistent with Q4 and you stack it on where we were last year, which was 4.9% or actually probably the more relevant number is the 7% ex tobacco. That's a very strong 2 year-on-year growth number even with that moderation that we saw from a collectibles campaign for 3 to 4 weeks in the middle. And as I said in the outlook, we're very pleased that the sales have recovered quickly post the collectible campaign coming to an end. I think more generally, not even just talking about the first 8 weeks, but I would say the competitive intensity right now is quite strong. That's not new, but we certainly are seeing many of our grocery competitors investing in price, and we are responding to that to ensure that we remain competitive. And then we are also proactively investing in areas, particularly own brand to ensure that we're giving the customers a basket that really is very value-oriented.

And could I just ask on the balance sheet positioning? Just pulling together a couple things I think was said on the call. I think you mentioned that you would look to return surplus capital to shareholders. And in the earlier question, it was said that you're more focused now on organic opportunities in nonfood. So just pulling all that together, the gearing is down to 2.3x. It was, we think, sort of over 3x 6 years ago. So can I just ask, do you think you actually do have surplus capital at the moment? I guess that will depend on your acquisition outlook. But do you look to return that capital to shareholders over the next 12 months? Or I just want to get your thinking on that, please.

Adrian, great question. Thank you for that. Look, I think it all starts, Adrian, with our capital allocation framework that Leah took us through a little earlier. And really, we do take a very disciplined approach to how we allocate capital. And we take into account the things that you've highlighted, things like the strength of the balance sheet, what our organic investment requirements might be, dividends, strategic flexibility and of course, the relative returns from all those various areas that you could deploy capital, which become really important. So and as you know, we've been paying out dividends of around 80% of our earnings in the form of dividends each year. That's been really consistent since demerger. This year, we actually stepped up 13% and the fully franked dividend is $1 billion, which is quite an achievement.

But in terms of surplus capital beyond our requirements, the Board is always going to consider the most appropriate way to deploy or return capital. And the objective is and will always be how do we generate the optimal returns for shareholders over the long term.

Your next question comes from Bryan Raymond with JPMorgan.

Just one on the renewal program. I just wanted to ask about the average store age at the moment, how -- I guess, since it was either opened or last had a major renewal as opposed to a light touch renewal, where that is versus your target and whether these 150 renewals are like incremental to sort of what you have been doing, which is 50 to 70 per annum in recent years? So just keen to understand sort of the magnitude of what you're doing here on renewing the store network.

Yes. No, thanks, Bryan. Great question. Look, I think we have been. I think when we were renewing at a rate of about 50. I would say that our store fleet was getting older, right? And when we step it up in FY '26 to 70, that's the point in which is your fleet in general actually gets younger. And certainly, going forward with the 150 renewals that we are indicating that we could see that our average fleet will get younger going forward. But it's a quick reminder though of what are we spending the renewal amount on. And I think we talked a little bit about and I talked a little bit about that it is going to look at how do we actually build capacity for growth. And that's the important distinction. These aren't just normal renewals, and we will get a younger fleet out of it, but we will more importantly, increase the capacity to facilitate more online growth, but also better experiences for our customers in store. And that's our focus with these 150 renewals over the next few years.

Right. Just to put that in context for us through numbers, is it possible to give us sort of an average spend per renewal in this $150 million versus what you've been doing in recent years, which I assume is not as transformative for those particular stores?

Look, I won't go into in terms of breaking it down. But I think the best way to think about it is if I look at the sort of $300 million or the $150 million over each year for FY '27 and FY '28. 70% to 75% of that spend is really in relation to property, whether it's the new stores or the renewals. So it's all about how do we actually grow and augment our store network for growth.

Right. Okay. That's helpful. And then just on the new store openings, as you said, it's been a bit softer in recent years, and you are looking to accelerate that, which is good to see. The 45 stores, I assume a lot of those have been in train for some time because these things don't happen overnight with the property planning approach, et cetera. Just wanted to understand like how confident you are in delivering those, let's call it, 22 to 23 stores per annum for the next couple of years, given you've been doing roughly half that pace in terms of store openings over the past 3 years? Or is there some chance of slippage given delays and all sorts of things with building and approvals, et cetera?

Yes. So in relation to those 45, Bryan, we're very confident. We wouldn't have called it out otherwise. So let me say, I think we're very confident. It will always be things like weather and things that could impact timings. What we are confident on, firstly, is these stores firstly have been pre the merger law reforms that the ACCC, they are approved. We have line of sight. We're doing more through our Coles Property Group as well. And we are in constant dialogue and constant monitoring with our developers that are working through to the extent the lease developed stores. So Bryan, we're very confident of the 45 stores. But always, there will be other things like weather things that can't always predict. But we're confident of delivering over 2% net space growth over the next few years.

I think it's probably also just worth touching on in the context of this question around the ACCC merger regime. So we have been submitting proposals through that regime since it came into place in January. There's obviously been a lot of media coverage around Kalgoorlie, which is the one store that has been denied through that process so far. But we've actually received 10 approvals through the process as well. So we are proactively and actively participating in that process and successfully having stores approved.

Your next question comes from Tom Kierath with Barrenjoey.

My question is just on your tobacco growth rate. I suppose, especially in July and August because you're lapping some pretty tough numbers, obviously, when the legislation changed. But can you maybe just give us an update on what's happening in the trading update on tobacco? I know it's quite volatile and you haven't given us a sales ex-tobacco growth rate there.

Yes. So sales have remained relatively consistent now in terms of the dollar number for several months, and that's really because we've cycled over that Q4 exit that we made of products last year related to the regulatory change. And so you will have seen in the Q4 numbers, there's very little difference between all-store number and the ex-tobacco number. That's what you should really expect going right now.

Yes. Okay. And then just secondly, on the gross margins, I think they only went up 7 basis points in the second half or a bit more just with tobacco kind of coming down, especially in that third quarter. Is the right way to read it like more price investment or just some of the, I guess, higher costs coming through like fuel prices, et cetera, that you couldn't kind of offset necessarily there?

Yes. Great question, Tom. So thank you for that. Look, you're right. So the gross margin, obviously, we did grow gross margin in FY '26 by 37 basis points. That was across the year. But it was weighted to the first half. I think not surprisingly, we called it out at the previous and earlier that [indiscernible], if you like, tailwind from -- in terms of gross margin run rate is very much first half related. But also what was in that first half as well is now very firmly the benefit that we got from the ADCs, right? So the ADCs, as we know, have been strong benefit programs that are delivering exceptionally well against the business case. Again, weighted in the first half than the second half.

There are lots of moving parts in gross margin. Our strategic sourcing, which is an always-on program, very successful. SSI very much over to $311 million. I guess what's been different this year in SSI is traditionally 1/3 of SSI has been in gross margin and 2/3 in CODB. It's probably more like 20% in CODB this year rather than 1/3. And -- but we see that potentially maybe reverting back to 1/3, 2/3.

So lots of moving parts, but also Coles 360 in that as well. So lots of moving parts. And I think that has allowed us to make the investments as well. We have been investing as we have called out. So I think going forward, tobacco tailwinds, if you will, et cetera, and the ADC now firmly in the base, they are very, very different going forward.

That being said, I really do encourage you to look at the P&L top to bottom. And things do move between GP and -- that we've moved anything, but with the mix of sales now and e-com growing very, very strongly. And so what's really pleasing about the result here is the growth in the EBIT margin. And the EBIT margin has grown strongly, and you've seen our EBIT growth rate 3x that of our [indiscernible].

And just, Tom, rounding out the answer, you specifically raised the fuel piece. We did call out in Q3 that we expected that to be $10 million to $15 million of impact in H2, and it came in at the top end of that range, and that will have gone into the GP as well.

Tom, just in case I did not -- just in case I said it differently, what we said was this year, 20% of the SSI was in GP, 80% in CODB, just to be very clear. But historically, that's been 1/3, 2/3.

The next question comes from Michael Simotas with Jefferies.

I've got one short-term question and one longer-term question. Firstly, on the trading update, I appreciate there's a lot of moving parts, and you've given us some color on the cadence of sales through that period. Do you think that exit run rate of something similar to the fourth quarter is indicative of the underlying growth in the business? Or do you still think there is some ongoing drag from your competitors' collectible program due to pantry stock and forward buying, et cetera?

It's a great question. So the collectibles campaign really came to an end 10 days ago. So it's -- I think at this stage, probably a bit hard to say whether the full recovery has occurred in terms of it coming back up. But I think in general, as we look ahead for sales for the year, we're feeling very encouraged because of a number of factors.

The first is this new space that we've got coming on will help to drive our top line sales. The second piece would be the strength that we saw in online through those first 8 weeks because really, it didn't miss a trick through that period and that strength that we've got in both Uber and Deliver More offer through the CFCs. We expect both of those to be good contributors to sales growth this year.

And then the third thing I'd say is probably where I came back to when I was talking about the market. It's certainly feeling to us at the moment that many customers are choosing to eat more at home, and that is really supporting a healthy growth rate in the grocery area. And very much that is led by volume, which is a great place to be. Our inflation actually at the moment is still running pretty low and most of our sales growth is coming out of volume, which is always where we want to be.

Okay. No, that's helpful. And then the second one is on implementation costs for the Victoria ADC. So you've called out $35 million of implementation costs in 2028. How should we -- without giving numbers, how should we think about the evolution of that as it comes through the P&L? Will it follow a similar shape to what you reported with the first 2 ADCs where it gets a little bit bigger in the years after the first year before it moderates and then turns into a tailwind for the P&L?

Yes, Michael, thank you for the question. Look, there's probably a couple of things. We've given you obviously the FY '28 number today. And as with the other 2 programs, we'll give you those numbers very much closer to in 12 months' time, a little bit. There will be a post -- there will be a step-up on the $35 million. That will be fact. But I won't give you the number today. But as you're right, there will be some implementation costs. They will then fall away as they have done with these sort of programs. And that -- because these assets are really strong returning investments that we are making for the future.

Yes. Okay. So it sounds like if we use the shape of the first 2 as a guide, it's probably sensible at this stage.

Well, Michael, that's not really what I said, but yes, I won't tell you how to model this. I've given you a number for FY '28. And yes, there will be a step-up in '29 as these will come on in '29, '30.

Your next question comes from Craig Woolford with MST Marquee.

Just first one, you touched on there on inflation. It is interesting and good for the consumer that we haven't seen much movement in that inflation figure despite the volatility around Middle East. Can you just give some color on what you're seeing on the inflation backdrop? And I'll be a bit cheeky and sneak in a second part of that, which is what do you expect in the outlook on your EDLP versus high/low mix?

Craig, it's Anna. I might give you a bit of color on that because there is a lot going on in the inflationary number. What I'd say at a headline level, it was broadly stable in the quarter. So there were a number of moving parts. I would say, first of all, in the quarter, we received twice the number of CPIs we did versus Q4 last year.

Fuel did account for the vast majority of those, but we saw additional pressure coming through from fertilizer, freight, shipping, packaging and utilities and labor. So there's a number of drivers behind that. But also some drivers at the category level. We're continuing to see inflation coming out of livestock, and we've been seeing that for some time as well as dairy, and that includes across kind of what we're seeing in milk and cheese and some of the pricing there.

Bakery was also impacted by the global disruption costs as well alongside some of the fuel-related pressures. But those increases we have seen offset by some very heavy deflation in produce as we cycled over the very tight supply and elevated pricing from last year, and that was particularly in soft veg, such as tomatoes. We've also seen eggs moderate as we cycled over the avian flu shortages last year as well.

This has also been coupled with really strong promotional intensity across a number of categories in grocery, predominantly impulse and breakfast. And coupled on top of that, we're continuing to invest in price competitiveness. So you saw that reflected in some of the GP profit and that investment we expect to continue into the first half.

If I flip into looking forward, there is definitely some upward pressure on inflation, particularly as produce cycles that deflation and more broadly as our suppliers face the inflationary costs. And we're also watching fuel, freight and packaging and the impact from global costs coming through very tightly as well as both poultry and eggs from the avian flu position. So there's a lot going on there.

I expect livestock to remain elevated. And indeed, we have been absorbing some of those increases for some time now to really minimize the impact on customers. So the full effect has not flowed through into our inflation number. And I would say the offset of that has been some of our sourcing program as we continue to work with suppliers to continue to achieve competitive terms and identify more opportunities to invest for customers, and we'll continue to invest really where it matters most to customers.

So on balance, I do expect we are going to see inflation higher in the next 12 months than we have in the previous 12, although there is a number of different variables, and it will depend a little bit on the competitive environment that we find ourselves in.

And just that EDLP, like what's the future of that EDLP mix in your business?

[indiscernible].

EDLP, the use of Down Down and our EDLP mechanics versus high/low.

Yes. I think, look, we've been for some time, as you know, Craig, focus on where it really matters, but coupling that with the EDLP, and we've seen really strong customer engagement through that. And we're doing it on a category-by-category basis. And actually, we have extended the number of categories over the last quarter that are on EDLP, and we're seeing that work particularly well. And importantly, the suppliers we have are on the journey with us around the right categories, and we're seeing that really drive benefit. So I expect it to continue, and we are still absolutely strategically committed to driving trusted pricing where it matters most to customers.

And Charlie, just to clarify your CapEx comment earlier, the $1.55 billion, I think you said it's not going to stay at that elevated level. It sounds like there's 2 years of extra store openings and extra renewals. And, I don't know we thought the renewal rate is more where it should be rather than elevated.

So Craig, let me break -- as I did earlier, break down what that $1.55 billion is made up of. One of it is the $1.1 billion that we have been spending, which does include -- has included 71 renewals, for example, last year. That obviously is what -- let's call it almost like core CapEx, but it does -- it can flex down very, very, very clearly. On top of that $1.1 billion is $300 million relating to the Victorian ADC. And as we've previously called out, FY '27 and FY '28 are really the core years of that program. Remember, the program is an $880 million program. We've spent $190 million to date, $300 million this year in FY '27, and we expect '28 to also be a strong CapEx year for the ADCs.

And in relation to these very specific investments that we called out, both in terms of new stores and the uplift in renewals, they have called those out. They are very specific investments, not to be ongoing, and we've called them out for '27 and '28.

Your next question comes from Benjamin Gilbert with Jarden.

Just around costs, I'm just trying to understand how to think about the shape into fiscal '27. And specifically, you've done sort of second half cost out for SSI, $180 million, which is obviously a big step up on the first half. So I presume we can annualize some of that into fiscal '27. You've got this Coles capability center, which you're taking below the line, which I presume a bunch of those benefits will come above the line through next year because there's redundancies, et cetera.

Is it conceivable that you could have pretty benign CODB growth similar to '26 into '27 based on these benefits? Because it seems like there's a lot of cost about to come out into '27 just based on second half run rate and the capability, which I think you said additional to SSI.

So let me take that, Ben. So thanks for the question, firstly. On one of the things -- let me just go back to FY '26. And I think FY '26 is a really good year for us. Obviously, we took out $300 million for SSI, a really important program, which really assisted us in trying to keep CODB as a percentage of sales flat year-on-year. That's the target that we try and target as ongoing going forward, a really important number because obviously, that assists in delivering the right earnings outcome through that sort of environment.

And more importantly, I think we've been able to do that with an ever-increasing e-com penetration rate, which is pleasing. I think in relation to the Coles -- and so remember, the SSI program, what we do try and target is about $250 million, plus or minus every year. That's been really the focus of the program. So just to give you some numbers there, $876 million delivered over the last 3 years. The previous 4 years, we delivered $1.47 billion through Smarter Selling. And so we are on track to actually deliver over $1 billion through this program. And obviously, we're not giving any guidance beyond this program in that regard.

The capability center, just to be really clear on the capability center, we are forecasting that the run rate will build to FY '29 and delivering annualized benefits of $100 million a year. And in order to achieve that, there will be one-off implementation costs and establishment costs of $190 million. And as we called out in our presentation and in our release, it is our expectation that, that $190 million will be treated as a significant item.

So Charlie, just to clarify. So the fact that the second half run rate, which is obviously a phenomenal number you guys have managed to do is $178 million, we shouldn't necessarily think that, that starts you off on a stronger run rate for SSI into '27 and in the capability center, that doesn't include redundancies, et cetera, for all the changes that have been announced more recently, that's part of SSI?

No. So the capability center implementation cost is all inclusive of establishing and will include elements of redundancy in that as well and establishment costs. In relation to SSI, as we said, we target about $250 million a year, plus or minus. In terms of what we delivered in the second half versus first half, there are programs that sometimes are timing of those between first half and second half can vary. So I wouldn't necessarily annualize a second half as an ongoing run rate or the first half as an ongoing run rate. I think take my guidance that we're typically around $250 million a year, and it can vary between first half and second half, depending on the nature of the programs and projects that fall within that.

That's helpful. And maybe just final one for me. Just sort of looking forward, if you sort of look forward on a 3-year lens, I appreciate it's probably touched on strategy as well. But what do you see Coles as? Do you see Coles as just a supermarket at its core and there's a few ancillary services around? Or -- is there a view to expand beyond that?

Obviously, we touched on Greencross, but you've closed Swaggle, which surprised me if you wanted to keep learning around these sorts of categories, probably one of the few big retailers out there that doesn't have a marketplace capability. And obviously, you can do that in a low CapEx type environment or capability. Is the focus just being a supermarket on a longer-term lens and then maybe there'll be some ancillaries around it? Or do you see yourself taking a bigger step looking at things like Greencross or leaning into marketplace as sort of areas on the longer-term lens?

I think the first point I'd make is we still see a lot of growth in the supermarket space. And you're seeing us today announce a set of initiatives that really help to set us up to go and capture that. And it's fantastic to actually have a set of opportunities within the core business that does help us to drive that growth with good returns. So very pleased with that, and you can expect to see us continuing to do that as we move forward.

However, I do think that we will continue to look at are there adjacencies. And I talked about that being close to the core. So you should think about that as that potentially is moving into other consumer segments. The pet specialty is the one that we've discussed today, but it could also include doing more vertical integration like what we've done with MilkCo and with Chef Fresh and even to some extent, what we do with RRM, our meat processing facility.

If that helps us to build strategic capabilities that enable us to grow own brand going forward, then that can make a lot of strategic sense for us. And then I think the third area is probably in the digital space. And are there nonorganic options that we would have to build capability in that space overall.

But all of that being said, we are very commercial. We are very financially disciplined around this stuff has to make sense from a value creation for our shareholders. And if it doesn't, we won't go down the path. And as I said, we've got lots of really good opportunities in the core right now to continue to grow and continue to deliver strong outcomes and dividend growth for the shareholder base.

Your next question comes from Richard Barwick with CLSA.

Unless I've missed it, I can't see any mention of stock loss or theft through any of the documentation other than theft gets a little bit of a mention in the risk section of the annual report. Certainly, if you follow the -- if we watch the evening news, it looks like Victoria is the crime capital of Australia, and there's been lots of negative publicity on the impact on the supermarkets. So what update can you give us there? It looks like things are getting worse from an outsider's point of view, but what are you seeing internally? And is it making a difference?

Yes. Thank you for the question. You're right to say that it is a difficult operating environment in retail with regards to crime and loss, and that's not just a Coles or a supermarket problem. I think we've all seen the media coverage. And as such, we stay very focused on the issue. We've got a series of technology solutions that we've deployed over the last couple of years, and we continue to deploy those into stores where we can see a return and a requirement.

And importantly, we stay very focused on making sure that our teams stay safe because not only has there been a slight uptick in loss from our perspective, the threatening situations that our team members have to face, which are completely unacceptable, they've also increased. And so making sure that our team are protected and safe and fully supported is super important.

The uptick that we're seeing at this stage isn't material in terms of our commercial performance. But I wouldn't want you to think that, that means that we are deprioritizing the issue, though it is one of the top things we're certainly focused upon.

And we will continue to not just work with our own team members and the retail industry, but also police and government and pleasingly, state governments are starting to really progress with some of the policy changes that we need to tackle these repeat offenders. And so the sooner we can all work together to solve problem, the better. But it's one we're definitely very, very focused on.

And I'd probably just round that out, Richard, by saying that for FY '26, our total loss overall was essentially flat. So it didn't have the big shifts or the big benefits coming through that we saw in '23 and '24 and '25. And really, we put that down to we now have a very stable technology solution that we're applying to the problem. As Matt said, there has been a bit of an uptick industry-wide as we've gone into the end of the financial year. But our aspiration for FY '27 would be to hold the total loss rate flat again. And we think in this market, that would be a great result.

Yes. Okay. That's useful. And then the last one, just you obviously called out customer satisfaction scores improved across the 5 key metrics as you sort of call them out. It's interesting that price is clearly the weakest uptick that you've seen. So -- yes, it's improved, but nowhere near to the extent of the others.

How much of that is a reflection, you think of the negative publicity around the ACCC case, et cetera? And any comment you could add in terms of the way that you were seeing your relative price competitiveness? Just trying to put that into context, really, the 110 bps on price, but obviously well over 200 on the other measures.

Yes. I mean it's an interesting observation, and I think it's probably very fair to say that just the amount of commentary that is out there does impact perception on that front. And I also think that it's a very pertinent issue that households are struggling with every day in terms of cost of living. So it's very, very front of mind and people have a high expectation around what you're going to deliver on the value front, which given the environment, I think, is there.

I think I would definitely say that we would say perception is half of the equation when you talk about are you delivering appropriate value. The other half of it is how are customers actually shopping and what are you seeing from a sales perspective. And if you go back to the volume growth that we've seen, and I sort of refer you to a 5.1% supermarket sales growth for the year versus a 1.2% inflation rate, the remainder of that differential is largely volume. That would say that we seem to be hitting the mark more times than not.

Your next question comes from Nicole Penny with Rimor Equity Research.

AI was elevated as part of the strategy today with opportunities outlined across customers, smart operations and team productivity. Would you elaborate further on those opportunities and point to which one you see the largest source of economic value over the next 2 to 3 years? And perhaps secondly, where you are already starting to see material benefits come through?

Thanks for the question, Nicole. I mean we have had AI use cases in the business for around a decade now. The vast majority of those are either machine learning for predictive AI use cases or generative AI use cases. And they have delivered substantial value to us. So a few examples that I'd probably call out would be the smarter forecasting system, which drives availability as well as sort of sales matching for us to store. Our [indiscernible] system is the other one.

So our store-specific ranging tool, for example, is a machine learning tool. And that has delivered substantial increases in sales, but also gross margin outcomes for us as we've rolled that out and tailored stores in terms of their range store by store. And then another example would actually be what we were just talking about with Richard on theft front.

A lot of the tools that we have used in terms of skip scan and bottom of the trolley recognition, they are generative AI use cases, for example. So we have at-scale AI use cases that have delivered substantial value in the business.

Now that being said, we're pretty excited about what comes next. And the big difference that we're seeing now with the advent of Gen AI is just the pace of capability that you can access and where you can apply it. I might get Michael maybe to just touch really briefly on how we're thinking about it from a customer-facing perspective.

But certainly, in our sort of core operations, we think there's a lot of opportunity in terms of doing system optimization end-to-end, particularly across the supply chain, where there is -- there are huge parts of our cost base that if we're able to even get small benefits there can actually result in quite substantial savings for us. But Michael, do you want to talk a little bit about the customer?

Yes, very happy to, Leah. I think it's -- on a forward-looking basis, I think it's certainly one of our biggest opportunities from a product perspective. Now that being said, whilst we want to move towards that quickly, we do have to balance that with the opportunities that sit across the rest of our product set to be able to improve the customer experience.

And I'll tell you why that's important. When we have our product teams working on enhancing the customer experience, which then drives more traffic, greater scale, better profitability within the e-commerce business, we've currently got teams across about 20 different digital products where we have them working in squads.

And that's across everything from digital media to last mile fulfillment to in-store digital experiences. So it's really across many different aspects of what our customer experience is.

We continue to make really good progress in terms of enhancing that customer experience. So AI commerce is something that we see as a big opportunity. What we're focused on is making sure that we're able to get there before it becomes a really at-scale opportunity for customers.

We've got many different experiences that are currently in testing internally with product teams. And we're going to be focused on releasing some of those across FY '27 because we think it's a really important part of the offer going forward. But it's only one part of what the opportunity is for us to keep improving our customer experience.

The next question comes from Michael Toner with RBC.

Just following up on Ben's question on SSI and the earlier question on AI. It looks like you're very comfortably exceeding $1 billion for SSI and the 2 half run rate is very strong. And I know you said not to annualize that. But has the evolution of AI capabilities throughout the term of that SSI program perhaps broaden the scope of potential efficiencies you can deliver? And has that had an impact on the stronger performance for SSI?

Look, we're obviously very excited about what AI can do with -- in various areas of the business, whether it's productivity, efficiency and what it can deliver. I do want to reiterate, Michael, I would not annualize what we are seeing in the second half. It's not to sort of say that we have a cap on our SSI savings. It's certainly not the discussion we have internally. Our target is $250 million a year, and that's an important sort of part of where we go, and it's been a successful formula.

There will be programs and projects that go either side of a fiscal year or a financial year through that. And we're certainly always focused on delivering more as well. So -- in that regard. But we are excited about what AI could help and unlock more product efficiency. And as Leah pointed out, it's not a new phenomenon for us. We've been using all forms of AI now in the business for at least a decade, which have continued to generate better results for our customers, improved efficiency in our business, and we'll continue to deploy those sort of tools going forward.

Okay. And then following up on Richard's question on price perception. You've obviously built some very strong capabilities in distribution and online, for which you deserve credit. But in that context, do you think there's an opportunity to use that cost leadership position to go harder on competitive positioning as opposed to sort of reacting to competitor activity, just knowing that your relative margin position looks like it is quite strong relative to where it was a few years ago?

Yes. Thanks for the question, Michael. I mean we are proactively investing. We come into each year and each quarter with a plan around where we will put value investment, and we base that on where we think we can have maximum impact from a customer perspective. So we do have a very active and have done for many years investment program into price. And I called out most recently, we've made some strong investments into our entry tier of our private label with Coles Simply, for example. And so that's an important part of what we do.

But the other side of it is we want to always ensure that we're competitive in the market every week. And we're certainly seeing that with AI, a topic of conversation today, the advent of AI tools has meant that customers are using those to compare prices more than they've ever done before, particularly in young families and prefamilies. So the younger part of our population. And so ensuring that we are competitive week in, week out for every set of offers that we have, that's really key for us. Some of that is proactive and some of that is reactive.

There are no further questions at this time. I'll now hand back to Leah Weckert for closing remarks.

Well, great. Thank you, everyone. In summary, we're very pleased with what we've delivered in FY '26. We've strengthened our competitive position with supermarket gaining market share, strong earnings growth and further improvements in customer satisfaction. Our e-commerce business continued to scale profitably with e-com sales growing by more than 26% and our CFCs achieving positive EBITDA.

And at the same time, we've continued to focus on productivity, delivering $311 million of SSI benefits, which is helping us to invest in value for customers while growing earnings ahead of sales. Importantly, we're entering FY '27 with a strong platform. The investments we've made over the past 3 years have materially strengthened our business and our strong cash generation and balance sheet gives us the capacity to invest in this next phase of growth.

We have a clear focus on expanding and renewing our store network, continuing to build our digital and technology capabilities, continuing the development of our Victorian ADCs and improving the performance of liquor. Thank you, and I look forward to speaking to you again in only just a few short weeks for our first quarter results in October. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Coles Group 3Q '26 sales results. [Operator Instructions]

I would now like to hand the conference over to Ms. Leah Weckert, Coles Group CEO.

Thank you, and good morning, everyone. Welcome to Coles' third quarter sales results for the 2026 financial year. Before I begin, I would like to acknowledge the traditional custodians of this land on which we meet today, peoples of the Koolan nation, and we acknowledge the strength and resilience and pay our respects to their elders past and present.

I am joined in the room today by Charlie Elias, our CFO; Matt, our Chief Operations and Supply Chain Officer; Anna Kraft, our Chief Commercial and Sustainability Officer; Michael Courtney, our Chief Customer Experience Officer; and Claire Lauber, our Chief Executive of Liquor.

Before I open up to Q&A, I would like to make a few comments on the results.

I am pleased to report another strong set of results in the third quarter, reflecting both the resilience of our business and the consistency of our execution. In Supermarkets, we delivered volume-led sales revenue growth of 4% and 5.7% excluding tobacco. This is above-market sales growth and a particularly encouraging outcome in the current environment. Our e-commerce channel continues to be a standout performer with sales growing by 24.8%.

Overall, supermarkets inflation, excluding tobacco, moderated to 0.8% from 1.7% in Q2, reflecting deflation in fresh produce, easing inflation in packaged groceries and increased promotional activity and price investment across a number of nonfood categories. This was partially offset by inflation in Red meat, however, the full impact of the increased beef and land livestock cost of goods was partially absorbed as part of our investment in value for customers.

Our focus remains firmly on delivering value and availability. Value has always been a critical part of our offer, and customers are increasingly deliberate in how they shop. We are responding by ensuring they can access quality products at competitive prices, whether in-store or online every time they shop with us. At the same time, we have maintained strong availability despite ongoing supply chain volatility. Encouragingly, all of these efforts are reflected in our customer metrics with improved customer satisfaction scores across both supermarkets and liquor, including price satisfaction reinforcing that our strategy is resonating with customers.

In liquor, sales revenue declined by 3.9%. Sales in our core convenience portfolio remained resilient, despite the market environment, which continues to be challenging and subdued. Across the group, we have remained focused on our strategic priorities, delivering value, improving the customer experience, investing in our digital capabilities and strengthening our supply chain while also navigating short-term volatility in market conditions. Looking ahead, supermarket sales revenue growth has remained broadly in line with the third quarter. While the liquor market remains impacted by weaker consumer sentiment, and this is expected to have a flow on impact to liquor earnings in the second half.

With heightened geopolitical tensions impacting fuel and other commodity input prices, our focus remains on continuing to provide customers with a compelling value proposition that supports their everyday needs, coupled with inspiration as more of our customers are telling us they are shifting from eating out to cooking at home. In recent weeks, we have seen an increase in supply cost price increase requests and a higher cost within our own operations, particularly in fuel, freight and packaging. We are actively managing these and will mitigate impacts where possible while balancing the needs of customers and suppliers.

As a business maintaining and building long-term customer trust has never been more important to us, particularly in light of the current economic environment that our customers are facing and the highly competitive landscape that we operate in. And this will be -- this will continue to be a clear focus over the coming months.

Thank you, and I'll now hand back to the operator for Q&A.

[Operator Instructions] Your first question is from Michael Simotas with Jefferies.

So you've called out some increase in price requests from suppliers, and I don't think that should surprise anyone. In the past, Coles as well as the broader industry has done a very good job of recovering that higher cost while working very hard to continue to provide value for consumers. Is there anything different in this cycle that you're seeing so far that might limit your ability to continue to manage that dynamic and deliver good financial outcomes?

I'll ask Anna to help with the answer here. I think broadly, our view though, would be we've got a pretty established process here. As we went through the last inflationary spike value was very important to customers. We prioritize that, and we were able to walk the balance. And this time, it shouldn't be any different. But Anna, maybe you can just talk to a little bit of what we're seeing.

Yes, of course, Michael, you're right, we are seeing a step-up in supplies from suppliers. The vast majority today have been in the fresh areas. And in the categories such as meat, dairy and produce and the way the pricing mechanics work, we're seeing those coming through and hitting us sooner, which you'd have probably seen some of that in store.

In terms of what we're seeing in package, we are seeing that step up, and we're actually going through them very robustly and making sure that we manage the balance of how we keep our suppliers in the right space, but also how we balance value for customers. And the vast majority of the request to date have been fuel-related and where we haven't got rise-and-fall as it relates to fuel in our contracts. That's how we're managing it. So as quickly as the fuel price comes out, that cost comes out as well. So it is going to be a careful balance, and we do expect some level of inflation to come through, but we'll be balancing it very carefully to make sure we look after customers that we deliver what we need to do as well.

Your next question comes from Ben Gilbert with Jarden.

Just following up from that one. Just interested in how you're thinking around managing that balance between profitability and the price request in terms of continuing to let on that. I think you've had that sort of Midlateral in South Australia. Just how are you sort of thinking around sort of promotional intensity, or looking to change promotional depth. Are you going to lead more into sort of -- how do you balance -- just in terms of take ticking works comments yesterday with respect to, obviously, the downgrade that are talking to net increase investment and hold back on pushing price increases through.

Sorry, it's a great question, Ben. And it is certainly a balance. We have a lot of mechanisms that we can use to deliver value to customers, as you've highlighted. And certainly, the work that we've been doing for some time to optimize our promotional program, that will continue going forward. That's been working really well for us. And as part of that, we have moved more lines into an EDLP position, particularly in nonfood.

I think the other thing from a value perspective, and you will have seen the strength of the number and the results that we saw today is on brands. So 1 brand is a real strength for us as a business. It was something that customers really took advantage of as we went through some pressures around cost of living a couple of years ago. The growth in that probably moderated over the last 12 months, but we've seen in this quarter that, that strength has really come back, and that is an area where we have a lot of control about how we price, how we present it in store, how we market it. And you've probably seen us doing a bit more of that over the last 3 months.

In terms of walking the balance, though, I guess, Charlie, do you maybe want to just talk through how we're thinking about some of the margin pieces.

Absolutely. Yes. Thanks, Ben, for the question. Look, I guess if I look at it the first leap sort of at a high level, yes, when we saw, obviously, these events sort of play out a little bit through the Middle East. Our first focus really was to be sure we have the availability, right? So the focus is very much on ensuring for our customers. Yes, the availability was strong. And we actually took some investments in the supply chain -- and the inventory into our supply chain today, which really help with very much our availability around inventory. And that meant they are really working strongly with our relations with our suppliers. Our team members really lend in there. But also pleasingly, what you're seeing is actually the value of the investments that we were making in the supply chain really pay off.

Delivering customer value is at the forefront. So all this through is how do we continue delivering customer view, and that was a really important part of our decision-making. And in terms of -- in relation to costs, look, as you know, Ben, we've had a really strong cost-out program now for a number of years, whether it was a smarter selling, SSI, et cetera. It's in our DNA. And our first approach here was when we saw the outward pressure costs starting to sort of come through, the teams sort of rallied around in terms of how do we play a role here in helping to mitigate or these elements of costs and control them.

But if I look at some of the more immediate impacts, so more closer to Q3, Q4, we did see, if you note now released some elevated sales in March from pantry stocking. Yes, this peaked in sort of mid-month, but we saw those volumes normalize post that. And this was across our network, and that came through disproportionately in our regional stores.

In terms of supply cost increase requests, I think Anna addressed that a little earlier. We did see some base hike, but we also saw some higher costs in our own cost base in areas like fuel and freight specifically, and they really had a minimal impact for us in Q3, but there is an impact in Q4 because the direct fuel mechanisms, there is a lag effect to those.

In terms of Q4, we do expect from a fuel perspective, probably an impact of around $10 million to $15 million as a result of this sort of price right. But what we have seen pleasingly since April is actually those fuel prices moderate a peak. So overall, I'd say we continue to invest in the customer offer. That's at the forefront. We expect to see continued volume growth and the sort of mix shifts that we spoke a little bit earlier. But in terms of the impact on earnings and partly due to the timing lags and our cost recovery but also how we're managing through this, at this stage, we don't expect a material impact in Q4. And really, our focus is very much talent in the need of all our stakeholders, our customers, our suppliers and our shareholders.

Your next question comes from Craig Woolford with MST Marquee.

Can I just ask a question about the just a call the broader consumer behavior. It looks like both Coles and Woolworths have had a good quarter relative to the supermarket sector. Does that mean you're seeing less cross-shopping from consumers? And do you see this better performance from Coles and Woolies relative to market persisting?

Thanks for the question, Craig. So obviously, we're lapping over a period of time, Q2 and Q3 were very, very disrupted last year because the industrial action in our competitive supply chain. So going over the top of that, I think what we're seeing is a bit of a normalization of market shares. We have set ourselves target that we wanted to grow ahead of market in this Q3 period because that would indicate that we have managed to hold on to some of the customers that we gained last year. So we're really pleased. We have been able to do that. And we certainly are seeing in the market share data that we get that there have been some unwinds from a market share perspective from some of the discounters and independents as we've lapped over that period from last year.

In terms of where the consumer is going, so I think it's fair to say that sentiment has really shifted in the last 2 months. If you look at the Westpac Melbourne Institute Index, that fell in April to the lowest level that we've seen in that for over 2 years, which would have been surprising. We've had 2 interest rate increases, and we've seen a sharp rise in fuel prices because of the Middle East conflict. But again, we look at this as an opportunity. It's an opportunity to engage with customers.

And to your question around are they consolidating shops. It's been interesting. We saw obviously this increase, this pantry stocking through March and the early part of April where people were putting a couple of extra items in the basket. We've also, from our cost of living survey had customers say that since the Middle East conflicts started at about 32% of customers are visiting submarkets and shopping centers less times a week because they want to consolidate their shop to save on fuel.

And so for us, when we look at that, what really is critical within that is then how do we be the destination where they come to do that big shop. And so the behaviors around researching prices, willingness to shop at a broader range of retailers, buying more affordable products, we are very focused on lending on those and making sure we're very competitive on price week to week. When they do research those prices that we've got a great own brand portfolio, and the investment that we've made into that on the last couple of years, I think, is really going to pay dividends for us as we move forward. And then we need to make sure that we continue to have a great special programming and great loyalty program that underpins that as well.

So I think we've got a customer right now who is going to be eating out less eating more willing to invest in time to research craft. And we think we're well set up to be able to lean into those trends.

Your next question comes from Shaun Cousins with UBS.

Maybe just a question regarding liquor. Can you just discuss where the fixed cost -- the reduced fixed cost fractionalization comment you've made heard the most? Is it big box where your sales are weaker or small format where your costs are more fixed and maybe more generally around big box. What's the outlook for that network given it seems to have been weak for some time?

Yes. So I mean we have seen a tough market. I think -- we saw a very strong competitive push as we came into Christmas. That has continued as we've gone into the new calendar year, maybe moderated slightly in terms of that behavior. But the most significant thing we saw in the quarter was a step down in customer sentiment when the Middle East conflict began. So it really started end of March, we saw quite a different result for January, February to what we have seen for March and April. And all of the conversations we're having with suppliers is indicating that, that market-wide impact that we've seen and certainly in conversations I'm having with peers overseas that they're also seeing that there. So I think this is not something that is contained to Coles.

In terms of what we're doing to address it because we're definitely not sitting on our hands on this one. We are taking action. As you say, is a relatively fixed cost base and that's primarily driven by the team member costs that we have because the vast majority of our stores only have 1 team member rostered on most of the time. There's limits to how much we can manage back our team momentum -- sorry, team remuneration costs at cost line as the sales chip. But what we are doing is really looking at how we can streamline our other operations. So we've been taking action on above-store costs. You would have seen us during the board we do a lot more integration with the food business, particularly in our co-located sites, and putting out campaigns that actually bring together food and liquor, and we're quite pleased with the success that we've been seeing on that.

And I think the other thing that we're leaning in on is how do we evolve the range. And this is quite an interesting one. I shared on the media call earlier that it's interesting where we're seeing some of the strengths of performance. So mid-tier beer is performing quite well. The euro sugar RTD is growing really rapidly. It's those things that haven't help overlay to them. And I think all of our research is pointing to the fact that actually consumers are engaging in more occasions where they consume beverages. It's just a different type of beverage going forward. And so we need to be able to lean into that and actually -- our convenience network, which is largely provides us a really interesting opportunity to do that going forward. We are actively assessing the role of the warehouses. And I think we would say there's a bit more work to do on that, but we'll come back with a bit of an update on that when we get to the full year.

So I think in summary, convenience is strong. We're integrating it more with food. And we see this as an opportunity to lean into some of the customer changes that we're seeing and probably a bit more of an update to come on the warehouse side as we come into full year.

Can you maybe quantify the decline in the big box, would they be down sort of like gosh, 30%, if you're talking 30%, 40%. I'm just curious around how you've spoken about the small format or the convenience store sort of being sort of broadly flat or the like there. But if we think about the math maybe 10% of stores, 10%, 20% of sales, it looks quite a significant sort of decline there. So maybe could you sort of provide the detail around what -- how much that is down, please?

Yes. It's around 20%, Shaun.

Sorry, it's declining by 20% or just the 20% of site.

Decline -- the 90 warehouses that we have, the decline is around 20% on a sales basis. And as you can see, that is getting in heavily offset by the fact that our in our convenience network, the other 910 stores is broadly flat.

Your next question comes from Adrian Lemme with Citi.

Charlie, thanks for the commentary on the fuel. That's very helpful. And it has been encouraging, obviously, the petrol pump price has come down recently. But mean Brent oil is still very volatile and still very elevated compared to the first half of this year. As you look into '27 where you may see an annual impact, are you looking at potentially bringing forward efficiency initiatives or cutting discretionary spending further or other actions to mitigate these impacts, please?

Yes. Thanks, Adrian. I appreciate that. Look, it's obviously lots of moving parts. Things are moving very, very quickly. So I'm not going to clearly give a bit of a view on FY '27. I think what you need to take away from this is we use the words we're not sitting on our hands. We have a really well-established cost program, our productivity program at Coles, which has been around now for 8 years. And we've been targeting almost $2 billion over those 8 years in terms of offsetting cost structures. That's going to be clearly a continued focus of ours in terms of working through, especially on the direct costs that impact Coles but really all costs, whether it's in the GP line or in CODB. So -- but to give a view of FY '27, that is we'll certainly give a much better view at the full year results. but it's far too early to give you any views on FY '27.

Your next question comes from Bryan Raymond with JPMorgan.

Leah and Charlie team. Just on the evolving sort of price competition outlook that you're seeing in the stores, how that competitive environment has evolved. Like it would be great if we could get a feel for percentage sold on promotion, if that's stepping up at all in this current environment where value is becoming more important. Are you seeing polo promotions perform better given all the focus on red tickets from ACCC, et cetera? And then just how you've seen sort of some of these early price rises go in terms come through from suppliers, milk and bread and so on. in terms of the response. I'm just trying to get a feel for sort of the outlook around that price and competition side, please?

Brian, I might take that one. Look, I think what I would say is we continue to be really customer-focused, and we will absolutely be competitive and we're taking it as a broad competitive set because every category in every market is different. So we're taking a view there. And I think our strategy on value has been consistent now for some time, which is to build customer trust on pricing and focus on promotions where they really matter most to customers and make sure they're meaningful. While at the same time, really expanding our EDLP portfolio to give much more trusted value.

And actually, what we're seeing is promotional activity in Q3 and participation was actually slightly lower than Q2 and lower than last year. And this is offset by an increase in EDLP penetration and really on our targeted promotions as well.

The other bit we are seeing is, we're seeing actually a really strong response from customers to having this balanced approach. And actually, if I look at our telco satisfaction in the quarter, our metric was up year-on-year. And if we look at the affordability score, we were also up in terms of year-on-year performance there. So we continue to be laser-focused on making sure we're ultra-competitive but we're balancing the right promotions, the right value set, with the right tiering in every category that we have.

Your next question comes from Phil Kimber with E&P Capital.

Just wanted to circle back on liquor. You mentioned your convenience business, which was flat, which is a great outcome in a tough market. But you also called out March coming down. Was that more seen in -- was that across the board? Or was that really seen in the big box business. And I'm just trying to understand whether that's a market share shift issue or it's a whole market coming down issue?

Yes, March for us, definitely, from all the data we've seen in the triangulations that we've done with suppliers is definitely a whole of market piece that I would say the convenience portfolio generally is very resilient.

Okay. So it was more a bigger impact in March in your big box stores and in your convenience stores.

Yes, that's right. The convenience stores really benefit from the fact that we have transactions coming from the co-located supermarkets in the vast majority of cases. And that is really providing real resilience and particularly while customers, as we talked about earlier, starting to think about how do they reduce fuel usage and consolidate shops. This is a classic 1 where customers would look to do these purchases together. So that convenience part of the network is really resilient.

Your next question comes from Tom Kierath with Barrenjoey.

Just a quick one. Charlie, you mentioned that $10 million to $15 million of direct fuel impact in the fourth quarter. Are you adopting incremental kind of cost-out strategies to offset that? Or should we think about that as like an investment in -- how should we kind of think about how you guys are responding to that $10 million to $15 million impact.

Look, that's an estimate time very much of what the direct fuel impacts for us at the for Q4. I think as I keep saying, I think our first focus is always going to be how do we offset those costs and look at -- go back to our program in terms of what are the ways to mitigate those. But we're calling out -- just give you a bit of a view of the magnitude of that fuel price changes and the impact of the lag effects. But as you know, we will balance the needs of all our stakeholders as we look at our entire P&L, top to bottom. But our first focus is how do we reduce those costs.

[Operator Instructions] Your next question comes from Caleb Wheatley with Macquarie.

Leah and team. Yes, I appreciate we've had some discussion around fuel and costifications. But just keen to explore if we could, a little bit specifically. Appreciate that channel is still growing at 25%, our subscriptions are also growing at pretty elevated levels as well. Just how you're sort of thinking about mechanisms and pass-through in e-com more specifically? And have the sales phase sort of playing a role in any potential efficiencies that are coming through that channel just given that strong growth, please?

Yes. Thanks for the question. I might ask Michael whether he could talk to this one.

Yes. Thanks, Leo. Carl, if I heard your question correctly, the line was breaking up a little bit, but it was more about specifically the cost impacts on e-com coming through in relation to fuel and what are we doing -- is that right?

Yes. Yes. Thank you.

Yes. Thank you. So I mean I think what we're benefiting from at the mine is very strong growth in sales, which is really important because that growth is driven from increased traffic, which drives sales, which drives improved economics for us, which is a positive. I think in relation to the costs specifically for this business, it does relate to fuel. Now we haven't made any decisions at the moment to move any of our fees in relation to our offer. That being said, our fees reviewed periodically. And certainly, this is 1 factor that we need to consider anytime we are considering changes to the offer, we're always starting with making sure that we've got a competitive customer offer in the market. And so I would describe it very similarly to the sentiments that you've heard from both Leah and Charlie, which is there's a delicate balance that we need to walk between protecting the customer offer as well as delivering commercial outcomes for our stakeholders and shareholders. And that whilst we're monitoring those cost impacts, there's still areas of our business where we're continuing to invest in the customer offer to make sure that we're driving a better experience and continuing to see growth.

Your next question comes from Peter Marks with Goldman Sachs.

Just a follow-up on the leases. Can you just help us, I guess, clarify or better understand the outlook comment that you've made there. does it mean like into April are sort of in line with what you've seen in March, which like online, it looks like a step down to about negative 6%. I'm just hoping you can clarify what you're seeing in April far in the camp.

Sorry, Peter. The line was really breaking up. With your question, were the sales that we saw in April sort of more or less in line with March, is that the question?

Yes.

Yes, that would be a fair assumption. We've seen that step down in the customer sentiment flow-through into the sales results for silica and that has continued through into April.

Your next question comes from Michael Toner with RBC.

I was curious how you're going with your market share, particularly in nonfood categories because in February, you sort of called it out as a big focus and that you were seeing some sort of positive emerging trends, presumably kind of more supplier price increases will be coming through in this category soon. And I'm just wondering if that kind of presents a risk to derailing some of the good progress you've already made in that category.

Thanks for the question, Michael. I might take the opportunity to talk about overall market share, and then I'll pass to Anna to talk about the Health & Home piece, in particular.

So I think 1 of the things we were really pleased about in this quarter, Q3, is that we were cycling a really strong result last year, and we were really cycling on top of that a strong result from 2 years ago. And so when you start to look at the 3-year stack, what we are really delivering is consistency of sales growth ahead of market and building on that year-on-year. And so we knew that coming into Q3 is quite challenging to cycle the market share growth from last year given the environment we were operating in and the level of disruption. So we're really pleased this year that we have been able to deliver that. again. And obviously, as we go into Q4, we're continuing that focus on the overall market share growth. Noting Q4, again, for us last year was a very, very strong quarter. I think we've been quite pleased with some green shoots in Health & Home, and maybe you can give us a bit of detail on that.

Yes. Mike, I think no surprise, nonfood has been a clear area of focus for us for some time. And we are seeing some really encouraging green shoots coming through. Progress has really been driven by sharper value. We've been really focused on improving our range execution and a real move to EDLP in the space where it matters most to customers. As I've said before, this isn't a 1 size fits all approach. We're working category-by-category to define the range and the value proposition in the competitive environment that each of those operate in. And we're really partnering closely with suppliers to make sure we're doing that in conjunction with them.

That for us is as the most convenient destination for nonfood products, our priority is to get the customers no reason to shop anywhere else and that remains. And what we have seen in the second half is actually a clear improvement in our market share trajectory. We've gone from kind of below the market to in line. And actually, more recently, we've seen our growth ahead of both market channel and the total market, which we're encouraged by. And I think there's so many great examples of where we've reset categories such as paper or toilet tissue, where it's been really focused on bulk strategy, how we think about our CFC offer, how our own brand plays into that and how our pricing hierarchy. So we're really pleased with that.

We're very focused on innovation, and we're starting to see that really resonate with customers, particularly in Beauty & Personal. We had some standout performances in skin where we brought in a number of lines exclusive to grocery, and you'll see more of that coming in Q4. So encouraging green shoots, lots more to do, and we remain absolutely laser focused on the customer proposition in each of those categories versus their whether they are grocery or nongrowth.

Your next question comes from Phil Kimber with E&P Capital.

I was just going to ask around supply price rises. The initial ones on fresh, a lot of them have been sort of expressed in the media anyway as sort of a surcharge increase. And just trying to understand the timing of those sort of price rises that flow through or surcharges versus traditional price rises which I think you've said more shelf-ready or shelf-stable products, that's expected to come through going forward. And historically, it's been like a 13-week process to get those through. So I just wanted to understand the differences between the 2 of them and maybe whether that time frame for shelf stable price rises might shrink a little bit in the current environment? Or does it take so long for them to flow through it?

Thanks for the question, Phil. I think if you call out fresh produce, if we interpret that as your question around fresh, that has quite a different price setting set of mechanisms than our packaged goods. So fresh produce items, say, pricing on is quite market-driven, and it's set week-to-week. And so as our farmers see prices coming through, that then is reflected in those market prices that we would see each week and certainly is already reflected in the price. It's quite different to the packaged goods where there is a cost price adjustment process that we work through, as we said, it's well established. That does tend to have a longer time lag on it because we do work to make sure that every component of that price adjustment that has been requested can be supported by data to show that those increases are valid. Certainly, in the current environment where fuel is making up start to be part of that. That's probably a quicker process for us than normal, but there is still definitely a lag versus fresh.

Our next question comes from Shaun Cousins with UBS.

Just regarding online growth in supermarkets. I don't believe you've called out explicitly which sort of channels we're growing or which routes the customer are growing there. I'm particularly interested around how the Ocado sees on the next day basis for growing relative to quick commerce, where you've got a partnership there with Uber, please and then I guess, relative to the rest of the growth in the other routes to customer, please?

Yes. Thanks for the question, Sean. So pleasingly, all of our offer types are in double-digit growth. So across whether that be across Click & Collect, home delivery or immediacy. So minus is certainly in percentage terms, our fastest growing channel. And part of that is the recent expanded partnership that we announced with Uber, which this was the first quarter of transition on that, and that's going very well for us. But home deliveries still remains in dollar terms our fastest growing -- sorry, our largest offer type by far, and that continues to be in double-digit growth, and that's led by what we've seen out of the CFC. So I would say across each of our the top is a very pleasing set of results.

Your next question comes from Craig with MST.

Just a follow-up on the price inflation outlook. I realize there's lots of moving parts, but is there a way you can give us a sense on the breadth of the price rise requests when we were doing COVID we'd hear about how many requests you are having? Is there a sense you can give us on how much of these price rise requests are coming through and the magnitude?

Yes, Craig, what I would say is we have seen them at to good levels and in some cases, in certain categories more elevated than COVID. But as we said earlier, they are really the vast majority of fuel, which are on short-term rise and fall where we don't have those agreements. And I think as we look at the outlook, I expect livestock to continue to be elevated. I think produce this inflation will moderate, and we'll see a bit of a tighter supply there, and you'll see some of those package ones coming through. So we're working really closely with suppliers to work out how best to manage this, that it doesn't impact customers, and that's what we'll continue to do. But that's a bit of a sense of the scale we're seeing.

So over, in terms of magnitude or like in -- it sounds like nonfood, you mentioned -- Leah mentioned was in deflation is some of these categories not being affected by the fuel effects.

Look, I said, vast majority so far have been fresh categories. We are starting to see that come through in some of the other categories, but really the vast majority of this time is ratch would be kind of bakery, produce, meat, dairy, as you would expect and starting to control some of the grocery categories but not to the scale at which we've seen on fresh.

There are no further questions at this time. I'll now hand back to Ms. Leah Weckert for closing remarks.

Well, thank you for your time this morning. I think we say overall, it's been a very pleasing quarter with volume-led above-market sales growth in supermarkets and real strength in our e-commerce business. There's no doubt that the operating environment remains dynamic, and we do that value and available will be important to our customers over the months ahead. We are well placed to respond to this with our extensive brand portfolio, our leading e-commerce platforms and the strength of the infrastructure and capability that sits within our supply chain.

Our strategy is clear. Our execution has been consistent, and our team remains deeply committed to serving our customers every day. Thank you, and I look forward to speaking with you again at the full year results in August.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Coles Group 1H '26 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Leah Weckert, Managing Director and Chief Executive Officer. Please go ahead.

Good morning, and thank you for joining us for our half year results call this morning. Before I begin, I would like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri people of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders, past and present.

I'm joined in the room today by Charlie Elias, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Croft, our Chief Commercial and Sustainability Officer; Michael Courtney, our Chief Customer Experience Officer; and Claire Lauber, our Chief Executive of Liquor.

Moving now to Slide 3. I'm pleased that we've been able to deliver another very strong set of results in what is a competitive operating environment. We delivered strong supermarkets earnings growth with continued sales momentum. E-commerce was a key contributor again with sales growing by 27%. Our automation programs are delivering tangible benefits, and we delivered cost savings of $133 million through our Simplify and Save to Invest program. Of course, what matters most to us is our customers, which is why the improvement in our customer satisfaction scores across the business during the half was a key highlight for me. Finally, we completed our Liquorland banner simplification program. And while there are challenges in the overall liquor market, we are seeing positive growth across our convenience portfolio, which is really pleasing.

Moving on to Slide 4 and the financial results. We reported group sales revenue of $23.6 billion, an increase of 2.5%. Excluding significant items, group EBIT increased by 10.2% and NPAT increased by 12.5%. In Supermarkets, adjusted for the competitive industrial action in the PCP and excluding tobacco, sales revenue increased by 6.1%. And Supermarkets EBIT increased by a very strong 14.6%, underpinned by top line growth and EBIT margin expansion of 55 basis points. Charlie will talk more to the financials in his presentation.

Moving on to Slide 5. During the half, we maintained a consistent focus on executing against our strategic priorities, which once again underpinned our performance for the period. Let's get into this in some more detail, starting on Slide 6 with our first pillar, destination for food and drink. We know value remains front of mind for consumers and delivering on our value commitment to customers remains a priority for us. During the half, we strengthened our value proposition, expanding our range of everyday value products. We ran a winter and spring value campaign and our Shop Scan Win and European Glassware continuity programs each delivered strong engagement with our customers. Our exclusive to Coles portfolio continues to perform well with sales growth of 5.7%. We launched more than 500 new products, and the range was recognized with 17 Product of the Year awards.

We know our own brand portfolio is a unique differentiator for Coles, and these new products and awards underscore the momentum we are building in quality and innovation across the portfolio. We also entered into some really exciting exclusive partnerships during the half. One of these was with Marks & Spencer, where we brought a number of their iconic favorites to Australian homes. This included their well-known Percy Pig and Colin the Caterpillar lollies, which turned out to be our most successful lolly launch ever. Our partnership with Grill'd also proved popular, particularly with the rising takeaway trend for those who want to recreate their restaurant or takeaway dinner in their own home. These collaborations broaden our appeal and help ensure we remain a destination for inspiration and everyday meals.

We were also pleased with how we executed over the Christmas period, starting with our Christmas range, which showcased more than 340 own brand Christmas products and exclusive specialty drinks. We worked hard in the lead up to Christmas to ensure value was felt where customers needed it most. Our $1 seasonal produce lines in week before Christmas were a simple but powerful example of that commitment. Operationally, we delivered our highest monthly DIFOT results since December 2020, an important sign of the progress we are continuing to make in availability and overall execution. And this leads me to our customer satisfaction scores on Slide 7.

As I said at the start, the improvements in customer satisfaction scores were a real highlight with strong improvement across our key metrics of quality, availability, store look and feel, and price. The big takeaway here is that customers are noticing the changes we are making. Improved availability, sharper value, and better execution in stores are translating directly into stronger satisfaction scores, and that gives us real confidence as we look ahead. There is always more to do, but we are very pleased with the progress we are making.

Moving now on to Slide 8 and the next pillar of accelerated by digital. We reported another strong half in our e-commerce business with 27% revenue growth in supermarkets, penetration now over 13% and double-digit growth across all shopping missions, whether that be same-day, next-day, Click & Collect or our immediacy offering. We are focused on making sure we have a great offer across all online channels. We've made a lot of progress in e-commerce over the last few years, and customers are responding to this. We know customers have different shopping missions throughout the week, and the investments we have made allow us to provide them with exceptional service that matches their shopping mission.

For example, our CFCs allow us to provide the biggest range, better availability and improved freshness for those customers who are looking to do their weekly shop. And our expanded partnership with Uber and our windowless Click & Collect Rapid offer provides us with a leading immediacy proposition. During the period, we made investments in our digital assets and are seeing particularly strong growth in our app metrics with monthly active visitors to the app growing by 32% and the app share of e-commerce revenue now at 54%. Our CFC volumes increased in the half with sales growth again outpacing total supermarkets e-commerce sales growth. Same-day deliveries commenced in Melbourne in the first quarter and Sydney in the second quarter. And we also had a major catchment extension to Geelong and the Surf Coast in Victoria.

In terms of our immediacy offering, as I mentioned, we expanded our partnership with Uber Eats with now up to 17,000 products available to purchase through the Uber Eats app. And the windowless Click & Collect Rapid was also expanded to 255 stores nationally. Overall, our online NPS saw a meaningful uplift driven by improved availability, fulfillment and the overall digital customer experience. So, one of the most important points to make here is that we were able to make all of these investments, grow our business, expand catchments, and our immediacy offering while driving efficiencies through technology, scale, and a strong operational focus. We made further improvements to our picking processes in store, increased orders per van, and installed 2 key automation technology features in the CFC with on-grid robotic pick arms and auto frame loading. So, it's been a very pleasing half in terms of e-commerce.

Moving now to Slide 9 and loyalty. Flybuys remains an important driver of customer engagement across Coles as well as a key element of our overall value proposition. During the half, Flybuys exceeded 10 million active members, growing by 6.2%. This highlights the continued relevance of personalized value for our customers. We were also pleased to see strong growth in our Coles Plus subscriptions with customers recognizing the additional benefits they receive by becoming part of Coles Plus family, including free delivery, free rapid Click & Collect, and double Flybuys points.

Moving now to Slide 10 and our delivered consistently for the future pillar. Our SSI program remains a core part of our DNA. We know the importance of operational efficiency. Delivering consistent and sustainable cost savings through our SSI program enables us to help offset inflation and reinvest in the customer offer. And we see the benefits of that both in our top line as well as our bottom line. This half, we delivered cost savings of $133 million. This brings us to around $700 million since the beginning of FY '24, and we remain firmly on track to achieve more than $1 billion in benefits over the 4-year program. Consistent with previous years, there were many initiatives across different parts of the business that contributed. And again, a common theme with the use of AI and other technology automation to improve the effectiveness and efficiency of our processes. This leads me to Slide 11.

We've been building and deploying AI for over a decade. What has changed recently is the pace of capability and the breadth of where we can apply it. For our customers, we are already scaling AI to drive more relevant offers and engagement through personalization across the shopping journey. AI is helping us deliver more personalized and relevant experiences with tailoring engines is improving relevance, conversion and overall customer satisfaction. In parallel, we're also now moving into the next wave, agentic commerce, conversational AI, and real-time personalization, capabilities that will transform how customers engage with us over time.

We are proving the relevance, timing and effectiveness of offers and rewards for customers and helping them to find value whilst improving our promotional effectiveness. In our operations, AI is embedded across operational decision-making with a clear focus on outcomes to improve availability, reduce waste and lift productivity. We're using AI in forecasting, demand planning and ranging to improve accuracy and availability. And in stores and in our e-commerce business, AI is helping optimize rostering, improve workflows, pick efficiencies, and dynamic work. Across our supply chain, AI supports optimization in transport and improved workflows. We're also using AI in stores for computer vision for object recognition and loss technology.

Now looking ahead, we're building an end-to-end optimization capability across the supply chain from automated DC pallet flows to transport to replenishment. So, decisions are all made as one system and not in silos. A digital twin also lets us simulate scenarios before we change operations. Then we can apply this to execute the best plan in the rural network. The result is improved availability, lower waste, lower cost to serve and faster response time to any disruptions. And we're also looking to optimize online fulfillment capacity across our stores, CFCs and DCs, helping us to decide where orders should flow, how much capacity to allocate and when to flex resources.

And finally, for our team members, we're embedding AI tools that make work easier and more productive. Our knowledge assistant is helping teams quickly access policies and procedures, and we've rolled out AI productivity tools, including ChatGPT Enterprise and Microsoft Copilot, and we're partnering with OpenAI on team training. So, it's fair to say that AI is well and truly entrenched within our business, is delivering strong results and has been for some time. But the pace of change is accelerating, and we are really excited by the opportunities that are emerging, particularly in customer-facing agentic AI, and we will be talking about this more in the future as we start to scale. Moving to the next slide.

Alongside our financial performance, we remain committed to the role we play in supporting our team members, suppliers, communities, and the environment. So before I hand over to Charlie, I would like to cover off some of our achievements in this area. I will start with our team members. Through our November team engagement poll survey, we maintained our highest ever team member engagement score, remaining in the top quartile. This is a strong reflection of the culture and leadership across the business. Almost 70,000 team members provided their feedback, and it was pleasing to see that delivering for our customers from one of our strongest areas with 90% of team members recognizing our commitment to meeting our customer needs. We also continue to support the well-being of our team members, including through initiatives such as R U OK? Day, where our stores and distribution centers came together to reinforce our care and courage values.

We recently launched Round #14 of the Coles Nurture Fund, continuing our long-standing commitment to supporting innovation, sustainability and growth within the Australian supplier community. And we celebrated excellence across our supply base in the 2025 Supplier Partner Awards, recognizing achievements across each of our key trading categories. Our community partnerships remain a defining part of who we are. This half, we raised more than $1.6 million for November and more than $1.8 million for the second by Christmas appeal, helping to provide over 9 million meals for Australians experiencing food insecurity.

And finally, we continue to make progress on our sustainability commitments. 87.7% of eligible packaging is now recyclable or reusable, and we maintained 100% renewable electricity usage across our operations, and we continue to divert more than 85% of solid waste from landfill. And with that, I'm now going to hand over to Charlie, who will take you through the financial results in some detail.

Great. Thank you, Leah, and good morning, everyone. I'm now on Slide 14, which details our group results. Excluding significant items, we reported group sales revenue of $23.6 billion, an increase of 2.5%. Group EBITDA of $2.2 billion, an increase of 7.8% and group EBIT of $1.2 billion, an increase of 10.2%. NPAT, excluding significant items, increased by 12.5%. Off the back of these results, the Board declared a fully franked interim dividend of $0.41 per share, an increase of 10.8% compared to the prior corresponding period. This is a consistent progression of shareholder returns over time.

Moving on to the segment overview on Slide 15. Let's start with Supermarkets. Sales revenue increased by 3.6% with our value proposition continuing to resonate with customers. We adjust for competitive industrial action and excluding tobacco, sales revenue increased by 6.1% EBIT increased by 14.6%, reflecting the strong top line growth, coupled with EBIT margin expansion of 55 basis points to 5.8%, which was underpinned by a 65-basis point increase in gross profit margin. The strong gross profit result was achieved notwithstanding the significant investments we made in value during the period annualized benefits from our DC program, strategic sourcing, SSI initiatives and the growth of Coles 360. Lower tobacco sales also contributed 37 basis points to GP margin.

In Liquor, sales revenue declined by 3.2%. The liquor market remains subdued and competitive intensity increased through the period, particularly at the big box end of the market. During the half, we completed our Simply Liquorland store conversion program and our convenience portfolio, representing around 90% of our store network delivered positive sales growth. We are seeing a shift in customer behaviors towards convenience-led purchases. And pleasingly, our stores are well positioned in this convenience space. There is some work to be done to optimize our Liquorland warehouses now that the conversion is complete. Overall Liquor EBIT was impacted by softer top line and $13 million in one-off costs relating to the Simply Liquorland conversions.

In other, revenue relates solely to the product supply agreement we have with Viva Energy. As outlined in the results release, the PSA, which is due to expire in April, has been extended and is now due to expire at the end of November to allow Viva to complete the transition to New South Wales, WA and Queensland. The increase in other EBIT was predominantly due to the higher net property gains in the prior corresponding period. Turning to operating cash flow on Slide 16.

Before discussing the numbers, I want to highlight a timing impact. The half year ended on the 4th of January. And similar to last year, this resulted in an additional payment run in the final week, creating an additional cash outflow of approximately $560 million. The timing effect impacted several metrics, including cash realization, working capital and net debt. These metrics will normalize in the second half. Operating flow, excluding interest and tax was $1.5 billion with a cash realization ratio of 69%. Adjusting for this additional payment run, the cash realization ratio was 94%. For the full year, we continue to expect cash realization of 100% with the first half timing impact reversing in the second half.

The working capital movement primarily reflects increased inventory to support availability over the Christmas period and lower trade and other payables following the additional payment run. The movement in provisions and other largely reflects the flow provision, which is noncash but recognized in EBITDA.

Now I'll now move to capital expenditure on Slide 17. Gross operating capital expenditure on an accrued basis was $476 million, a decrease of $66 million compared to the prior corresponding period. We had a higher weighting towards store renewals and new stores across supermarkets and liquor this half as well as a lower spend in relation to our Victorian ADC, and this was as a result of a milestone payment having been recorded in the prior corresponding period. Pleasingly, our Victorian ADC remains both on time and on budget. We also incurred lower capital expenditure in relation to our investments in loss technology. As you know, CapEx falls into 4 key areas: store renewals, growth initiatives, efficiency initiatives and maintenance.

Within renewals, we completed 160 store renewals across our network, consisting of 35 supermarkets and 127 liquor stores. These included 122 Simply Liquorland conversions. Within growth, we opened 6 new supermarkets and 11 new liquor stores. We also contribute -- we continue to invest in our e-comm business. Efficiency initiatives included investments in the Victorian ADC, store front-end service transformation and Liquor ordering. Maintenance capital included our ongoing refrigeration electrical replacement programs and life cycle replacement of store and technology assets.

We continue to optimize our property portfolio with net property capital expenditure increasing by $157 million, primarily due to an increase in property acquisitions and developments and lower proceeds from divestments. And to reiterate the guidance we provided at our FY '25 results, we continue to expect capital expenditure of approximately $1.2 billion for the full year as we continue to invest in store renewals, digital and technology and growth initiatives.

Turning to funding and dividends on Slide 18. Our funding position remains strong. At the end of the half, our weighted average drawn debt maturity was 4.4 years with undrawn facilities of $1.9 billion. As I said earlier, the Coles Board declared a fully franked interim dividend of $0.41 per share, which is a 10.8% uplift versus first half '25 and shows a consistent progression of shareholder returns over time. We will also have a franking credit balance of approximately $600 million after the payment of our interim dividend.

Finally, we retained a headroom within our rating agency credit metrics and a strong balance sheet to support growth initiatives with our current published credit ratings of BBB+ with S&P Global and Baa1 with Moody's. And with that, I'll hand it back to Leah to take us through the outlook and concluding comments.

Thanks, Charlie. So, turning to the outlook on Slide 26. In the first 7 weeks of the third quarter, supermarket revenue increased by 3.7% or 5.3%, excluding tobacco. We're pleased with this strong sales result as we can see through the market share data that it represents above-market growth, continuing the sales momentum we have had for some time. It indicates that in Victoria, we have retained a portion of the customers that we gained as a result of our negative 2.5% continuing to deliver positive sales growth.

As I said at the start, the focus for Liquor this period is on leveraging our unified brand, simplifying our processes and improving the performance of our Liquorland Warehouse stores. So overall, I'd say we have had a strong first half and a good start to the third quarter. And with that, I'll now hand back to the operator for Q&A.

[Operator Instructions] Your first question comes from Ben Gilbert from Jarden.

Just a question on the trading update. But just on your comments around market growth, just interested if you could give us some color potentially ex Victoria and how within that trading update, you've seen some of the key categories in terms of sort of your health, beauty versus fresh versus sort of the food category?

Yes. Thanks for the question, Ben. So, as I said, we're quite pleased with the first 7 weeks for 2 reasons really. One is that based on the market share data, we can see that it's above market growth, and that means we have retained a portion of those customers, which means our Victorian sales numbers actually aren't that far off where we are from a national basis. And then we have grown some share on top of that. The data point we received on Wednesday is entirely consistent with the market share data that we have, which is that our major competitor has also performed ahead of market, but that share is not coming from us, and we can see that it's coming from others.

I think the second reason that we're pleased with that first 7 weeks is that it just really shows consistency. For those 7 weeks this year, we've got 5.3% ex tobacco. Last year, it was 4.5%. The year before that, it was 6.4%. And that represents really strong sales growth year in, year out. And we are really focused on continuing to drive the flywheel that we talk about, which is strengthen the top line, unlock operating leverage and then reinvest that back into the customer offer. So that's what we're intending to do.

In terms of strength of categories, so food continues to be very strong for us. We're seeing good strength across the fresh areas, and you'll see on the customer satisfaction scores that quality is really stepping up. That is actually directly related to our fresh categories. And I would call out meat as one area where we are seeing outperformance in the market in that space. In the nonfood area, that's been a real focus for us. And we would say we're quite encouraged by the emerging trends that we're seeing in that area. We have reconfigured categories in the half to respond to some of the pricing dynamics that we are seeing in the broader market, which means that we have introduced a lot more lines on to EDLP.

I mean we know that we're a convenient destination to pick up many of these nonfood products. You think your cleaning products, your paper products, your baby product, it actually makes sense to grab those when you come into the grocery shop. But we're taking very much a category-by-category approach. So, to maybe just give you a bit of color on that. We've invested, for example, into our cup wipes and our Ultra range in cleaning. So, beauty -- sorry, baby and cleaning, private label, and that has driven really strong volume growth for us in that space.

We've also taken action on some of the proprietary lines in pet, for example, to be more competitive with some of the players in the market that have recently moved into that space. And on the back of that, we've seen double-digit growth on those lines. So really encouraging in terms of where we're headed there and more to come.

Your next question comes from David Errington from Bank of America.

Yes, look, I'd like to pick up on that, particularly Slide 7. It's a fantastic looking slide. It's brilliant in terms of customer resonance, and you highlighted as one of your key highlights. But can you bring it to life a little bit, what does it actually mean? Like 330 basis points? Can you put it in context as how big a jump that is availability? I mean they look really impressive, but I don't know what to make of it. And what does shine for me a little bit is price, up only 180 basis points. I don't know if that's good or not, but your gross margin was very powerful, could you have gone a bit harder on price?

Can you basically bring Slide 7 to life? Because that looks an incredibly powerful chart, great execution, great improvement in margin. Can you bring to life what drove that? And maybe given that you are higher margin than your competitor, how much firepower that you've got going forward to maintain that sales momentum that you've got? A bit in that question, but if you could have a go at it, that would be really appreciated.

Thanks, David. We'll try and unpack it. I mean it was a highlight, I think, for all of us as a team because we do have a fundamental belief that if we're increasing customer satisfaction is one of the things that helps us to drive transaction and engagement in store. I think it is a real combination of the execution focus we've had, but also the benefits starting to flow through some of the transformational investments that we've made over a long period of time now. So, I think the benefits we're getting from the ADC, the CFCs, but also the step-up that we've made in terms of the renewal investment. Maybe I might ask Anna and Matt to give us a little bit of color. We'll maybe just work through the slides in order of what the headings are. But we start with quality. Do you want to cover that one?

Yes. David, it's Anna. When it comes to quality, obviously, it's important across the store, but very, very important in fresh, and we've been running a really big fresh transformation program. And that really has seen us take an end-to-end review of quality. So, taking every touch point on where we might aggregate that and how we would look to solve it. And actually, just to give you a bit of a sense of what we've been doing, we've been working through our supplier base to make sure that we have the right suppliers that are fit for the future. And we've gone into deeper end-to-end partnership with that. We've also coupled that with an upweight in our technical resource to really work with those suppliers to really unlock quality and cost.

We've really then also focused particularly in meat around our manufacturing network to make sure it's actually closer to stores. So, I think WA to WA. Queensland, we've got a port facility there now, which means that we're faster and we get fresher product to stores and then therefore, give life to customers in store, and we know that's how they measure quality when they see life at home. The other bit we've done is we've invested quite significantly in store team training and also central team training to really focus on quality. coupled with the work that Matt and the team have been doing in supply chain around faster, fresher flows that mean we are flowing product from our supplier base to the stores in a very nuanced way that means we get better life.

And on the back of that is probably to hand over to Matt to give a bit of flavor on that because reducing lead times has been a key priority. I might hand to you before we then talk about availability.

Sure. Thanks, Anna. David, look, it makes it easier when Anna and the team are super focused upon right supply, right range by store and the right pricing and promo plans. And that does then set us up to leverage the changes that we've made around our supply chain operations and our store operations. And the game we're playing here is speed. So, the faster we can move product, the fresher it will be and importantly, the less waste and markdown we also get. So, our faster fresh flows is essentially a shift away from bringing product in and racking and stacking to then wait to come and pick it later. We really are moving things through the supply chain as fast as possible and measuring in hours as opposed to days.

And then similarly tying that in with the store execution where we've got the right display space and the right resourcing to really make sure that the product gets in front of the customer in the least possible time. I would also add, we've now got a couple of years under our belts of our replenishment forecasting system. This was the RELX implementation we did and the final part of our integrated replenishment plans, and so they get better too. So, it's a number of parts that drive the difference in quality. An answer to your question around this 330 basis points a shift, it is a really big shift. And if I think about the 390 basis points, we've then seen improvement in availability, that is at levels that previously we've not really seen. So, they are extremely good results.

On availability itself, you probably think about this in 3 areas. So, the first, and I've talked about this again in the past, we're quite focused on foundations. So, this is where we've made the model changes, and we've got the commercial teams really focused upon supply collaboration, the supply chain team focused upon forecast and the logistics of moving product and the store teams super focused on it but it's the consistency with which the teams now work together that's driving the difference. And so we've got a really solid base that we can build on. Importantly, our supplier inbound fulfillment as I thought is at a 6-year high. And through the Christmas period where it traditionally falls away, we saw it maintain a level so we've got stability, not just consistency there.

The second part then that enables us to really drive investments as making the difference. That's the ADCs that we have talked to in the CFCs. And we are putting more cars and more products through those ADCs to drive the benefit of not just efficiency but service. And we've also now rolled out our transport management system. which has enabled us to have better control and visibility of our fleet. And that means we are better at picking up from suppliers through Click & Collect, and we're better at delivering to stores as well. So those investments drive a difference.

The final part, which I think is probably where we want to see the next level is really a shift from being reactive to being proactive. And this is where we're starting to use data and AI to look for gaps before they occur. So where can we see the problem before it becomes an issue in the store. And we're able to identify at a store SKU level potential out of stocks and target team members to go and manage the inventory closely so that we can then be proactive around availability and prevent any issues before they even occur. And I think that's then the next level, foundations first, technology driving the difference and then the AI and data really becoming proactive rather than reactive, that's setting us up for even further improving availability. So I might -- for the store look and feel, the third part.

Yes, there's a number of key areas that go into the store look and feel metric. A couple of things I would say, driving this certainly is our renewal program. If I take you back to '22, we would have done 40 renewals. This year, we will complete 70. And actually, what we have done is maintain the blueprint now for some years to get to consistency. What that does is give customer consistency in every store they go into, but it's also enabled us to take the cost per renewal down to do more of those. So certainly a key focus. And we've really started to address what I would call some of the long-term underinvested stores as part of this program, and we're seeing really good progress and customer response there.

The other bit that's in this metric is ease of shop, and we focused on the shelf edge through our range program and macro space. We've really stepped on both navigation of space and aisle. And the one big thing here, we've really thought about the integration of our omnichannel to actually remove the friction we see from customers in the store through that. So good progress there. And the big is we fixed up our checkout space through the service transformation program. So that has been a real meaningful step on from a customer satisfaction. So, I'd say there's lots of initiatives driving this. We are certainly focused on how do we continue to elevate this and how do we take it to the next level. So much more to do, but we're pretty pleased with where we are.

And then if I come to the final one on price, funny enough actually it is always the hardest metric to move and move the slowest from a customer perspective. So, we are really pleased with 180 basis points. And that's come from all the work that we've talked about before around fewer, deeper, more targeted promotions, removing the noise and making it easier for customers to shop. We're seeing the increase in EDLP in the right categories really driving that price satisfaction -- and again, the work we have done not only on simplifying the range, but also tailoring the range to the store has made it easier for customers to find value and find the products they want shelf. So, a number of key things.

Now there's an awful lot more to do in here, and we're really focused around that, but it's pleasing to see that the work we've done over the last 18 months really starting to come to fruition here. So, they would be the big drivers, David, across those.

Your next question comes from Shaun Cousins from UBS.

Maybe just a question just on the first seven weeks, sorry, you dropped out Leah when you were talking in your outlook. Do you think you were hurt by the cycling, the Jan '25 period in that Woolworths is now indicating that they got -- that they were hurt in Jan '25. So did Coles benefit there and hence, you're cycling against a period there, which actually means that 37% could be a bit stronger and that you're getting some big industrial action tailwind. And my question is really more around liquor. Just in terms of like-for-like sales are down 2.5% to start the year. Sorry, yes, please, Leah. Sorry, your line is quite -- we're losing you a little bit. Sorry, the team for a second here or there. So, apologies for that.

Shaun, can you hear me?

You're in and out.

I'm going to go ahead and answer the question. Shaun, are you hearing us okay?

Yes, I can hear you now.

Wonderful. Okay. So, I might reiterate the points I made when Ben asked the question. So, we are definitely still cycling over some disruption from the industrial action last year in the January period. We are pleased, though, with our first seven weeks of sales performance, and there's really two reasons driving that. So based on the market share data, what we have reported today is above-market growth. And that means that we have retained a portion of the customers that came to shop with us last year, and we have grown some share on top of that. What we received on Wednesday is entirely consistent with that market share growth -- with that market share data, I should say.

So, our major competitor has also performed ahead of market, but that share is not coming from us, and we can see in the market share data where that is coming from. So, we feel that we have the right pitch in terms of customer at the moment because we are retaining customers, and we are stepping it up. The second thing we're really pleased about on the result is just the consistency, which is something we really prioritize. So, if you look back in prior years, those first 7 weeks, we've reported 5.3% ex-tobacco today. That was 4.5% last year, and it was 6.4% the year before. And so that represents really strong sales growth year in, year out that we are delivering. And we believe that is part of what we're managing to get to work through the strategy of the flywheel of strengthening the top line, unlocking it into the customer offer. Did you get all that.

We got most of that. And I think across the 2 answers, I think we've got it. My question is around liquor. Just in terms of your like-for-like to start the year is down 2.5%. Your earnings were down 37% in the first half. You've called out the aggression from Dan Murphy's. As Dan Murphy's remains aggressive on price and really tries to reestablish its sort of price leadership, which is quite existential for them. How does Coles Liquor actually perform, and does your big box just continue to sort of suffer? Just curious around the outlook for earnings. Should we be anticipating earnings to be down another 30% again? I'm just -- you've got a fixed cost base there and a competitor that's quite aggressive. Just curious around the outlook there, please.

Well, we won't be giving any guidance on where the EBIT will go. But let me make a few comments. So, first of all, we're pleased that we've completed the 222 Liquorland conversions as part of the Simply Liquorland project. And along with that, we have reset range, and we have reset value mechanics in our stores. And ultimately, that entire program of work has really been about how do we attract customers into our offer. And what we're really encouraged by -- and I have to say it's early days. We only finished this process in the middle of December. But early days, we're very encouraged by the NPS uplift that we are seeing.

It is a very significant and material uplift that we are seeing in customer satisfaction. And that tells us that those changes are really resonating, which is the first thing you have to achieve with your customers. Now there is no doubt that the backdrop to all of that is the market is very challenging. And we have a subdued market, which is a combination of a structural shift, which is generational around consumption of liquor, but you've also got the impacts in there of cost of living. And certainly, in Q2, we saw an elevation in the competitive intensity in the market.

And that disproportionately impacted our large box, so the Liquorland warehouse stores, which is only about 10% of our network. And so, what we were really pleased about is even though those stores were impacted, the 90% of the network, which makes up the convenience formats of Liquorland and Liquorland sellers, that component of our network was in positive growth. And so, you team that up with strong customer scores and positive growth in the heart of our network. We think that, that is actually really positive in terms of setting ourselves up longer term to lean into what we are seeing is quite a few convenience trends coming through in liquor purchasing. Now that being said, we've got work to do on the warehouses, and that's going to be a big focus for us over the next 6 to 12 months.

Your next question comes from Adrian Lemme from Citi.

Just want to follow on in terms of the liquor commentary. So, one of the things you talked to there is lower consumption of liquor, a structural shift. I'm just wondering in supermarkets, oral GLP-1s seem to be coming down the pipe and maybe cheaper, which could drive increased uptake in your customer base. How are you thinking about the impacts on demand across the supermarket store, particularly in impulse categories, please?

Yes. So, it's a great question and one we've been discussing quite a bit as a team. So, I mean, if I come up a level, we're actually seeing a huge trend from customers generally around healthful leaving. And we're seeing that play out in our offer that we have in stores today. So, things like the fact that coconut water is up over 30% on sales. The fact that we're getting the growth out of health powders and supplements. Even things like we've seen a shift even just in the last 6 months in the penetration of fresh produce that is hitting customers' baskets.

And you've got items, snacking fresh produce items like baby cucumbers, snacking carrots, salary sticks. They're all in double-digit growth. And so, we are looking at that customer and seeing this behavioral change as there is a shift, again, a bit of a generational shift into healthful eating. We're excited by that. We think that's a really big opportunity and actually plays to many of the strengths that we have in the fresh area of the business, but also the way in which we're leaning into our convenience business.

So, if you think about our ready meals, fresh ready meals that we have in the dairy section and frozen meals, our perform meals, in particular, are growing really, really strongly in that space, and they're dietitian designed meals that actually tailor the nutritional content to nutrient-rich and high protein. So, with that as a backdrop, we're already starting to make a shift with a lot of the product development that we're doing and also the ranging work that we do with suppliers to bring in more healthful options in every category. And we look at GLP-1, and we're observing closely what's happening overseas. And what we are seeing from those customers is actually what they are really looking for is solutions. They want to find nutrient-rich food in the supermarket and the supermarket that helps them to navigate that as easily as possible. One of the piece of feedback we hear is it's really hard to navigate supermarket shopping as a GLP-1 user. They have the real potential to be a winner here, and that's what we want to lean into.

Your next question comes from Tom Kierath from Barrenjoey.

Just got a question on the gross margin. It's up 65 bps, and I understand you've made some restatements there. But I guess I'm just trying to square away the comment that you're investing in price. Could you maybe just step us through the moving parts on the gross margin? Because it's obviously a pretty big move there. And I guess, quite different to what Woolworths reported a couple of days ago.

Great. Thanks, Tom. Firstly, I just want to kind of lead off with the restatement was a prior period restatement. So, we didn't actually restate anything for this half. Look, we're really pleased with the progression in gross profit margin, as you'll note, 65 basis points. And if we look at the drivers, what are the drivers that are actually sort of leading to that sort of growth. Firstly, we're actually seeing the annualized benefits of the investments we're making in the ADCs and specifically this half, Kemps Creek. If you recall, Kemps Creek was in ramp-up last year in FY '25. So, what we're seeing at the moment is both the ADCs at business case in this FY '26 year. And we're definitely seeing benefits in the first half, and we'll continue to see that in the second half.

Strategic sourcing and SSI benefits, again, are 2 really important drivers in terms of how we look at gross profit margin. And SSI, you would have seen that we delivered $113 million -- sorry, $133 million this half. And a good portion of that goes into GP. And in fact, I think we're really pleased with that particular program. Coles 360. Coles 360 was actually in double-digit growth for the half, and that is on the back of a number of halves now of double-digit growth. So, we're pleased with how that's sort of tracking. And then we've also called out previously the mix benefits from tobacco. As you know, tobacco sales are lower. That contributes in terms of a gross profit margin benefit, not gross margin dollars, but gross profit margin. So, we're actually really pleased with how they're sort of tracking. And the ADCs, obviously, the implementation costs.

So, we successfully removed and unwound those implementation and dual running costs, and that created a benefit for the half. So, look, we're -- at this time, and as we did, we continue to sort of make these targeted investments in value, and therefore, we've been investing in value that's allowed us to do that, which is also driving that top line growth that you're seeing in our results.

Just can I just clarify the SSI benefit, like how much came through gross margin versus C0DB of the $133 million.

Yes. Well, look, typically, it's been -- yes, as you know, over a longer period of time, it's been 1/3, 2/3, 1/3 in GP and 2/3 in C0DB. This half was a little bit more weighted to CODB, for example. So it's a little bit more weighted to CODB and more like 1/4 in GP and 3/4 in C0DB.

Your next question comes from Michael Simotas from Jefferies.

Could I just follow on from Tom's question on gross margin? I think the message here is that gross margin would have declined if not for mix, Coles 360, SSI, the ADC benefit, et cetera. Can I just confirm that that is the case? And then you're investing in value for customers, which is great. Do you think you're getting enough support from the supplier base to continue to do that and justify what has been or reward what has been a period of very strong execution from Coles?

Maybe I'll start that question, and Anna can talk to the supplier piece. But I mean, we haven't done the add up specifically on the gross margin. I mean I think one of the biggest drivers in the gross margin expansion is the tobacco impact, which is the 37 basis points. So that obviously is a very significant mix impact in there. And then you've got the initiatives that we've been doing that Charlie outlined like the ADC with Coles 360, strategic sourcing, et cetera. But we have made investments into value, and so that is definitely an offset in that line. And a big one during the half has been in the red meat space as we've seen costs increase in terms of cost of goods on that. And we know that's really important for customers. So we haven't passed all of that through into retail.

But what I would say is it's a core job of ours as management to make sure that we're just managing that GP period to period. And we put in place a plan that works to have a look at what do we think the impact will be and therefore, what initiatives do we need to hit with the right degree of timing to be able to get those benefits coming through. So we're pleased with the overall result that we've been able to get there. Anna, did you want to talk about the relationship with suppliers?

Yes, happy to. What I would say, Michael, is that engaging with our supplier base more broadly to optimize the range and strengthen the customer offer is business as usual for us, and we're incredibly focused on that, and that won't change. I won't go into any specifics on the commercials because that wouldn't be appropriate. But what I would say is that we are incredibly focused on working collaboratively, taking a much longer-term view to drive a real meaningful step change in our offer and our commercials collectively.

And it's about getting further ahead together, taking a real end-to-end view of our businesses in a way that accelerates our true differentiation, and that's really where we've been focused on working with our supplier bases on, and that has taken a fully collaborative cross-functional approach, not just a trading approach. We're taking it from a supply chain, from an in-store perspective, and we're really looking credible to grave as to how we think about that going forward. So yes, more work to do, but we're absolutely working with the supplier base on that.

And so Michael, what you're actually seeing is actually our 3D strategy actually in action. So that's flywheel effect, right, where we're making very deliberate targeted investments in programs in GP, cost discipline in our CODB, allowing us to reinvest that back into the customer offer, driving top line sales and getting that operational leverage and efficiency because all through that, what you actually saw was also an expansion in our EBIT margin bottom line. So it's really our 3D strategy in action.

Your next question comes from Craig Woolford from MST Marquee.

I'm interested in the comments about the market share performance. It looks -- it is a great result and interesting how it's played out for both Coles and Woolworths. I assume you're referring to supermarket market share. I'd be interested in how much work you're now doing on other definitions of the market, if we look at results from Chemist Warehouse or Bunnings or the strength in dining out more generally. Maybe the bigger question is how do supermarkets ensure they don't lose share from other retailers as well.

Yes. Thanks, Craig. It did cut out in the middle, but I think we've probably got the gist of it. So yes, we were talking about supermarket share when we were making those comments around the outlook growth. But obviously, it's a much more competitive and broader competition market than it was 10 years ago. And so the likes of Chemist Warehouse, Bunnings and I think we could probably, based on the comments that you've just made, also talk about things like QSR in that mix. And for us, the approach that we've been taking is to really break that down category by category. And so even within the nonfood space, being very particular about how we think about the different categories in there. And I'll let Anna maybe talk to that one.

But certainly, on the food front, we continue to expand our convenience options for customers. And we actually introduced a number of new products into both the meat range, but also into frozen and convenience dairy over the half, which are really leaning into that. And I mentioned the grilled burgers, they're a great example of where we can actually bring share back into the supermarkets channel by giving a product to customers that they feel like it's something that they might eat when they're out, but actually they can prepare it in their own homes. And we've seen fantastic growth in our convenience-based meals out of the freezer section, for example, that's an area that we've expanded significantly.

So it is a focus area for us. Those categories that we're talking about there, they are in double-digit growth for us. So they're outperforming the rest of the supermarket. Do you want to talk a bit about nonfood and how we think about the different competitors there, Anna?

Yes, of course. And Craig, I think we've spoken about this quite a lot. It is a clear area of focus for us. What I'm pleased is we're starting to see some real green shoots coming through in both sales performance and market share. And when we look at that, we look at supermarkets market share. But more broadly, we look at kind of health and beauty and our pet business at a total market read because, as you said, our competition is far broader than the supermarket space.

And I think what we're pleased about the progress has really been driven by a couple of things. I think sharpening our value and moving to a trusted pricing position through EDLP has made a marked difference. In the quarter, we moved 400 lines in that space, and we made 1,900 value-based in store really emphasize the value we have, and we're starting to see that come through. We've really focused on range where it matters. So in pet and baby and beauty that's really come through. We're using the CFCs very strategically to go deeper on range that really matters as well as a bulk strategy, which really means that we are competing with others outside of the supermarket arena in terms of both neutralizing the value, but making sure that we keep the volume within our business.

I think in baby, we've talked about the importance of that. And Leah mentioned, we've been really doubling down on CUB, our own brand. And actually, we've invested in both value and quality, and we're seeing that now being the #1 both volume and value line in those categories. And then on pet, as we said, we've done a lot of work on both value and bulk and that is playing through. We ultimately know, as I said, we are the right convenience spot for customers to buy these categories. So we actually will take a category-by-category approach and make sure that we are being really tailored where we need to put innovation in, where we need to deal with value and where we need to deal with range. So certainly not a one-size-fit approach, and we're taking very much a total market view in these categories rather than the supermarket lens.

Your next question comes from Caleb Wheatley from Macquarie Group.

I wanted to follow up. I know there's been a bit of a discussion so far, but particularly around sort of the forward-looking thoughts on the capacity to reinvest. I mean, as you've spoken about, GP margins are up fairly materially, EBIT margins are up fairly materially. I know there's sort of one-offs and things dropping out that are helping that. But on a sort of go-forward basis, how are you thinking about now the sort of capacity to reinvest from an operational point of view? And I know prices has been a bit of a focus, but just sort of more broadly in the suite of options you have to reinvest from an operational point of view, whether it's kind of service or store ops or loyalty, how are you thinking about sort of your flexibility now? Do you have that margin expansion to reinvest and sort of where the more meaningful opportunities are from here, please?

Yes. It's a great question. And I think the expansion that we have got in the margin does give us flexibility as we move forward. I think we've been fairly clear in all of our results presentation that we intend to maintain competitiveness. And so we do continue to monitor very closely price and not just from one competitor, but from a full suite of competitors depending on the category that we are talking about, and we will continue to do that.

However, we have even just in the last 7 weeks, been what I would say is nuancing our operating model. And that's something that's just BAU for us, which is we look at performance, we look at where we see some opportunities, and we will put money in to help us to capture opportunities. A good example of that would be -- so we've actually seen some real strength in our Sunday trade. And as a result of that, we have made the move to invest more into store remuneration to help us to support that. And from a category perspective in the store, investing into the online space because we can see that there's latent capacity there that we can access. And we're not afraid to put some investment in to really capture that. And particularly through Flybuys, and we will flex on that to get the right outcome that we want.

I'm told that you might have missed part of that because we're struggling with clarity today. So I'll just reiterate that one of the things that we've noticed coming into the first 7 weeks of the calendar year has been real strength on Sunday trade in our stores. And we have, as a result of that, made additional investments into store remuneration, so our team to help us to capture the upside of that and in particular, in the online space.

Your next question comes from Bryan Raymond from JPMorgan.

Just mine is a bit of a follow-on actually around cost growth. On my numbers, excluding implementation costs, you had 6.6% cash CODB growth in the half. I know there's a lot of moving parts in there. But I just wanted to walk through because it was a bit of a surprise on the upside to me that cash cost growth. I acknowledge you had a pretty big online channel shift. That would be a higher cost channel. You just talked Sunday trading and there's obviously loading there, labor hours in store.

But given you had $100 million of SSI benefits, which is the 3/4 of the $133 million in the period in CODB, I'm just surprised that cost growth is running that high. So, if you could help us understand sort of why that is and if that is the path that should continue or if there's some one-offs in there that we need to adjust for?

Bryan, thanks for the question. And look, as you know, when we look at CODB and look at cost generally, we look at it as a percentage of sales. And I actually think we are completely tight band over a number of years now in terms of -- as a percentage of sales, particularly if you exclude the sort of the D&A element of that. Cost discipline in our business is very much part of our DNA, right? And you've seen that through our SSI program. Leah mentioned earlier, to date over the last -- since FY'24, we've actually delivered over $700 million of that. That's going to continue. We're going to continue delivering on that, and we're going to continue delivering around that sort of $250 million a year in SSI benefits going forward.

Look, we did successfully unwind and the implementation costs, as you did call out, and that was a clear positive. But we have been making very deliberate in strategic investments in our customer offer. So, including our CFCs, which are now fully embedded in our cost base. So, our CFCs are fully embedded in our cost base, they're delivering results and in line with expectations. So, you're seeing that result fall to the bottom line. We're actually making very deliberate investments in data and technology, which is all about improving that customer experience and online growth and omnichannel growth really across the board.

So, with these investments, they are driving our top line. And one of the things that I do sort of look at as I look at the -- including GP and including our CODB. And what we're seeing is these investments are driving not only growth but margin growth in our business.

Your next question comes from Richard Barwick from CLSA.

I've got a question around the CFCs. You do mention that the CFC sales growth was ahead or outpacing your total online or e-commerce growth. Can you put some metrics around that just to give us a sense of how much better your New South Wales and Victoria would be doing online versus the rest of the country. And part of that answer just makes me wonder if you are outpacing online within Victoria, just why -- so it sounds like it wasn't quite enough to get your Victorian sales growth ahead of cycling the industrial action because I think you did call out that Victoria was a little softer than the national rate of growth. So, you sort of put those 2 pieces together for us.

So Richard, it's Michael here. I did get the first part of the question, which was about CFC growth. And then I missed the second part of the question. So maybe I'll answer the first part first, and then maybe you can follow up and just clarify what the second part of the question was.

So, we're not giving specific growth rates for the CFCs. But if I take a step back and talk about proposition types, where we've got Click & Collect, where we've got same-day delivery, where we've got next-day delivery and where we've got immediacy. I think the really pleasing part was that all of those offer types were in double-digit growth throughout the first half. And then next-day delivery, which obviously the CFCs form part of, is still by far and away our largest offer type. So, to be still getting really strong growth through that with the CFCs being a driving factor is really pleasing for us.

The proposition continues to ramp up and continues to get really strong customer feedback. And I think that when you look across the positive feedback that we're getting from customers across range, availability and freshness, it's great to see that the customers are seeing the differentiation that is in that offer. So, we're getting really good growth. The operating metrics are in a really good spot in terms of Ocado partners globally where the top performing partner on key operational measures. As Charlie mentioned at the start, we're continuing to invest in that proposition when you look at things like on-grid robotic pick, there's other efficiency measures.

So, we're getting really strong growth. It's becoming a really important part of our proposition. The NPS is growing, but an important part also in that as part of being an omnichannel retailer is that we've seen as those volumes have come out of stores and gone into the CFCs, the NPS in store has also improved, which speaks to the benefit of the CFCs, not just as a sales driver, but as a really key part of an omnichannel fulfillment network. Would you mind just clarifying the second part of your question?

Yes. And the second part was just reconciling that commentary with the comment that Victoria was not growing as quickly as the rest of the country. And I realize that it was in part because of the industrial action but just trying to square those 2 pieces together. And just as a little adjunct to that, at what point are you completely clear of the -- any lingering sort of headwinds from last year's industrial action for Woolworths. So, when are you in sort of clear air there, so we're no longer having to make adjustments for that issue?

Thanks, Richard. I think that is a million-dollar question. So as we shared, if we go back to when all this was unfolding last year, our big expectation was that there was going to be a cohort of customers that experienced the industrial action where they only came to us because it wasn't convenient to shop somewhere where there was really poor availability, and it's likely that all those customers have just returned back. Then there was a cohort of customers making an active decision between us and our major competitor where the stores are quite closely located. And then there were our online customers that came to us.

And it's really the 2 second buckets that we have been working over the course of the last 12 months to put together a plan to say, how do we make sure that now that we've had those customers come and shop with us, that we can retain them. And what we're seeing in the first 7 weeks of data is that we have been successful in retaining a proportion of them, but we are definitely still going over the top of some of the disruption for last year. I think I'm hopeful that we're sort of past it. We aren't spending a lot of time trying to pull it out of the numbers, if I'm honest now. We're just cracking on with continuing to drive sales and do what we need to do. But my expectation would be that Q4, in particular, should be very clean.

That's an important one because obviously, there's a lot of comparisons with your rate of growth versus Woolworths quarter-by-quarter, and it seems like it's made a difference, obviously, for the first 7 weeks. But if we -- so that's going to impact the third quarter. But if you -- I mean, effectively, your answer is all clear in the fourth quarter, that's what's important.

That's my expectation. And we definitely -- obviously, we didn't actually receive all the sales that were disrupted as part of the industrial action last year. And I think you're seeing some very interesting reversions going on in the market share data because of that.

Your next question comes from Peter Marks from Goldman Sachs.

My question is just on liquor again. Just wanted to touch on the gross margins. I guess, surprised to see them up in the half. I think you had a 21 basis point headwind from range optimization costs there as well. So I think underlying, they're probably up 40 basis points or so, if that's right. And I think you would have been lapping like a strong period last year as well. So I guess have you managed to drive that improvement in the liquor gross margins in the half? And then just wondering on your trading update, the sales down 2.5%. Are you able to give any indication of whether you're losing share there? Like what's your liquor market data showing in the first 7 weeks?

Thanks, Peter. The line was a bit garbled. So let me play back what I think we're answering here. The second question you had was around what's our viewpoint on market share. And then the third part was around the expansion of the gross margin, which I might get Claire to answer. Maybe just market share issue though. The data that we have available these days for market share in the liquor market post the changes that were made to the ABS data that's available to us is quite poor these days.

So it's actually difficult for us to have a view on that until we see our major competitor come out with their results. So at this stage, we probably couldn't give you a clear view on that one. On the gross margin, Claire, I might ask you maybe to cover that one-off and how we've achieved expansion.

Thanks, Leah. Yes. So Q2 was obviously a heightened intense competition quarter. We were managing price and promotion intensely through the quarter with a focus to offer compelling offers for our customers. And despite the competitive intensity, we were really pleased that we thought we struck the right balance between driving sales and managing margin, with delivering the gross margin result of 17 basis points improvement.

Your next question comes from Phil Kimber from E&P Capital.

My question was just about the online business. Williams has called out that there's been a step-up in competition from all the various players in there. Is that sort of what you're seeing? I mean, your growth rates are very strong. Are you seeing sort of reactions now from a competitive point of view that are maybe higher than they were in the last 3 to 6 months?

Yes. Thanks, Phil. So firstly, in terms of our own offer, when we look at whether it's customer acquisition or investment in the customer offer, we haven't increased the investment relative to the prior year. We've obviously had very strong sales growth. So, the level of dollars that we're investing with customers has gone up, but that's a good thing based on the sales growth. Our investment in the customer offer as a percentage of our sales hasn't gone up. So, I wouldn't say that we are investing more.

In terms of competition, where I would say that there's been an increase in competition, is probably on the immediacy platforms because, depending on the platform, you've seen more competitors in the grocery space enter, which, a more competitors leads to more competition. But that's why we've taken a really proactive step of expanding our partnership with Uber. So that's something that will allow us to partner more closely with Uber, giving a better offer in terms of range, being able to partner more closely on things like loyalty, and something that's world-first for Uber in terms of the way that we're partnering. We think it's something that's going to allow us to have differentiation in this market as it relates to immediacy and ensure that we have a leading customer offer with strong economics. So, whilst there might be increased competition in certain parts of the market, I think we've taken some really proactive steps to ensure that we've got a winning offer.

Your next question comes from Ben Gilbert from Jarden.

Just another one on liquor. It sounds like, obviously, you're probably doing pretty well, given that the pricing competition is more so across 10% of the portfolio. Just interested in how you're seeing the pricing deck across the residual 90 smaller format, where you think you're doing better? Because just anecdotally, your pricing probably seems much sharper than the market there. And I'm wondering if that's where the risk is if your competitors go after the smaller formats, which have probably been left alone a little bit at the moment.

Yes, it's a great question, Ben. I mean, we're definitely seeing a good uptick in our customer satisfaction around value and price in the small format stores. And we have been very sharp on KPIs there. As we've said, we think that with the shift to convenience, building brand loyalty to Liquorland in that convenience format will be really key going forward. And the value proposition that we have in there is a really important part of that.

Your next question comes from Adrian Lemme from Citi.

Just one quick one, please. Just on tobacco. I think we've seen a bit of a crackdown in recent months on illegal tobacco shops. Are you seeing any slight improvement yet coming through in your tobacco performance? It's obviously still a big drag on sales.

Yes. Sales week-to-week are pretty consistent now for us, and they have been for the last 6 months. We have seen some slight improvements week-to-week when we've seen a couple of the crackdowns, particularly in Queensland and WA, but I'd probably describe it as quite marginal, and it doesn't tend to have longevity around it. So, it can go for a matter of days or a couple of weeks, and then we tend to see it revert back. So that's why, sort of overall, we're still in a sort of a similar position to what we reported at Q1.

Your next question comes from Michael Simotas from Jefferies.

Charlie, I just wanted to pick up on a comment that you made about the CFCs being embedded in the cost base. Just want to understand exactly what that means. Last year, you called out $40 million of effective start-up costs for the CFC model. How do we think about that going forward? And look, I'm not asking for specific numbers on that, but are there still some costs in the P&L that will come down over time? Or has that flipped to a positive contribution? And then just generally, what's the profitability of your online business look like right now, noting that your competitors disclose margins, and they effectively doubled year-on-year.

Yes. So, Michael, let me take that. Great question. So, a couple of things. Firstly, let me go to the CFC side of that equation. We are really pleased with the financial performance of the CFCs. They're absolutely in line with our expectations. And as we said, the CFCs are volume, we're seeing great volume growth, as Michael articulated a little earlier. And what we have seen now in financial performance is that the second half of '25 is better than the first half and certainly an improvement half-on-half and year-on-year in the CFCs.

All the one-off implementation, any of those costs, they absolutely go away. So, there are no lingering costs from that perspective. We're really saying, when I mentioned that CFC is, that they're now in the cost base. It's actually part of our business going forward. They're fully embedded there. And I would just encourage, again, as I said earlier, there are elements that go into GP, there are elements that go into CODB, and those changes. From our e-commerce business, generally, again, really pleased with the growth, a positive contributor to earnings. And from that perspective, we're seeing the leverage actually drop to the line. So, you would have seen our e-commerce business has grown at 27% this half. Last half, it was a similar sort of very strong growth rate. And in that time, we've not only grown earnings, but we've absolutely grown our EBIT margin through that perspective. That's the lens which I would look at in terms of the profitability of our business.

Your next question comes from Craig Woolford from MST Marquee.

Just a follow-up on the inflation path. Without getting bogged down on the technicalities of how Woolworths and Coles measure it, it was surprising to see Coles measure accelerate in 2Q versus Q1, whereas Woolworths measure decelerated in 2Q versus Q1. So perhaps there are some elements in your basket you can talk to that may have added to inflation. And what's your perspective on that inflation outlook over the next 12 months or so?

Yes. Thanks, Craig. I mean, we did see it accelerate 30 basis points, as you just highlighted quarter-on-quarter. I probably would say that over time, Coles has tracked quite closely to what we see in the CPI data, which gives us some confidence around how the reporting that we do actually aligns to that. The most significant areas of pressure for us from an inflationary perspective have been in the red meat space, so beef and livestock prices are coming in.

We haven't passed all of that through to consumers, but it's definitely, some of it has moved through, particularly in the lamb space. We've also seen a bit of inflation in dairy for chilled desserts and milk. Some of that is related to capacity constraints in the market around yogurt. But equally, there have been others on the other side of the ledger. So, eggs have come off now that we're past the avian flu impacts. We've still got deflation in quite a few of the non-food categories where there continues to be very intense price investment across the market.

Your next question comes from Thomas Kierath from Barrenjoey.

Just a quick one on depreciation and amortization. I think before you had said it would rise by $115 million this year, and it only went up by $46 million in the first half. How should we kind of think about that for the second half of the full year?

Yes. Well, look, thanks, Tom, for that sort of question. Look, we'd expect the second half to be around that sort of $50 million or so increase. So, we're probably expecting -- if you think about the full year, these things are not always a precise science in terms of -- because they do vary on when capital investments and things land. The depreciation is probably more like $100 million or thereabouts for the full year of '26.

Your next question comes from Bryan Raymond from JPMorgan.

Might be one for Anna. There's obviously an ACCC case going at the moment. I don't expect you to comment on that specifically. But just wanting to sort of get your thoughts around value perception impacts that might come through from all the press coverage, but particularly how you're thinking about red versus yellow tickets longer-term, like this might be increasing a bit of distrust in some of those red tickets and whether you need to pivot a bit more to high-low. I'm just interested in how you're thinking about the composition of your promotional program going forward.

Thank you, Bryan. I won't comment on the case, but I think that would be appropriate. I think that we remain really focused on how we give our customers great value across the entire basket and making sure we've got the right mechanics in every category. And as we said, in some categories, we've had to move more on to EDLP. The program we've been running around actually doing fewer, bigger, bolder promotions, and that into activity with EDLP seems to be really working for customers, and we can see that through some of those areas.

So I think, look, we're just really focused on actually using data and AI to work out how do we get the right promotions to meet the right customer cohorts and how do we do that longer term. And actually, what we are seeing is the work that's done in range is making it simpler for customers to find value. And obviously, our own brand growth in the quarter around really driving quality and value is another lever we have to really simplify that on an ongoing level.

So, we're really focused. The outcomes will be the outcomes of where we are on the ACCC, and we'll work through that, whatever that may be. But again, it comes back to making sure that we're doing the right thing across the basket, not in any particular category, but lowering the cost of shopping and giving customers the right value in the right way in the right categories. I don't know whether you want to add anything, Leah?

I think that's a good answer.

There are no further questions at this time. I'll now hand back to Leah Weckert for closing remarks. Great.

Thank you for joining us this morning. In summary, we say we're very pleased with the financial results and the strategic achievements that we've delivered over the last half, including strong supermarket sales and EBIT growth, and strength in online. The fact that our automation and operational efficiency programs are now delivering really tangible benefits, including improved customer satisfaction scores and the completion of the Liquorland banner simplification. So, we're seeking to be laser-focused going forward on what really matters to customers, both in the short-term and the long-term. And we know that if we do that, we will continue to move the dial in each period.

We know that's what is going to drive our top line, translate to sustainable earnings, and create long-term value for our shareholders. So, thank you for your time this morning, and I look forward to speaking to you again at our third quarter results in April.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Coles wishes to acknowledge the traditional custodians of the land on which we are gathered today. We recognize their strength and resilience and pay our respects to their elders past and present. Coles extends that respect to all aboriginal and Torres Strait Island people and recognizes their rich cultures and continuing connection to land and waters.

Good morning, everyone. It's my pleasure to welcome you to Coles' 2025 Annual General Meeting. My name is Daniella Pereira, and I'm the Group Company Secretary. On behalf of Coles, I would also like to acknowledge the people of the nation as the traditional custodians of the land. I pay my respects and present and also to my respects to those present here today, -- also to those aboriginal and Torres Strait Island people's present here today.

For those online, I would also like to acknowledge our additional lands from where you join us today. A few housekeeping matters to begin with. As a courtesy, could you please ensure that your mobile phones are silenced. In the event of an emergency, there will be an announcement over the PA system with further instructions from the Melbourne Park staff.

Before we move to the formalities of today's meeting, we will play a short video outlining the procedures for asking questions and for voting during today's hybrid meeting.

[Presentation]

This video explains how to ask a question and vote at today's meeting. Shareholders, proxy holders, attorneys and corporate representatives may ask a question and vote in person or using the online platform. The Chairman will address questions relating to a particular item of business during discussion on that item. If you are attending online, we encourage you to submit written questions at any time from now. For those attending in person today, if you hold a handset or a yellow or red card, you may ask a question. If you hold a white card, you are a visitor and you are welcome to attend, but you will not be able to speak or vote.

During the discussion on a particular item of business, if you have a question relating to that item, please move to a microphone, give your name and show your handset or yellow or red card. If you are not attending in your personal capacity, please also state your affiliation. Your name will be announced to the meeting. If you are unable to make your way to a microphone, please raise your hand and a microphone will be brought to you.

For those joining the meeting online to ask a written question, click on the messaging tab, select the category of your question, type your question and click Send to submit. You can view your questions under my messages.

To ask a live audio question, click on the request to speak button. This will pause the broadcast enter the topic of your question and click submit request. Please then click join queue and follow the instructions to test your microphone. Once you have tested your microphone, you will be able to hear but not see the meeting. When it is your turn to speak, the moderator will introduce you, and you will hear a beep. Please then ask your question.

All questions at the meeting must relate to an item of business and the company as a whole. If a question has already been asked, please don't ask it again. To give all shareholders a reasonable opportunity to be heard, please ask no more than 2 questions or make 2 comments initially. If we receive a number of similar online questions, we may need to answer them collectively. We may also need to summarize questions in the interest of time.

If your question is of a personal nature relating to your shopping experience at any Coles Group business, please visit the booth in the foyer where the attendance will be delighted to assist you. Our executive leadership team will also be available in the foyer following the meeting to answer your questions. For questions relating to your personal shareholdings, please make your way to a Computershare attendant. If you are attending the meeting online, please contact our customer care number or the Computershare Registry number shown on the screen.

Moving on to voting. For those attending in person, if you hold a handset or a red voting card, you may vote. This handset should have a white plastic card inserted and should display your name, the resolutions and voting options. To vote on the first resolution, press the green square button to vote for the resolution, press the red triangle button to vote against the resolution or press the blue trackball to abstain. There is no enter button. Once you have entered your vote, use the blue trackball to scroll to the next resolution. You can change your vote up until the Chairman closes the poll, simply move the trackball to the relevant resolution and reenter your vote, the final selection on your device at the close of polling will be counted as your vote. Please return the handset to an assistant when you leave the meeting. For those voting online, click the voting tab to display the resolutions.

To submit your vote on each resolution, select either for, against or abstain. The selected option will change color. Your selection is automatically recorded, and there is no submit or send button. You can change your vote up until the Chairman closes the poll. Detailed instructions on how to use the online platform are set out in the online meeting guide available on our Annual General Meeting web page or under the documents tab on the Lumi platform. If you have any technical issues, please call Lumi using the phone number shown on the screen. You can also find the number on the home page of the platform. Thank you.

I hope that video was useful. If you require any assistance during the meeting with your handset or if you have any questions in relation to the meeting procedures, please raise your hand and 1 of our attendants will assist. As noted in the video, for our online attendees, we encourage you to please submit your written questions any time from now.

And it is now my great pleasure to introduce our Chairman, Peter Allen.

Thank you, Daniella. Good morning, everyone, and welcome to our 2025 Annual General Meeting. Thank you for joining us here today in the room and online and for your continued investment and support of Coles. Before I begin, I would like to note that today is Remembrance Day. We honor the service and sacrifice of those who have served and pay our respects for those who gave their lives for Australia. At 11:00 a.m., there will be an announcement over the PA system for us to observe a minute silence.

As we have a quorum, I now declare the meeting open. I'd like to start by introducing my fellow board colleagues starting from my far right are Wendy Stops, Andy Penn, Jacqueline Chow, who is standing for reelection at today's meeting, and Jacqueline Chow, Chairman of our People and Culture Committee. And to my far left is Abi Cleland, Scott Price, who will also be standing for reelection at today's meeting. Leah Weckert, our Managing Director and Chief Executive Officer; and Daniella Pereira, our Group Company Secretary.

At the front of the meeting, our members are our executive leadership team, together with Mr. David Shewring from the company's auditor, Ernst & Young. A notice of meeting has been distributed, and I take it as read. Voting on all resolutions will be way of poll, and I will now declare the poll open. The poll will remain open until the end of the meeting. Tim Heughan of Computershare will act as a returning officer for the poll and will oversee the counting of the votes. The final results will be made available after the meeting to the ASX and on our website.

This is my first AGM as Chair. I joined the Board as a Nonexecutive Director in September 2024 and was honored to become the Chair in May this year. I'd like to acknowledge and thank my predecessor, James Graham, who is here with us today. James was a Chair of Coles for its demerger and the ASX listing, the disruptions of COVID and oversaw significant capital investment. On behalf of the Board, our team and shareholders, thank you, James, and also thank you, Helen, for your support. I'd also like to thank Terry Bowen for his services as a Nonexecutive Director from 2022 to 2025. Terry has recently retired from the Board to take up a full-time executive role, and we wish him all the best.

Over the past 6 months, I've visited stores, distribution centers and support centers across Australia and met suppliers and partners in all of our regions. I've been inspired by the passion of our team and partners and their focus on delivering for our business and customers. Coles has been part of Australian life for more than a century, creating local jobs, building and operating a central infrastructure in our national food system. Supporting Australian producers and suppliers and most importantly, providing quality food and drinks at great value to families.

In the 2025 financial year, Coles contributed $46 billion to the Australian economy. This reflects wages for our more than 115,000 team members spend with our 8,000 suppliers, taxes, community support and dividends for 400,000 shareholders. We've also had the privilege of serving millions of customers each week. We're proud of that and determined to keep building on it and playing our part.

This year, we delivered on our long-term investments in automation. We've ramped up our 2 customer fulfillment centers in Sydney and Melbourne, transforming our home delivery proposition across the catchment of more than 10 million people. Those facilities have significantly improved our online offer with an expanded range, improved freshness and higher perfect order rates. We now also have 2 automated distribution centers fully operational in Queensland and New South Wales, with a third under construction in Victoria. These ADCs have transformed our product flows from our suppliers to our stores, leading to better product availability and more efficient operations.

Together, these 4 sites have step changed our customer offer and the resilience of our supply chain. For the 2025 financial year, Coles net profit after tax was $1.07 billion, up 2.4% on the prior year on a normalized basis. This reflects the strength of our strategic investments. We declared a fully franked total dividend of $0.69 per share returning more than $925 million to shareholders in FY '25 and benefiting the many Australians who hold Coles shares indirectly through their super funds. A strong profitable business is what enables us to keep delivering for all our stakeholders.

Turning to sustainability. In the 2025 financial year, we made significant progress. We achieved our target of 100% renewable electricity for our operations, along with our target to reduce Scope 1 and 2 emissions by more than 75%, which was achieved 5 years ahead of plan. We've also met our waste diversion target. In FY '25, 88% of the group's solid waste was diverted from landfill and our aim is to maintain that above 85% through to FY '30. We also look to the future and set a science-based target, independently validated by the science-based targets initiative to cut forest land and agriculture emissions by 30.3% by FY '30. We will achieve this by working closely with our suppliers and partners to reduce emissions and nature-related impacts.

Regarding responsible sourcing, I'd like to make some brief remarks on the resolutions at Item 6 which have been repositioned by a group of shareholders holding approximately 0.0021% of Coles issued capital. I note that since the release of our notice of meeting in September, Item 6.2 has been withdrawn by the requisitioning shareholders. Coles takes responsible sourcing seriously, and we're committed to continuous improvement of our seafood sourcing due diligence practices and monitoring and addressing environmental risks and the impacts of farm seafood on undated species. To this end, as reported in our 2025 sustainability report, we've already commenced a review of our due diligence processes as they relate to seafood sourcing and are committed to considering a range of appropriate guidelines and frameworks to build on our due diligence approach.

With regard to Macquarie Harvest specifically, we have taken a heightened approach to our due diligence practices in relation to salmon farming. Since 2019, we've engaged directly with a range of stakeholders to inform our understanding of the potential impacts of salmon farming in Tasmania and in particular, Macquarie Harbour. This has included engagement with NGOs, scientists from the University of Tasmania's Institute of Marine and Antarctic studies and the Tasmanian Environmental Protection Authority. As part of this engagement, members of management and our Board have recently visited Tasmania. Most recently, Leah Weckert, and I visited Macquarie Harbour in October, and we're encouraged by the actions being taken by scientists and industry to address this complex issue. This includes initiatives such as Macquarie Harbour oxygenation project which is a joint collaboration between the Australian government's Fishery Research and Development Corporation and Salmon Tasmania.

We recognize that certain stakeholders may have a particular view on Cole's approach to sourcing salmon from Macquarie Harbour and the specific standards that Coles should adopt. However, we believe that these matters fall within the purview of the company's Board and management. While the conclusions formed by Coles as part of our ongoing due diligence with respect to salmon farming Macquarie Harbour may not directly align with the views of those shareholders who requisitioned resolution 6.3. This does not negate the fact that we have undertaken a heightened due diligence and made an informed decision in relation to our salmon sourcing, taking into account the current information available to us. We will continue to review our due diligence processes as they relate to seafood sourcing together with any scientific updates in relation to Macquarie Harbour specifically, and we'll consider our position in light of any developments. We believe our current and planned actions remain the most responsible and effective path to sustainable seafood sourcing and disclosure.

Resolution 6.3 will duplicate work already underway in relation to due diligence processes and assessments and potentially add costs without adding clear environmental benefit. For these reasons, the Coles Board recommends voting against the shareholder requisition resolutions.

This time last year, we addressed the regulatory environment in which we're operating and we've continued to engage constructively with government and regulators over the past 12 months. In March, the ACCC published findings from its 12-month inquiring to supermarkets. We've already made changes in response to key recommendations and remain open to industry-wide working solutions, working closely with our suppliers. In the Fair Work Ombudsman proceedings, the court delivered an initial judgment in September. As disclosed to shareholders, our preliminary estimate is $150 million to $250 million in additional remediation, which includes interest and on costs such superannuation. The judgment is complex and several issues relating to the General Retail Industry Award remain outstanding and here and will require further court hearings to determine. Following the determination of outstanding issues by the court, we will consider our appeal rights.

Having regard to the complexities in this area, in conjunction with the Australian Retail Association and several other retailers, we are engaged in a number of processes with the Fair Work Commission, which we hope will result in clarity and simplicity being brought to the interpretation of the award for all retailers in Australia. Proceedings in relation to the ACCC's action on the downtown program are ongoing, and we continue to defend these.

In closing, Coles is well positioned for the future. We are focused on continuing to deliver a differentiated and compelling customer proposition and sustainable returns for shareholders. To enable this, we have a clear strategy and disciplined long-term investment plans. Thank you to my fellow directors, the executive leadership team, our Coles team members across Australia our suppliers and partners and our shareholders for your trust and support.

I would now like to invite our CEO, Leah Weckert, to address the meeting.

Thank you, Peter. It is my pleasure to welcome you all to the 2025 Annual General Meeting, including a number of the Coles family who are with us today. I am immensely proud of what we have achieved this year. Together, we have made great progress across our strategic pillars of destination for food and drink, accelerated by digital and delivered consistently for the future. Pleasingly, in FY '25, customer experience improved across all of our key metrics. With cost of living front of mind, we continue to invest in value meeting customers where and how they choose to shop. Our commitment to providing value at the checkout through thousands of weekly specials, everyday low prices and extended great value hands down seasonal campaigns, provided relief throughout the year as customers look for ways to balance their household budgets. Our exclusive to Coles range continues to set us apart and remains a growing reason why our customers are choosing to shop with us.

Over the past financial year, we launched 970 new products into the range, achieving sales growth of 5.7%. And within this, Coles finer sales grew at 13.6%, demonstrating how own brand innovation is resonating with customers. Our Flybuys loyalty program also provided value for customers. This year, we increased Flybuys active members by 4.4% and saw a 13.3% increase in customers redeeming Flybuys points for dollars off their shop through Coles supermarkets. Our continuity campaigns, including our SMEG knives and Curtis Stone glass containers promotions proved very popular, and were a key driver of customer engagement and sales.

Australians are becoming more and more digitally engaged. And in FY '25, our e-commerce sales growth was 24.4% in supermarkets and 7.2% in liquor. This was supported by the introduction of a windowless rapid offer, app and web feature enhancements and simplification of our checkout process online. In our liquor business, we commenced the national rollout of Simply Liquorland, which is progressively bringing all of our liquor stores under the Liquorland brand. We can already see the benefits through improved sales and customer experience in the converted stores.

Our Retail Media business, Coles 360, is continuing to grow rapidly with income up 13.5% in the past financial year as we help our supplier partners connect with customers in new ways. In the year ahead, our strategy will remain firmly focused on strengthening our core supermarkets and liquor businesses, particularly through the use of data and AI to unlock productivity enhance customer experiences and enable smarter, faster decision-making processes across our operations. At Coles, we feel a deep responsibility to the communities we serve. Natural disasters again affected several communities this year, and we are immensely grateful to our teams across Western Australia, Northern New South Wales and Queensland who kept our stores and transport networks operating in the face of both cyclones and floods.

In addition to providing relief in times of crisis, we are also proud to offer ongoing year-round support to many community groups and charities. With the support of our team members, customers and suppliers, we contributed $40.2 million to community and charity causes and also donated the equivalent of 39.1 million meals to people facing food and security through our food rescue Partners, SecondBite and FoodBank. We are proud to once again be recognized as the #1 corporate giver as a percentage of profit in the giving large report.

Our strong relationships with our 8,000 suppliers underpin the range and quality we offer. Many also play an important role in our community programs through donations and fundraising and I want to acknowledge and thank them for their partnership across multiple fronts this year. At Coles, we are continuing to invest in a vibrant and sustainable food manufacturing and farming industry which we know benefits all Australians. And since 2015, we have provided over $40 million in financial support to small and medium Australian farmers and producers through the Coles Nurture Fund to promote innovation and sustainability.

The dedication and hard work of our more than 115,000 team members is a key component of our success. In FY '25, we achieved our highest ever team member engagement score, reflecting 5 consecutive years of improvement. This result places us in the top quartile of large companies. We continue to strengthen diversity at Coles. And this year, we saw even greater representation of women in leadership roles at 42.7%. Our First Nations workforce representation remained above target at 3.5% and more of our leaders identified as culturally diverse. In May, we achieved platinum status in the Australian Workplace Equality Index, recognizing our work and progress to foster an inclusive, supportive and safe environment for LGBTQ+ team members.

Sadly, the retail industry continues to experience a rise in violence and aggression towards frontline workers. We have actively worked to reduce threatening situations through crime prevention initiatives, training, technology and post-incident support as well as industry partnerships and advocacy.

I'll now comment briefly on our most recent financials. Our first quarter financial results released in late October showed early momentum for Coles this financial year. Supermarket sales increased by 4.8% and excluding tobacco, increased by 7%. Liquor sales decreased 1.1% for the quarter. Total supermarkets price inflation excluding tobacco, was 1.2% for the quarter. And pleasingly for customers, grocery staples like avocados, pantry oils and infant nappies were all in deflation. E-commerce continues to perform strongly and after strong year-on-year sales growth in our supermarkets in FY '25. In Q1, we reported e-commerce sales growth of 27.9% in supermarkets and 6.8% in liquor, showing that our investment in digital continues to resonate with customers.

As we look ahead to the rest of the financial year, we will continue to focus on providing value, quality and an improving customer experience. With the festive season fast approaching, our team members are working tirelessly to deliver an exciting Christmas range for celebrations in every corner of the country. With over 225 new exclusive to Coles products, there is something for every taste and budget.

Before concluding, I want to acknowledge the extraordinary efforts of our team members over the last 12 months and the support of our more than 400,000 shareholders. And finally, to all of our customers. Thank you for your continued trust and for choosing Coles to serve you and your families every day. Thank you to everyone in the room, again, for joining us today. I hope you all have a wonderful Christmas and festive season.

And before handing back to Peter, I'd now like to share with you our Christmas television ad, which showcases the beautiful product and products that we are offering at Coles this festive season. Thank you. a chance.

[Presentation]

Thank you, Leah. I'll now turn to the formal agenda items of today's business at this meeting. The Notice of Meeting sets out the information regarding the items for consideration. I'll introduce each item separately and then invite questions and comments for each item. Please ensure that your questions and comments are relevant to the resolution being considered and to all shareholders. For each item, I'll first ask for questions from the room, and then we'll turn to questions received via the online platform, addressing written questions first and then audio questions. Jessica Tangri from our corporate affairs team will introduce the online questions.

As set out in the Notice of Meeting, Items 2 to 6 require a shareholder vote. The Board supports items 2 to 5 and recommends that shareholders vote in favor of these resolutions. The Board does not support Item 6.1 and 6.3 and recommends that shareholders vote against these resolutions. Following discussion on each item, details of the proxies and direct votes received will be shown on the screen. I will then ask shareholders and proxy holders to vote on the item, noting that you may have already done so. As set out in the notice of meeting, I intend to vote all available undirected proxies held by me as the Chairman of the meeting in favor of items 2 to 5 and against Item 6.1 and 6.3.

I'll now turn to the first item of business, which is to receive and consider the financial report of the company and its controlled entities and the reports of the directors and auditor for the year ended 29 June 2025. These reports are in the 2025 annual report available on our website. While there's no requirement to put this item to a vote, this is an opportunity for shareholders to ask questions relating to these reports. Mr. David Shewring from Ernst & Young also available to answer questions regarding the audit. The text of this first item of business is now shown on the screen. And now I invite any questions or comments from the room regarding the financial report, the directors report or orders report.

Mr. Chairman, I would like to introduce shareholder, Mr. Michael Muntisov from the ASA.

Good morning. I'm Mike Muntisov. I'm from the Australian Shareholders Association. Today, I hold proxies from 600 shareholders, representing, in aggregate, 1.9 million shares. And thank you to all those shareholders who appointed ASA as their proxy. Before I get to my question, I'd like to thank the company for your continued use of the hybrid meeting format, which allows the maximum opportunity for shareholder engagement and also for the time you took to meet with ASA before today's meeting. My question -- I have 2 questions. They relate to the liquor business. Coles Liquor business continues to trail its major competitor in terms of EBIT margin. What more do you need to do? And over what time frame to at least match your competitors' margin performance?

Mike, good to see you again. Thank you for joining. Yes, the liquor business is something which we see as really important for the Coles overall business. Liquor is probably the closest aligned business to or drinks, in particular, is the closest aligned business to supermarkets. And we see that it's very important in terms of ensuring that we can get the best out of those 2 together. I think we have seen a sales decline as you've rightly said, and this is due to a number of different reasons. Probably first off with regards to the consumer demand, health of the consumer and the cost of living that people are going through and the issues that they're facing. The second 1 there also seems to be there's changes in consumption habits across not just Australia but also globally.

And so what we're doing to address that is to focus on a number of 3 things: the first 1 is to really focus on how do we get efficiency out of our business. And so 1 of the projects which we're doing now is Simply Liquorland. What Simply Liquorland is doing is it's ensuring that we have all of our 3 Coles liquor brands under 1 banner. What that provides is it provides us much more simplicity in dealing with our suppliers. It ensures that we have a single price point offering to our customers. And it also ensures that we're providing the right brands and drinks to our customers for those particular locations. But this pathway is only just started. It's a rollout of our -- just started. We're probably halfway through the rollout of our over 1,000 stores in terms of our liquor stores across Australia. But what we are doing is we're very careful and minded to ensure that we're able to continue to grow this business and grow our market share. .

Okay. You touched on my second part of the question, which is what's the plan to compensate for what is overall a positive trend in terms of society as a whole of reduced alcohol consumption among young people in particular? .

Yes. Mike, as I said, I think, that the key is for us to ensure that we've got the right product in our stores that our customers want. And as you say, in terms of the reduced consumption of alcohol, the different products that our young people, certainly, my kids are drinking. It's very important that we are able to understand that and ensure that we have those type of products in our store. And to be able to make sure that we also have other products within our Liquorland stores to be able to, in effect, combine and looking at our business, not just from a supermarket point of view or liquor independently, but as 1 business and also to look at our online business as 1 business and ensure as Leah said in her speech, continue to drive our growth in terms of sales through our liquor business.

Mr. Chairman, I would like to introduce shareholder, Ms. Adele Chaisson.

Thank you. Good morning, Chair. Good morning, everyone. My name is Adel. I work at the Wilderness Society. My question is about your directors' report. Australia is in the group of a deforestation crisis with unique forests and bushland destroyed every day for supermarkets products, particularly beef and timber pallets. And for several years, Coles was the only big supermarket in Australia with a commitment to going deforestation free. But in August, calls announced a long-awaited commitment to ensure its own brand products don't come from deforestation and disclosed actions it's taking and challenges it's facing, sorry, in tracing its supply chains, particularly for beef. The welcomed this commitment, and I want to do that again today. As a major step in calls taking a leadership role in helping end deforestation station in Australia. But Coles still has some blind spots and a lot of work to do to actually protect forest and bushlands in Australia. So my question is, will Coles' next public update on deforestation, one, disclose how much of its beef supply chain has been verified as deforestation free and how the supermarket is confirming this. Two, will Coles next public update, provide details about the next steps Coles is taking within its phased approach to tackling deforestation particularly regarding how the supermarket is taking action to clean up its sourcing of timber pallets.

Thank you very much for your questions. With regards to your first question, yes, we are committed to continue to provide transparency in what we're doing and how we're verifying the amount of deforestation that has happened within our Coles owned brand products. And it's not only just beef, but we're also looking at cocoa soy, timber in terms of pulp and paper products for our own business as well. And so that's certainly something which we're going to be focusing on and certainly providing more disclosure, so we can confirm that. With regards to, as you say, we've got a progressive view in terms of how we focus on our commitment to deforestation. And as you're aware, it's a very complex thing in terms of ensuring that we are able to get that certification and confirmation in terms of that deforestation.

We're certainly fully aware of the issues that are confronting with regards to pallets. And we're working together with those pellet suppliers that we don't necessarily control in terms of trying to make sure that we're getting full verification in terms of how they source the timber for those pallets. So we will provide any updates in terms of what we're able to receive for that. And as you said, we've got this progressive movement towards our deforestation commitment, and we will see in terms of when that comes about going forward. So thank you very much for the question. Thank you microphone 3. Sorry, I've got to keep looking.

Mr. Chairman, I would like to introduce shareholder proxy, Ms. Tara Jones.

Thank you. I am Tara Jones, Program Manager Plastics and Packaging from the Australian Marine Conservation Society. Australia's leading national charity dedicated solely to protecting our precious ocean wildlife. By the time this AGM ends an estimated 60,000 kilos of plastic will have entered Australia's environment, equivalent to around 3 million single-use plastic water bottles. It's clear that there's an urgent need to prioritize solutions that prevent plastic pollution at its source. Yet Coles Group remains silent on the total amount of plastic packaging it uses each year. For the third consecutive year, Coles has failed our independent audit of Plastic Packaging use in Australian supermarkets. Our 2025 unwrapped report released today found that Coles sustainability reporting still lacks transparency and detail needed to assess progress and that online customers receive unwanted plastic produced bags even when selecting loose options. In most cases, a single bulb of garlic was delivered in its own plastic bag. My question is, will Coles commit to publishing data annually on how much plastic it uses overall, beginning with the 2025-'26 sustainability report to provide shareholders and customers confidence that Coles is taking genuine responsibility for its contribution to Australia's plastic pollution crisis.

Thank you for your question, Ms. Jones. Yes, we are committed to transparency and continuous improvement in the reporting of what we're doing with regards to plastics. I agree with you at something which -- it's very difficult for us to look overall at the amount of plastic, which is used in our business and across our industry. We are very focused in particular in what we're doing ourselves with regards to Coles own brand our Liquorland branded products. I think some over 87% of our product packaging is recyclable. And certainly, in last year, we took out 191 tonne of single-use plastic out of our business through Coles and Coles Liquor Land.

So we're on the path in terms of being able to meet our needs and meet the requirements in terms of our customers and our other stakeholders. But it's very difficult for us to commit to providing the detail across the whole industry. With regards to the report that has just come out, well, I haven't read it, apologies, it's just come out today. But I do know that we will read that report thoroughly. I'm certainly sure that our team will inquire about that report and look at how we can improve our reporting on that. So thank you, Ms. Jones, for your question. It appears there are no further questions from the room. So Jessica, are there any online questions?

Chairman, we have received an online question from Mr. Stephen Mayne to the following effect. Congratulations to Peter Allen on being chosen by the Board to chair our company. Peter joined the Board in September and became Chair 7 months later on May 1, whilst Peter recruited last September to be the next chair -- or was it a competitive internal process this year? -- who ran the chair succession process, and internal search firm, certain non-Canada directors or the Company Secretary. How did it work? Did the formal process extend to presentations from multiple internal candidates, interviews and a formal internal vote of the Board.

Stephen, thank you for your question. As far as the appointment of me coming on to the Coles Board, given I was not part of that process, I will not comment on that. With respect to the process in undertaking the share selection after James' retirement, that was led by a process led by the Nomination Committee of Coles. And it was also open to any Board member of Coles to participate in that. I think that's all I can answer in regards to that question. Thank you, Jessica. Any further questions?

Chairman, we have an online question addressed to Ms. Leah Weckert, from Mr. Stephen Mayne. The question is, could CEO, Leah wacked please comment on how many full-time equivalent staff we currently have and whether this is likely to fall over the coming 12 months with the rapid rollout of AI which parts of our business and operations are the most prospective AI productivity gains and how energetically are we embracing those opportunities.

Thank you, Mr. Mayne. I'll try and answer that question before seeing whether Leah can add any value to it. But we certainly believe that our full-time equivalent numbers will remain the same. With the application of AI across our business. And the reason for that is that what AI is doing in terms of the areas of our focus is to improve productivity within our work to focus on a lot more of the complex information and data and analytics. To ensure that we're able to give our customers, our teams more time to be in our customer-facing roles. So we believe that our FT equivalents will remain the same. But what will happen is the change of work will happen. AI also helps in an upskilling of our team members and growth within our staff across our environment. Leah, any further to add? Thank you, Mr. Mayne, for your question. We have a question on the floor again microphone. .

Thank you, Mr. Chairman. I would like to introduce.

Mr. Ron Gay from the regional Trade Union Human Rights shareholder group. .

Thank you. Just another question concerning plastics. In Victoria, recently, there's a lot of opposition against the incinerators for burning plastic. So presumably part of the circular economy, but there's a couple of community summaries, I think, the last 1 that's opposed the issue. And I was wondering whether -- on the reduction of plastics that the Coles is headed towards, can the company oppose household and commercial waste incinerations. That the consideration of the polluting of farmlands, waterways and air with cancer causing dioxins and asthma producing fine particle matters. These plants are banned in New South Wales and Canberra, phasing out in Europe, but the start-up in Victoria is causing a bit of concern to the local communities. And Australia is signed up to 3 international treaties. The Minamata Convention, the Stockholm Convention and the Basal Convention. So I was wondering if you could join on to that campaign.

Well, Mr. Guy, thank you for the feedback and the comment. We certainly take that on notice, and I'll ensure that our team here in Victoria do review the situation and see what we can do in terms of supporting that. As I mentioned in 1 of my previous replies, we're focused on reducing single-use plastics. So done a reasonably good job last year, and we'll continue to do that. We're also focused in terms of removing the soft plastic waste pile that was built up and working collaborative with others in terms of being able to find a better way in terms of disposing and using that plastic. So we'll take that comment on notice and acknowledge that. So thank you very much.

Yes. Thanks. If I could just have 1 more question, I guess. So the company has been working hard to get -- to remove the modern day slavery, the itinerant work is the treatment that's been happening to them in Australia, which is great, and we've been working with the unions on that. I wonder if you could update to whether there's any contracts from suppliers in the supply chain that's happened over the last 12 months or at least being improved? Or is it .

Well, certainly, Mr. Guy, thank you. We have a very strong ethical sourcing policy so that all of our suppliers have to abide by that policy. We do regular audits in terms of those suppliers to ensure that they meet the policy and the conditions that we have. We're working very closely with those suppliers to ensuring that, that is the case. Some of the things which you are doing in terms of working with the unions for example, particularly when you think about agriculture, horticulture as well as the meat workers is setting an accommodation standard, which we've introduced this year to ensure that those itinerary workers and other workers are housed properly. So we are working with that, and we're continuing to do that, and we'll continue to report on that in our sustainability report. Yes. Thanks, Mr. Guy. Jessica, are any further questions?

Chairman, there are no more online questions or comments on this item. .

Thank you. As there are no further questions, we'll move on to item 2 on today's agenda. This item of business relates to 2 directors standing for reelection. Each of these directors will shortly provide an address, which will include some back information on their background. Item 2.1 relates to the reelection of Ms. Jacqueline Chow as a Director of the company. The text of the resolution is now displayed and Jacqueline's details are set out in the Notice of Meeting. Jacqueline has served as the Director of the Coles Group since our demerger in 2018. Over the past 7 years, she has been highly diligent and value contributor to the Board, bringing deep operational insights from our FMCG background. I now invite Jacqueline to address the meeting.

Thank you, Chairman. Good morning, shareholders and guests. I am honored to be standing for reelection to the Board of Coles Group. I take this responsibility very seriously. I've run several large-scale businesses end to end with my last executive role spanning 80 countries. Having hands-on operational experience, for context for what it truly takes to deliver on our promises. We must make sustainable and acceptable returns to you, our shareholders, and we must stay in intuned to the expectations of our diverse constituencies, be they our own workforce team members, our customers, our communities, governments or regulators.

I've almost entirely served customer-facing businesses with household brand names and Biscuits, Construction Materials, Fisher & Parke Appliances, Kellogg Company to name a few. Using artificial intelligence and data analytics to garner insights so I can constantly appreciate the very real challenges of our Australian households. I sought to learn what are their pain points? How to make their lives easier with innovation and technology solutions, all to build customer loyalty.

Finally, the last few years of geopolitical uncertainty, macroeconomic volatility and societal shifts have all caused businesses to redefine their supply chains and mitigate their risks. And as an executive, I was always an FMCG, fast-moving consumer goods supplier to Coles supermarkets. So I bring an important perspective on how to harness a productive and trusted partnership with suppliers. I am motivated to contribute toward our purpose of helping Australians eat and live better every day. And I would be honored to receive your support to serve as Director. Thank you.

Thank you, Jacqueline. The Board with Jacqueline abstaining, unanimously staining recommends the reelection of Jacqueline Charles, a Director. I now invite any questions on this item of business -- it appears that there's no questions on the floor. So Jessica, are there any online questions?

Chairman, there are no online questions or comments on this item.

Thank you. If there are no further questions, we have now finalized discussion of this item. The details of the proxies and direct votes received on this item will now be displayed. Please now enter your votes for item 2.1, if you have not already done so.

Turning to Item 2.2, which relates to the reelection of Mr. Scott Price as a Director of this company. The text of the resolution is now displayed and Scott's details are set out in the notice of meeting. Over the past 3 years as a Coles Group Director, Scott has brought his invaluable insights and global perspective to the board, drawing on his extensive retail, FMCG and logistics experience. Particularly in relation to complex supply chains and business transformation. I now invite Scott to address the meeting.

Thank you, Chairman. Good afternoon, shareholders and guests. As a fellow shareholder of Coles, I'm very pleased to be here today standing for reelection. For over 30 years, I have worked in the consumer goods, the retail and the logistics industries. I began my career with Coca-Cola. At that time, had an opportunity to live in Australia, where my family and I fondly recall shopping at the Coles store in Birkenhead Point. I then left to join DHL as President of their Japan operations, subsequently CEO of Asia and then CEO of Europe, leading all aspects of those markets.

I then enjoyed working for Walmart, a global retailer, starting as the Chief Executive Officer of the Asia business, a number of stores throughout the region as well, opening stores in new markets. I then took on a global role covering global sourcing technology, house brands, real estate direct manufacturing. I joined UPS and was the first executive outsider in 112 years in that company, which they reminded me of frequently, led a substantial transformation program at that company globally. And my last role was the President of their international operations, which covered all 220 markets outside the United States.

I joined the Board 3 years ago and have really enjoyed being part of Coles over the last 3 years. Subsequent to that, I took on a role as Chief Executive Officer of DFI Retail group based in Hong Kong. DFI's business encompasses 7,500 stores across 11 countries in Asia across the formats of food, health and beauty, as well convenience stores, home furnishing and restaurants.

The comprehensive portfolio of that business allows me to bring a unique perspective I enjoy fulfilling my obligations as a Coles director attending all board meetings, committee meetings, strategy session, study tours and enjoy the opportunity to tour stores with executives of the business, whether they enjoy that or not, I do not know. I'm honored to be a Coles team member and to continue working with such a great management team and as well Board.

Thank you. Thank you, Scott. The Board with Scott abstaining, unanimously recommends in favor of the reelection of Scott Price as a director. And I invite any questions on this item of business. Microphone #3.

Mr. Chairman, I would like to reintroduce shareholder Mr. Michael Montes from the ASA. Mike?

Yes, hello again. Scott told us about his considerable international experience in retail, including at Walmart and now in Asia. I wonder whether he can share with shareholders how supermarket operations in Australia compare against global benchmarks, which he's familiar with. And is he seeing the political pressure on supermarkets that we have here in other parts of the world?

Yes, I'll get Scott to answer that question. Thank you, Mike.

Thank you for the question. Actually, we have an opportunity as a Board to travel around the world. We were in Toronto, Canada this last year and are able to benchmark the operations. I continue to be impressed by the operations of Coles, not only in just in terms of Coles service to its communities in terms of mass food retailer, but also keeping up with technology including both digital and as well the technologies that enable the business in terms of supply chain. I think Australia is unique in as much that as a food retailer, we are advocate for our customers. and customers of Australia have a quite narrow view on country of origin. They want to buy Australian, which offers quite a few complexity in terms of, I think, versus other markets in the world. So I do believe that Coles is a very, very good operator around the world. As to your second question, I was so attuned to the first. I have now forgotten the second half.

It.

Was about political pressure on supermarkets. Is that -- are you seeing that elsewhere? Or is it an Australian phenomenon?

I would suggest that probably Walmart had probably the most significant role as a bit of a political bellwether. And I've learned quite a bit from how that company navigated. We are advocates for 100% of our customers. As a result, we have to be neutral. But at the same time, when you were at scale, you have an obligation to ensure that the regulatory environment is adhered to. So I don't think the pressure is any lesser or greater than any large-scale food retailer around the world.

Thank you, Mike. It appears there's no further questions from the room. So Jessica, are there any online questions? .

Chairman, there are no online questions or comments on this item.

Thank you. If there are no further questions, we now have finalized discussion on this item. The details of the proxies and direct votes received on this item will now be displayed. Please now enter your votes for item 2.2, if you've not already done so.

I'll now turn Ion 3, which is an advisory vote on the 2025 remuneration report, which can be found on Pages 58 to 76 of the 2025 annual report. I now invite Richard Freudenstein as Chairman of our People and Culture Committee, to address the meeting. Richard?

Thanks, Peter, and good morning, everyone. The remuneration structure for the Coles executive leadership team comprises fixed compensation, an annual short-term incentive, including an equity deferral and a long-term incentive based on performance over a 3-year period. The short-term incentives payable to the executive KMP for the 2025 financial year range between 74.8% to 82.1% of the maximum opportunity. The long-term incentive, which covered performance over the 3-year period between the 2023 and 2025 financial years vested at 79.8% of the maximum opportunity. The Board considers the outcomes for both the short-term incentive and long-term incentive to be appropriate considering the rigor of the process by which the targets were set, the financial performance and strategic objectives delivered by management in the 2025 financial year.

Within the 2025 remuneration report, the Board announced a 3.5% increase in the total fixed compensation for the Managing Director and Chief Executive Officer, as well as an increase in STI opportunity to 100% of total fixed compensation that target and 150% of total fixed compensation at maximum. These changes better align the total remuneration package to the benchmark peer group and represent the first increase in remuneration for the CEO since her appointment on 1 May 2023. The Board also determined to replace the Ocado transformation objective in the CEO's individual balance scorecard for the 2026 financial year short-term incentive with an objective focused on our accelerated by digital strategic pillar. Performance will be assessed against the achievement of revenue growth in the Coles 360 offer and evolving the digital customer value proposition.

I would also like to take this opportunity to speak to resolutions 4 and 5 relate to the allocation of equity to our CEO, Leah Weckert. Resolution 4 relates to the approval sought to allocate 42,864 shares to Ms. Weckert, pursuant to the 50% deferral into equity of the short-term incentive earned in the 2025 financial year. These shares will be subject to a 2-year deferral. Resolution 5 relates the approval to allow Ms. Weckert 167,864 performance rights being equivalent to 175% of Ms. Weckert's total fixed compensation. The terms of the long-term incentive grant are set out in the notice of meeting and importantly, they are entirely performance-based. Thank you.

Thank you, Richard. The text of the resolution of Item 3 regarding the remuneration report is now displayed. While voting this item of business is advisory only, the Board takes account of the discussion and voting when reviewing our remuneration practices and policies. The Board recommends that shareholders vote in favor of the adoption of the remuneration report. I now invite any questions on the remuneration report. There appears to be no questions on the floor. So Jessica, are there any questions online?

Chairman, we have received another online question from Mr. Stephen Mayne. He has asked. It was a shame you didn't disclose the proxies to the ASX along with the formal addresses, allowing for a more fully informed debate. Did any of the proxy advisers recommend a vote against any of today's resolutions, including this remuneration report item. If so, what reasons did they give and did this translate into any material protest votes? Please don't say protest adviser recommendations are confidential. It is standard for companies to be across this detail on the voting recommendations and inform shareholders where relevant. And I could show you examples of more than 50 chairs responding positively to this question.

Mr. Mayne, thank you for your question. We do believe, as far as the proxy adviser firms are concerned that the information is confidential to those who subscribe to those proxy adviser reports. Notwithstanding that, we do not put up our proxies beforehand. I don't believe it is respectful for those shareholders who are here in the room to be able to make their own informed choice as to how they're going to vote on the resolution at the time. So we do have no intention of putting up the proxies prior to the voting. Thank you, Mr. Mayne. Jessica any further questions. .

Chairman, there are no more online questions or comments on this item. .

Thank you. If there are no further questions, we now have finalized discussion on this item. The details of the proxies and direct votes received for this item will now be displayed. Please now enter your votes for item 3, if you have not already done so.

I'll now turn to Item 4, which is the approval of the grant of STI shares for our Managing Director and Chief Executive Officer, Leah Weckert. As a deferred component of a short-term incentive award for the 2025 financial year. The text of the resolution is now displayed. Details of proposed grant are set out in the notice of meeting. The Board, with Leah abstaining, considers the grant of SCI shares to be appropriate in the interest of shareholders and unanimously recommends that shareholders vote in favor of Item 4. I will now invite any questions on the approval of the short-term incentive grant. There appears to be no questions on the floor. So Jessica, are there any questions online?

Chairman, there are no online questions or comments on this item. .

Thank you. If there are no further questions, we have now finalized discussion on this item. The details of the proxies and direct votes received on this item will now be displayed. Please now enter your votes on item 4, if you've not already done so.

I'll now turn to Item 5, which is the approval of the grant of performance rights to Leah Weckert, as a long-term incentive award for the 2026 financial year. The text of the resolution is now displayed. Details of the proposed grant are set out in the notice of meeting. The Board, with Leah abstaining, considers this grant of performance rights to be appropriate in the interest of shareholders and unanimously recommends that shareholders vote in favor of item 5. I now invite any questions on the approval of Leah's long-term incentive grant. There appear to be no questions from the floor. So Jessica, are there any questions online?

Chairman, we have received another online question from Mr. Stephen Mayne, who has asked when disclosing the outcome of voting on all resolutions today, including this proposed LTI grant to the CEO, please advise the ASX how many shareholders voted for and against each item similar to with the scheme of arrangement. This will provide a better gauge of retailer shareholder sentiment on all resolutions and insight into the chronically low retail shareholder participation rate, the likes of Qantas, ASX Suncorp, Tabcorp, Myer, Flight Centre, Stockland and even the world's biggest share registry provider, Computershare, have all voluntarily provided this data at their most recent AGMs. You've got the data, so why not let the sun shine in. Qantas revealed last week that less than 1% of its 155,000 shareholders voted at the AGM, how many of our 480,551 shareholders voted today on this LTI grant and were the majority against. Did you even make it to a 1% turnout? .

Mr. Mayne, thank you for your question, which we will take on notice. But as you're aware, our practice is not to disclose the number of shares voted -- so our practice is to disclose the number of shares voted rather than number of shareholders as business approach is basically in line with the Corporations Act as well as the ASX listing rules. And we believe we're consistent with other companies, but we'll take that notice -- that question and notice. Thank you, Mr. Mayne. Jessica, any further questions?

Chairman, there are no more online questions or comments on this item.

Thank you. If there are no further questions, we have now closed discussion on this item. The details of the proxies and direct votes received for this item will now be displayed. Please now enter your votes on item 5, if you've not already done so.

I'll now move on to Item 6, which was initially in 3 parts: 6.1, 6.2 and 6.3. As noted earlier in my address, all 3 items were requisitioned by a group of shareholders under Section 249N of the Corporations Act. As announced to the ASX on second of October, Item 6.2 has been withdrawn. Item 6.1 concerns a special resolution proposing to men Coles constitution to include a provision enabling shareholders by ordinary resolution to express an opinion or request information about the way in which a power of the company vested in the Board has been or should be exercised. The text of the resolution is shown on the screen.

The Board unanimously recommends that shareholders vote against this resolution. Detailed reasons as to why the Board does not support this resolution. Item 6.1 is set out on Page 16 of the notice of meeting. In summary, the Board considers that it is not necessary or desirable to amend the constitution given that the existing rights of shareholders under the Constitution and Corporations Act. The resolution proposes a special resolution which means it will only be passed if at least 75% of votes are cast on this resolution are in favor. Irrespective of the vote on Item 6.1, there will be an opportunity for discussion of Item 6.3, following the completion of Item 6.1. And I ask that you hold your questions on that -- in that time. At this stage, I invite any questions or comments only on Item 6.1 which relates to the proposed amendment to Cole's constitution. It appears that there's no questions on the floor. So Jessica, are there any questions online?

Chairman, there are no online questions or comments on this item. .

Thank you. If there are no further questions, we have finalized discussion on this item. The details of the proxies and direct votes received for this item will now be displayed. The directors unanimously recommend that shareholders vote against this resolution. Please now enter your votes on item 6.1 if you've not already done so.

Based on the proxy and direct votes received ahead of the meeting and the number of votes that have been -- I've been informed and represented on the floor and online today, -- it is a pound that Item 6.1 for the amendment of Coles' constitution of the company will not be passed. Therefore, Item 6.3, which was contingent on amending the constitution will not be put to the meeting for voting. However, as I previously mentioned, I will shortly invite shareholders to ask questions or comment upon Item 6.3. The text of the resolution for Item 6.3 is shown on the screen. As discussed in my address earlier, this item was not supported by the Board. Detailed reasons as to why are also set out on Pages 16 and 17 of the notice of meeting. I now invite shareholders to ask questions or comment on Item 6.3. Well, I'll start with 1 because it's an easier number. Microphone 1 first. Thank you.

Mr. Chairman, I would like to introduce shareholder, Mr. Linden O'Neill.

Yes, my name is Lindon. I'm a Tasmanian original tuck-in a man born and raised in Northwest of latrine Tasmania. I have 4 sums and we're shopping Coles. I founded healthy Country services and consulting, built on traditional ecological knowledge, woven into contemporary conservation and ecosystem management. I pay my respects to all of you, your family and your ancestors. More than a century ago, the man who would go on to found Coles first worked in his father's small general store in the village Wilmont, not far from the Wild Rivers that flow west into the Macquarie Harbor. The waters of Macquarie Harbor were pristine then, a world of deep oxygenated water, brackish layers were the mountains and mortars, mixed with the oceans. Supporting the abundant and thriving life of the harbor. Among that life, there are species older than the dinosaur, found nowhere else on earth. It's called Maugean skate. The then was abundant uninterrupted for over 60 million years.

The land and waters of Tasmania were clean, resilient and self-sustaining Today, I can share with you that the skate cannot survive if we continue to support its demise. So as a company with these strong ties to the Tasmanian community, we carry our moral responsibility to the landscapes and the waters that gave rise to our brand.

Now our sourcing choices have the potential to either help or harm the last surviving members of this ancient keystone species. Coles has positioned itself as a leader in responsible sourcing and sustainability. Yet, if we continue to sell salmon farmed from the Macquarie Harbor, we undermine that promise. So in an era where consumers increasingly choose products aligned with their values, sourcing from a compromised environment is not on neutral act. In Wilmont, the Coles family built their store upon a simple idea that good business serves people and place alike. If their store could thrive in that era when Tasmania's natural systems were strong and healthy then surely Coles can thrive today by protecting those systems, not exploring them.

The skate has shared its waters with Tasmanian communities from millennia. It now depends on us, on Coles to decide whether those waters will remain a living part of our national story or a cautionary tale of what we failed to protect. Our shareholders and Tasmania, we owe it to our founders and to future generations to ensure that Coles growth never comes at the cost of Tasmania's living heritage, but stand by our origins for integrity. Today from this moment and into the future, will you stand with me for a Tasmanian living dinosaur. For Earth for nature and for all life. Thank you.

Thank you, Mr. O'Neil, for your comments as well as your question. Yes, we do take responsible sourcing very seriously and certainly understand and are trying to manage the potential impacts. With regards to Coles getting sourcing salmon from the salmon farms in Macquarie Harbour. We acknowledge that, that salmon farming is government approved, it's EPA licensed. It's farmed under strict certification. And we also do our own due diligence in terms of understanding the impact that, that is having on the Macquarie Harbor. As you may be aware, I think we mentioned it in our sustainability report, we have reduced the amount of salmon that we are taking out of Macquarie Harbour. We've also trialed other overseas salmon for our consumers to see whether they are prepared to buy overseas salmon rather than Australian salmon.

Unfortunately, notwithstanding the price differential where the Australian salmon is higher, our Australian consumers have voted to continue to buy Australian salmon. That doesn't stop us though in terms of working out ways in which we can find alternative supplies to ensure that, like you, we want to see Macquarie Harbour and the continues to survive. We've been working and engaged with Salmon Tasmania with our suppliers, with the EPA with unit versus Tasmania, as I mentioned, the institute of something and something and Antarctic Services that to really understand the impact that salmon farming is having on.

The scientists are saying that there are some positive signs that they are seeing within the harbor, as I mentioned, with the benefits of the reoxygenation project that is taking place with the reduction with the amount of salmon farmed but also with the general environment itself, as you -- given from the area that harbor is impacted quite dramatically by not just the harbor itself and the depth of that harbor and the within that harbor, but also in terms of the narrow opening to the sea in terms of the amount of oxygen water flowing in from the sea and also the impact potentially of the hydroelectric waters in terms of the release coming down the rivers and the impact that, that has on the Macquarie Harbour itself. But we're continuing to do our due diligence and we'll continue to do so. And as I said in my opening remarks, we will make decisions based on the science at the time. Because, again, as you said, we don't want to be in a position where we do not source responsibly because we have that obligation not just on ourselves, but for all of our stakeholders and our shareholders. So thank you, Mr. O'Neil microphone #2. Thank you.

Mr.

Chairman, I would like to introduce shareholder, Ms. Jes, who is here today with SIX. Hello.

Thank you for having us. I've traveled from the 2 Editas mania. I represent environment Tasmania. We formed part of the SIX Invest coalition who put this resolution forward. Coles continues to sell farm salmon from Macquarie Harbour, a place where an ancient species, the is being pushed towards extinction by the impacts of summon farming. The creature has survived since Gondwana, it's lived through ages and yet it may not survive your supply chains. Last year, almost 39% of shareholders voted for our resolution asking you to address this in your supply chain despite the Board's recommendation to vote against it. Your shareholders sent you an extraordinary signal.

Since then, in the Tasmanian salmon industry, we've seen worse mass fish deaths, pollution and public outrage as the industry has publicly conceded that it sells diseased salmon for human consumption and its standard practice. We now have a harbor and an industry literally on life support. The FIDC funds, that oxygenation program with taxpayers money, so we are all here paying a salmon tax regardless of whether we eat it or not. It's there to offset the oxygen being taken down from the salmon. It's keeping those salmon alive, not the.

While we recognize the step forward by Coles in assessing the threats to farm salmon the threat of farm salmon, through species identified under the EPBC Act. And publicly, you have acknowledged the threat to the. We also appreciate that you have removed your responsibly sourced labels from all Tasmanian farm salmon products sold under your Coles own brand seafood. In recognition of this, SIX Invest and the co-filers, Environment Tasmania, neighbors of fish farming and Jeff Cousins have withdrawn 1 of our resolutions, in an act of good faith that you will continue in the right direction.

However, I'm here today to remind you that you can't keep looking away from your complicity in what is happening in Macquarie Harbour and emerge and you can emerge as a leader in sustainability ahead of your competitors. Resolution 6.3 goes to the heart of what kind of company calls wants to be. Coles can emerge as a leader in this space and champion the ideals of sustainability that the team works to achieve noting. However, that you do not appoint a sustainability representative on the Board of the company. It calls for Coles to align Seafood's sourcing policy with global best practice. Already used by major retailers in Europe and North America. It's credible, it's achievable, and it would help in show Coles is never again associated with the extinction risk or cut.

The adoption of global best practice outlined by the Conservation Alliance for Seafood Solutions would ultimately help your business safeguard against unethical practices and reputational risks in supply chains. By addressing the root cause of the issue at play. Importantly, it would make Coles it would help Coles, make sure it's meeting its due diligence obligations under the OECD responsible business conduct guidelines. Governments expect major companies like Coles to comply with those guidelines, guidelines that expect companies to conduct a heightened due diligence whereby diversity harms involve UNESCO World Heritage areas and protected spaces.

The Maugean skate is a protection spaces that is listed as a world heritage value under the Tasmanian Wilderness World heritage area. A 1/3 of the Macquarie Harbour forms the World Heritage Area and the guidelines also say that certifications must be fit for purpose. Those in Macquarie Harbour that you quoted are not. They do not require certified farms to detect their impact on the skate. These flawed certifications fail to safeguard the skate, and they fail to safeguard Coles from contributing to an extinction. By aligning with global best practice secure seafood policy, Coles could safeguard our supply chains while protecting shareholders and the skate or while leaving Coles' biggest competitor, Woolworths, lagging behind in disgrace.

Industrial salmon farming, and let me just make it clear to everyone in the room, Tasmanian farmed salmon is not native. It's Atlantic salmon. It doesn't belong in our waterways, is causing an extinction event in Macquarie Harbour. Coles must make a decision on addressing its supply chain. As you've mentioned in the past, you have reduced your supply from the harbor. And I would like to ask whether or not you continue to plan to reduce and by how much -- is there a plan to transition entirely away from Macquarie Harbour when sourcing your farmed Atlantic salmon.

Thank you for your comments and your questions. As I mentioned, Coles, we take our reputation very seriously. We take responsible sourcing very seriously. With regards to Macquarie Harbour, in particular, and the salmon that we -- that is farmed, that we source out of Macquarie Harbour. You're correct. We've been looking at this as a business since 2019. And so it's not something which hasn't just come up in the last couple of years. So we've been focused on this. We don't rely on the certifications that we currently use. We do a lot more detailed due diligence above that certification. And yes, with regards to the requirement of the -- in terms of looking at CASA Conservation Alliance and Seafood Solutions in terms of their verification or certification. We are looking at those areas in terms of seeing whether that is duplicative of the certification that we currently do or whether it's additive to do that. And I think we mentioned in our sustainability report this year, that we're going to be continuing to focus and improve our due diligence as we move forward.

We're basing our decisions on that due diligence in terms of the sourcing of salmon in Macquarie Harbour. The science is saying that at and which we are closely monitoring is saying that the Maugean skate numbers are improving. They are saying that the benefits of the oxygenation program are improving there. They're saying that the reduction of salmon farm is improving the benefits of the Maugean skate. We're going to continue to monitor that and work with not just any or our suppliers, but the University of Tasmania, IMS, other NGOs, SIX, et cetera. And I know that our team have been working with you over a number of times within the last 12 months. But we are doing enhanced due diligence and we'll continue to improve that diligence going forward. and we'll make the right decision in terms of the benefit of all stakeholders with regards to our sourcing of salmon in Tasmania and in particular, Macquarie Harbor.

With regards to the addition of, I suppose, moving completely out of Macquarie Harbour. Unfortunately, there's a time of the year where we can only source salmon from Macquarie Harbour. Now provided the consumer is comfortable in terms of that, and we will continue to work with that and looking at in terms of where the science is at that may be a situation that does eventuate. But at this point in time, we believe that the source -- the salmon we saw from Macquarie Harbor is responsible.

Yesterday, the ABC reported that Dave Wood Williams, the former Board Chair of Tassal said that Coles and Woolworths were desperate for an alternative to farm salmon. Can you confirm this?

I don't think we're desperate to confirm with regards to farm salmon. We know that our customers want to have Australian salmon, and Australian fresh salmon. So we're trying to supply that to our customers and finding ways in terms of the most appropriate and best and environmentally beneficial way of being able to do that. And we will continue to do that in terms of looking at our responsible sourcing. Microphone 2. Thank you. .

Mr. Chairman, I would like to introduce proxy holder, Mr. Leonardo Guido. Good morning, Gordon. Thank you, Chair for the opportunity. .

Thank you. I'm Dr. Leonardo Guido, a scientist with specific expertise in the biology and fishery management. I currently work with the Australian Marine Conservation Society who in the past we have engaged with you. And again, I acknowledge that you've taken that step. Coles' view that the Maugean skate population is recovering and is similar to baseline measurements in 2014 is misleading your shareholders. There are critically important caveats when interpreting population estimates as 2014 levels, caveats with the -- with which the authors of the Institute of Marine and Antarctic Sciences. So IMS for short, those authors of that report described themselves.

So ability to -- my apologies. Please bear with me as I present to you the following evidence. First, it is biologically implausible that the relative abundance increased 425% in skate from 2022 to 2024. Given the natural rate of increase for this population is up to 8.8% per year. The IMS report does not claim any population trends as a significant increase, I quote significant increase in terms of magnitude. On that there are statistically significant differences reflected in the catchability of the animals since 2022.

Second, 2014 population levels reflect an already heavily impacted population. So it's not a baseline of a healthy population. This population was yet to be estimated to be wiped out in half come 2019. Third, despite tentative signs of juvenile recruitment in the animal in 2022, smaller animals were not caught in 2024, suggesting recruitment may not have continued. Assuming any of these juveniles from 2022 to survive to reproductive age, which is around 4 to 6 years old, females in particular, the earliest this would be 2026. Mind you, these states only live to around 10 years old. Fourth, the majority of females captured in 2024 were adults nearing the end of their natural lives, which, as I mentioned, is only around 10 years.

Thus, as is the very definition of an endangered species is a very high extinction risk. This risk still remains and the scientific evidence to date does not preclude the necessity for a precautionary approach to taking action. Thus, my question today for you, Coles, is let me stay forth how will Coles apply the precautionary principle to sourcing salmon from Macquarie Harbour?

Thank you very much, Dr. Guido for your question and your comments. With regards to -- we do understand that there are early positive signs, as you say. But again, as you're all aware, the measurement of the number of Maugean skate is very difficult to do in effect. So it's a catch in terms of a certain number of area. Counting those and then extrapolating out in terms of the area. In our discussions with IMS and the scientists of IMS, what we have been told is the fact that they are seeing increasing numbers. They are seeing an increasing number in terms of Maugean skate in terms of the breadth within the Macquarie Harbour in terms of where they're located and probably also that they are seeing increasing numbers in terms of, as you say, the more juvenile Maugean skate. So that is, to us, a seen as positive. And these are just recent information that we've received with our discussions with IMS.

As I mentioned before, we do take responsible sourcing very seriously. And so the decisions which we are making in terms of the due diligence, making up -- reducing the amount of salmon that we take out in Macquarie Harbour, the understanding and recognizing that Maugean skate. There is an issue in terms of Maugean skate. We are working and making sure that we are doing the right thing, as I said, for all stakeholders, and we'll continue to do that, and we'll continue to enhance our due diligence as we move forward to be able to do that. you microphone #1.

Mr. Chairman, I would like to introduce shareholder, Mr. Stuart Fisher.

I am a retired professor from Institute of Marine and Antarctic Studies at the University of Tasmania, the very Institute that you mentioned several times when -- and the reports that they've made when you refer to the Maugean skate. When I left the university, I was hoping to enjoy my retirement and not expected to see a news headline that Australia was on track to become the first nation in the world to send a shark array global extinct in modern times. This was a shock to me. I discussed it with a colleague, a former Executive Director of the Western and Central Pacific Fisheries Commission, Former Executive Secretary of the Commission for the Conservation of Antarctic Marine Living Resources, and despite us having nearly 100 years of research nationally and internationally, and the sustainability of marine resources, we could not believe that this was occurring in the 21st century and against Australia's international obligations for sustainable development and the protection of biodiversity. And surely, we thought the government will put a stop to this.

The response of the Tasmanian Government, as the regulator, or simply to renew salmon farming licenses for another 2 years, despite -- and without that, the current primary cause of the habitat degradation in the harbor was by salmon farming. But unfortunately, the spin and the misrepresentation of a science by government, industry and the regulator is apparently providing a convenient smoke screen for companies such as your, Coles and Woolworths, to hide behind. A recent article in the independent Tasmanian Times, labeled smoking gun, RTI right to information documents expose salmon cover up as documented quite clearly the collusion between government, industry and the regulator.

I'd also like to add reiterate some risks to the Board. I won't go through the population, Dr. Guido, if I have his name correctly, has already stated the actual population biology but claims that the harbor is equally as healthy as it was in 2014, in dissolved oxygen levels, only refer to the waters that are deep in the harbor. These aren't the waters where the Maugean skate lives. And in the preferred habitat, they are still low and the worst area is adjacent to the world heritage area. And as you have mentioned, and I'll digress a little bit, Mr. Chair, you've specifically mentioned the oxygenation project in Macquarie Harbour. That project is simply to provide the oxygen for salmon survival when it becomes low. It is not and never has been to remediate the harbor.

The skate is at high risk of marine heat wave, as shown in the Tasmanian Government Marine, Heat Wave and Related Events Response Plan recently released. And we all know that to withstand the impacts of climate change, we need to have our waterways in the healthier situation they can be. We've all seen what's happened in South Australia. Climate change not only will impact the harbor as well as the fish, but it's also increasing. And we all know that those increasing periods when water temperatures are occurring in Macquarie Harbour as well as Southeast Tasmania, they are scientifically shown to be above the optimal limit for salmon production. During these periods, salmon have been kept inhumanely in suboptimal conditions.

Now I'm also pass that what you've just said that Coles stated, and I heard you last year that it has removed some of its salmon source from Macquarie Harbour and that seems to remain your response. Sustainability is that continuum, either you are sustainable or you are not. You need to make up your minds. Now -- through the continued retail of Tasmanian Atlantic, Coles is compounding the threats to the state's future to the harbors health to the World Heritage listing, to its reputation for sustainable producing and now ignoring the inhumane treatment of the product itself. My questions to the Board are given that government as regulator is failing to properly deal with escape faces, why is Coles not taking the opportunity to be a leader by demonstrating sustainability actions. And told me that actions speak louder than words, and removing Tasmanian salmon from your shelves. And how is the Board thinking about these risks? I've outlined and the consequences to the Coles brand. thank you.

Thank you, Mr. Fisher for your comments as well as your question. Regarding your comments on the information that you provided, I think also, and this goes to Dr. Guido as well is catching up with some of our sustainability team outside. We have a booth to general inquiries booth where we have a number of our sustainability team there would be great so that we can get that information and be able to utilize that in a way that we continue to do our due diligence in terms of ensuring that we are responsibly sourcing salmon from Tasmania.

With regards to, as you say, yes, sustainability and ensuring that and doing the right thing is a continuum. It's not just a one-off. And we are continuing to reduce the amount of salmon that we are taking out of Macquarie Harbour. We're basing that not on the certifications, but on the due diligence that we are doing. And you're correct with regards to the oxygenation project. This trial is basically confirming that it has been able to improve the oxygenation levels within Macquarie Harbour, but at certain levels within that harbor. And I think that in the discussions that we've had they're looking at being able to expand that trough further and then looking at ways in terms of how do they improve that throughout the whole harbor and also at the various depths within the harbor, particularly with regards to the habitat of the skate.

We believe that we are doing the right thing in terms of the due diligence to making the right decision so that we are able to meet our stakeholders' needs in terms of our customer needs and having Australian and Tasmanian salmon on the 1 hand, but also doing it in a responsible way and working with our suppliers in finding alternatives in terms of being able to meet the needs of our consumers. Thank you, Ms. Sonia I appreciate, sorry. Looks like I've got microphone 2. Maybe if you go to another microphone. Excuse me -- are you a shareholder? Okay. Well, I think we'll just set that confirmation. That's -- I think that's why Microphone #2. Thank you.

Mr. Chairman, I'd like to introduce proxy holder, Spencer Hitchens.

Good morning. Thank you for this opportunity. I am Spencer Hitchins. I'm 14 years old. I am standing here today on behalf of my generation, on behalf of the future, on behalf of the youth because this is about our future. I've been to Macquarie Harbour, and I think, you mentioned at the start that you've been there, too. It is an absolutely incredible place. And when I saw those fish pens and I saw the fish farms, it just makes me feel so sad to know that the impacts from those fish farms are extincting a species, the Maugean skate, the of the sea. It's just so sad, I just -- I cannot comprehend how the adults, the decision makers can do this to a species and do this to my future and future generations.

You're obviously selling Tasmanian salmon and salmon from Macquarie Harbour, specifically in your stores? And how would people know the salmon that they are buying right there in their stores is coming out of Macquarie Harbour enforcing a species towards the brink of extinction. They don't know. My mom and dad wouldn't know if I hadn't told them. And so that's really important. And I do want to recognize that you have made some positive steps in the right direction. You have started to take action to protect the Maugean skate, and you have moved that responsibly sourced label, which is brilliant -- but really, if we want to turn this around, if we want the Maugean skate to survive into the future and these incredible water ways, like Lyndon said before, to be healthy into the future for my generation, my future generations beyond me, then you have the power, you have massive power to change this.

You're a retailer of this product that is impacting species and forcing it towards the brink of extinction. So my question to you today is, firstly, I know you have a vision to be the retailer that's most trusted, and if you're to gain the trust of my generation and generations beyond me, then it's so important to listen to our voices and take action for us in our future. My question is, are you willing to knowingly extinct species like the Maugean skate? If your answer is yes, then why? And do you care about my future, my generation's future. I hope that you care because this is really important.

Thank you, Mr. Hitchin, thank you for your comments as well as your question. As a parent, I do care for the future generation. To me, that's something which is very important in terms of ensuring that, in effect, we as a generation leave the earth in a better place than where it was in terms of when we joined the planet as young, as a baby in effect. I think as far as where Coles is concerned, and no, we don't want to be associated with the extinction of Maugean skate. I think that what you are seeing and what you have seen since 2019 we have been working within ways in terms of trying to understand the impact that salmon farming and outsourcing of salmon in particular, is having on the Maugean skate and the environment within Macquarie Harbour.

We're continuing to do that, not just relying on the certification that other groups are providing, but doing and going over and above that, as we mentioned before, in terms of doing over further our due diligence. We're working with the understanding of the scientists in terms of understanding the science of that. That's 1 of the reasons why we have substantially reduced from 2019, the amount of salmon that we've taken out of the harbor. As I mentioned in my address, we've reduced it the last year as well.

So we're continuing to monitor that to ensure that we believe that it's going to be sustainable and responsible for the Maugean skate. If the science changes, then we're going to have to significantly review what we are going to be doing with regards to that to ensure that we do not have that extinction event happen. But at this point in time, we're comforted by the science and what it is telling us, the improvement that I've mentioned previously, but we will continue to monitor that. And if that changes, we'll make changes ourselves.

Thank you, and I really do hope that you've listened to our voices today and that you will continue taking action. Thank you. .

Yes, thank you very much Microphone 4. .

Mr. Chairman, I would like to introduce shareholder, Mr. Ted White. .

Thank you, Mr. Chairman. I'm representing the other end of the spectrum. I'll sum be 89. So I'm trying to balance out the debate with the young boy who did an excellent job. My comment really -- well, first of all, I'd like to congratulate the Board. I think they've done an absolutely magnificent job. I'm a bit surprised that we spent an hour and 15 minutes on a subject, which a lot of people are passionate about. But I believe that on balance, Coles is doing a very good job in a very difficult circumstance. And I'd like to think in the future that we can have some sort of limit time wise on the so core questions that are being put up. I think people are passionate, and I love passionate people, but I think there's a cost at times, and we've got to balance how the benefit for the cost. Thank you.

Thank you, Mr. White for your comment. We'll certainly take that on board.

Just to put a little bit of reality. Normally, I spend this morning giving out food to people who are in desperate need of food. We have 40 families in the area who are virtually living on the bread line. So I think that we've got to be mindful of the fact that our shareholders are very fortunate people. Thank you.

Yes. Thank you, Mr. White, and well done on what you do. Thank you. There appear to be no further questions from the floor. So Jessica, are there any online questions? .

Chairman, there are no online questions or comments on this item. .

Thank you. If there are no further questions, we have finalized discussion on this item. For your information, the details of the proxies and direct votes received for Item 6.3 are now displayed. As previously mentioned, noting that Item 6.1 was not passed. Item 6.3 will not be put to the meeting for voting. Before I close the meeting, I'd like to pause to give shareholders a final opportunity to enter their votes on all resolutions. While we pause, are there any remaining questions in the room or matters not already discussed. market phone #1.

Mr. Chairman, I would like to introduce shareholder, Mr. John Sprague.

One question. What is the significance of stock shrinkage through theft. Now last year, when you asked this question, we were just told that it was less than the previous year. Can you give us a dollar figure on what the stock loss is thank you.

Mr. Sprague, I personally don't have that information on me. I'm not sure whether our CEO does. But we are continuing to induce a stock theft across our business. It's certainly being a significant improvement over the last couple of years. But what we are seeing, and particularly here in Victoria has organized crime is unacceptable levels. And we're certainly working with the government, the police and others in terms of trying to ensure that we end up with some better measures in terms of helping us help ourselves with the level of technology and training, which we're putting into our team to be able to try and remove that stock theft that is taking place. But in terms of the quantum, Mr. Sprague, I'll see whether Leah has any response to that. .

So Mr. Sprague. We're very pleasingly, we're able to reduce our total loss by 25 basis points over the course of FY '25 and -- so if you were to have a look at our supermarket sales, 25 basis points of that improvement was achieved, which was a significant shift for us over the year.

Thank you very much. It's just stressing as a regular customer, seeing people decide it's optional to pay because it's not uncommon for me to see people walk out of the store without paying. But thank you. .

Yes. Thank you, Mr. S. market phone #1.

Mr. Chairman, I would like to introduce shareholder, Mr. Henrik Kay.

Good morning, Mr. Chairman. As regards the crime issue, I'd like to suggest that you work with Neighborhood Watch Victoria and also Victoria Police have a crime prevention division within Victoria Place, that would help you. And also as regards to the shareholder meetings, I would suggest that in future you follow what Woolworths has done in the last 2 years and hold it at your you head office.

Thank you, Mr. Kay, and thank you very much for the advice in terms of how we can improve our security and reduce that in our stores, and we'll continue to work with the Victorian Police and the government and neighborhood watch, et cetera, to be able to do that. I will take on notice in terms of being able to hold the AGMs in a different location. We see that it's beneficial in some respects in having a room, which is reasonably large, something which we probably cannot provide at our -- in a safe, secure way in Taronga with regards to it being a working environment. but we will certainly take that on notice. And as you're probably aware, we're relocating our offices in a few years' time into the city. And so therefore, there will be a different forum and venue. So thank you very much, Mr. Kay. There seems to be no further questions on the floor. So Jessica, any questions online.

Chairman, Australian Ethical Investment has asked a number of questions on our cage-free egg commitment. -- and our broader animal welfare commitments. They have also asked about sustainable food choices and diversification into plant-based alternatives. Their questions are, can you meet your page? Can you meet your cage-free egg and broader animal welfare commitments in the context of biosecurity risks affecting animal agriculture production? Can Coles explain how the company will mitigate the animal welfare and sustainability risks associated with extending the time line to 2030. Can you encourage customers to choose more sustainable options like plant-based alternatives. Will Coles consider making protein diversification part of its climate strategy?

Thank you very much for the question. With regards to the eggs and cage or uncaged, Coles has committed since 2013 to have case free eggs. So Coles 1 brand, Shell eggs are 100% cage free. We've had to extend the deadline with regards to the caged deck or non-caged eggs and getting rid of those and in effect, temporarily paused it because of the avian flu epidemic that has taken place and the need for our customers and their demand to have the availability of eggs. We continue to see that 85% of our eggs that we sell is cage-free, and we're continuing to make sure that, that is the case. And we're encouraged in terms of the improvement in cage-free eggs that are taking place, and we'll continue to work with our suppliers in terms of trying to meet that commitment, understanding that our commitment is well ahead in terms of where it's going to be mandatory.

With regards to animal welfare, we are very focused on our animal welfare and particularly with the sustainable options. We offer a wide range of choice of products and plant-based products, in particular, through our stores. And so we're looking to ensure that we are able to provide the customer what they want in terms of how they get their protein and providing them more sustainable options. So thank you for your question. Jessica, any further questions?

Chairman, we are just checking whether there are any more online questions or comments on this item of business.

Need to have some holding music .

Chairman, we have received an online question from Ms. Athena Pasini, who has asked do Coles feed Bovaer to all its meats? If not, then is it labeled.

I'm not -- personally, I'm not sure in terms of the answers to that question. I'll ask a Leah, in particular, to respond to that. .

Thank you for the question. We do use Bovaer in part of our beef supply chain, but it is not used in any other parts of our meat supply chain. .

Thank you. Jessica any further questions.

Chairman, we have received an online question from Maravik Zarati, who has asked, I'm a member of your Coles circle consumer platform. Has this added value to the business.

Mrs. Zarati. Thank you for your question. Of course, any engagement that we have with our customers is very important in terms of providing feedback and input. And so therefore, we welcome and we have a number of processes in place where we're engaged with our customers to ensure that we're able to deliver what they want with response to it with regards to our purpose. So thank you Microphone number two.

Mr. Chairman, I would like to introduce proxy holder, Ms. Lillian Henley.

My name is Lilly Henley. I have traveled here today from Tasmania. And I would like to just revisit the issue of the farm Tasmanian salmon I am interested specifically in Jacqueline Chow thoughts, considering you spoke earlier of your experience in managing complex supply chains as well as brand reputation and sustainability. Tasmanian people are deeply, deeply concerned at the environmental implications of intensive salmon farming in Macquarie Harbour and across the state more broadly. Industrial salmon farming in Tasmania is taking more than it gives. It is polluting our waterways, our beaches. It is degrading our recreational fishing opportunities and tourism opportunities. It is siphoning profits offshore whilst leaving Tasmanians to bear the environmental cost.

Earlier this year, Tasmanians were horrified with videos released during the summer mass mortality event of aquaculture staff pouring crates of dead, diseased, along with live salmon straight into skip ins and shipping them off to the tip. Given another recent mass die-off event, this time of Tassal Barramundi in Western Australia, another stark warning about the fragility and environmental cost of intensive aquaculture and global failings of this intensive open fish farming model more broadly. When will Coles recognize that it is not the location or species of fish that is the problem, but the unsustainable business practices of the company's and supply chains that you source from and directly support, thank you.

Ms. Henley, thank you for your question. I don't believe it's appropriate Ms. Jacqueline Chow to answer the questions, but I will try and address that question or your questions. We do take reputation seriously. And as I mentioned previously to the number of other shareholders, we are focused on working with and understanding the due diligence and the scientific updates. We're certainly ensuring that what we do is we're trying to make the right decision with regard to be able to provide a product that our consumers want. With regards to ensuring though, that it is sustainable, particularly within Macquarie Harbour, and it's not endangering any other species. We're trying to work within that balance in terms of the balance of all stakeholders. And I believe in terms of the action which we've taken to date is proving that to our word with regards to do that and are making changes.

With regards to the unfortunate event of the -- mortality event down in Tasmania earlier and also what we've seen in Western Australia. It is something which we're working with our suppliers in terms of trying to understand how it occurred, what remediation works that they are able to do to ensure that it doesn't happen again. And also it goes part in terms of our due diligence to ensure because we want to make sure that we have a sustainable product that we sell to our customers. So if that's not available or if it's not the right location, et cetera, or the right way to farm, then we will be making changes in terms of how we source that product. So thank you for your question and comment. Yes. Thank you very much. Yes. Thank you very much. I noticed that. And I believe that there will be -- I will pause the meeting at this point in time, and I believe that there is an announcement coming over the loud speaker.

Ladies and gentlemen, can we please have your attention? On this Remembrance Day, we paused to recall the brave souls who gave their tomorrow for out today.

If you're able to, could you please.

They will not grow old as we that are left to grow old. Age should not wear of them nor the years. With the going down of the sun and in the morning, we will remember.

Ladies and gentlemen, can we please pause for a moment of silence. Thank you for your attention.

Thank you, ladies and gentlemen we'll go back to the meeting. Jessica, are there any further questions?

Chairman, there are no more online questions or comments on this item. .

Thank you. If there are no further questions, -- if there are no further questions, we have finalized our discussion. That concludes the formal business of the meeting today. If you've already done so or already not done so, please ensure that you submit your vote for each resolution. I now declare the poll close. The final results of the poll will be advised to the ASX later today and will be published on our website as soon as possible. Congratulations to Scott and to Jackie for your reelection. That concludes our business today. Thank you for your attendance at the Coles Group's Annual General Meeting and your support of Coles.

We very much look forward to continue -- you'll continue to support as we enter this busy Christmas period. and I wish everyone a joyful festive season. I now declare the meeting closed. For those of us who joined us here in Melbourne, I invite you to join the Board and executive leadership team for some refreshments, which will be served just outside the entrance of this meeting. Thank you very much for your attendance.

Thank you for standing by, and welcome to the Coles Group First Quarter 2026 Results.[Operator Instructions]

I would now like to hand the conference over to Ms. Leah Weckert, Coles Group CEO. Please go ahead.

Thank you, and good morning, everyone. Welcome to Coal's first quarter sales results for the 2026 financial year. Before I begin, I'd like to acknowledge the traditional custodians of this land on which we meet today, there were entry peoples of the cooler nation. We acknowledge their strength and resilience and power respects to their elders past and present. I'm joined today by Charlie Lis, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Kraft, our Chief Commercial and Sustainability Officer; Michael Courtney, our Chief Customer and Digital Officer; and Claire Albert, our Chief Executive of liquor.

Before I open it up to Q&A, I would like to make just some short comments on the results. I'm pleased to report another strong performance in the first quarter. In supermarket sales increased by 4.8% and 7% excluding tobacco, with comp sales growth of 4.6%. Our focus remains on ensuring our range and value offering resonated with customers. This was delivered through initiatives such as our Great Value, Hands Down campaigns, promotional offers such as Shop scan win and our European glassware campaign. We also introduced popular product innovations, including the Grilled Retail range and Colaco spread, which is already 1 of our top 10 selling spreads.

We achieved our highest level of monthly availability since recover this period, which continues to build trust in the consistency of the offer with customers. And we continued to see strong e-commerce sales growth of 27.9%. The performance of our CFCs were really pleasing with CFC to field sales continuing to outpace total e-commerce sales. We introduced new products into the CFC range, expanded our catchment areas in Melbourne and Sydney and launched same-day CSC for field deliveries for customers in Melbourne. In liquor, sales revenue declined by 1.1%. Ongoing softness in the liquor market continued through the quarter with consumers remaining focused on value. We are pleased, though, with the customer response to our simply like land banner simplification with 112 stores now converted since the program commenced.

Overall supermarkets inflation, excluding tobacco, moderated to 1.2% from 1.5% in Q4. Inflation in fresh produce eased due to plentiful supply. We are keeping an eye on inflation in meat categories, particularly red meat, and we have seen beef and lamb livestock cost of goods increasing. However, we are investing in this area to reduce the impact for customers.

Looking ahead, Supermarket sales revenue growth has remained at similar levels to the first quarter. The market continues to be competitive. And as we enter the festive season, we are focused on providing inspiration for Christmas a time and delivering value to ensure our customers can make the most of every dollar they spend. In liquor, the market remains challenging with consumers remaining budget conscious. With the warm weather and festive season approaching, we are focused on ensuring we have the right range and value proposition to cater for all entertaining occasions. As part of this, we plan to complete almost all of our remaining Simply Liquorland store conversions by the end of the calendar year. And just a reminder, over the next 2 months, both supermarkets and liquor will be cycling the competitor supply chain industrial action that occurred in Victoria and New South Wales in November and December last year. However, we are pleased with the momentum we have heading into that, and we feel we have a strong trade plan for the next few months.

Thank you, and I'll now hand back to the operator for Q&A.

[Operator Instructions] Your first question today comes from Shaun Cousins with UBS.

Right. Just a question, Lee, maybe just around the broader competitive position of Coles. Are you sort of seeing your prices sort of lower or in line with Woolworths and then maybe how you sort of see yourselves relative to other competitors across Audi Chemist Warehouse? I'm just curious around how Coles is managing a more promotional Woolworths and 1 that's got better availability now and how you're sort of finding that from a competitive dynamic perspective in supermarkets, please?

Thanks for the question, Sean. Well, first of all, I'd probably say it's definitely competitive out there at the moment, and we are keeping a very close eye on pricing. I'd say we've been quite nuanced in the way that we're thinking about the right competitor by category when we're looking at price. But we do know that cost of living challenges are still very much front designed for our customers. And so that weekly offer is really important. So we're very focused on having the right mix of promotions, but also everyday low price, and we actually have increased the number of products that we've got on everyday low price over the course of the quarter, but also what we've got on down down so that when customers are comparing us to competitors, and those competitors vary by category, that overall, we compare very favorably.

I think I would say we're seeing all retailers make investments in price at the moment to drive traffic. And we've been very clear that we intend to remain competitive on price. And so where we have been needing to make changes. We have done so. I think at the moment, we're comfortable that we know what matters to our customers that we understand that through the work that we're doing week in week out with surveys and focus groups and that we're investing in the right places to keep that momentum going.

Your next question comes from Michael Simotas with Jefferies.

Well done on a great quarter. Following on from Shaun's question, we heard from Woolworths yesterday that they took some action in September around price and availability and always worry about focusing on very short periods. But if I look at your sales cadence through the first quarter and into the second quarter based on what you said and did the same for Woolworths you're still taking share, but it does look like Woolworths has closed the gap a little bit. Is there anything you're noticing in your business across any of the categories that suggest that you may be losing some of this trading advantage relative to a major competitor?

Thanks for the question, Michael. So I would say if we were to look across the quarter, our sales growth momentum was very consistent, and that has slowed down into Q2 very consistently. We are also seeing it across the board. So it's not something where we would call out there are particularly categories that are outperforming or underperforming for that matter. It is a consistent outperformance that we're seeing versus market. And we do think we are outperforming market at the moment based on all the data points that we can see. I think what's really pleasing in the shape of the sales that we've seen for the quarter and then the first 4 weeks of Q2 is we've got strong volume growth. And you really see that in the numbers.

If you look at the sales ex tobacco at 7% for Q1 and then you look at the inflation ex tobacco at 1.2%, the difference between those 2 is a combination of mix and volume, but most of it is volume. So we've got really good volume growth. And part of the thing that is driving that is transactions. And so our transaction growth at the moment is very strong. And that's a combination of both new customers that we are seeing shop with us, but also our current customers shopping with us more. So across the quarter, we would say that we're feeling pretty pleased with the sales share that we're seeing.

Next question comes from Tom Kierath with Barrenjoey.

Just 1 on the liquor business. I think at the August result, you said the comp there was kind of flattish. It's kind of a negative $1.4 million for the quarter. Is that broader kind of market weakness? Or is it, I guess, the disruption from maybe changing the stores over converting the stores. Can you maybe just flesh that in a bit more detail, please?

So this might be a good 1 for Clair to take for us. I'll hand over to Claire to manage this one.

Yes. Thanks for the question, Tom. We did benefit from the cycling of crowd strike outage in the early part of the quarter in the first 8 weeks. But as we know, the market still remains really challenging, with consumers limiting the alcohol consumption and seeking value. And that is why we're remaining focused on our simply Liquorland program and ensuring we have the right range customer value proposition. And really pleasingly, we're seeing positive responses from customers through our strong NPS metrics and our strong loyalty metric. So I think we have the right balance.

I think on the disruption point, Tom, we -- obviously, when you put a store through conversion, you do see a little bit of disruption, but I would really say it's very much at the margin. And actually, the positive benefit that we see on post conversion is definitely the more significant contributor than what we think to the sales line at the moment. So I think in summary of all of that, I think the biggest difference between the first 8 weeks and then the total quarter result, it's probably the cycling of CrowdStrike, which is about a $7 million impact last year.

Your next question comes from David Errington with Bank of America.

Leah, this may be a question for Matt. I'm not sure you might want to answer it yourself. Availability, I mean, it seems to be the big buzzword right now in food retail, 1 seemed to 1 retailer has got it, the other 1 doesn't. You've called out that your delivery in full on time or defied or whatever you call it, there's a lot of catch cry words out there at the moment for availability, but it's better than it's been since pre-COVID. Okay. What does that mean? I mean what does it mean in terms of now you called out consumer trust, but it's got to mean more than that. How are you able to improve this availability? How is it these new ADCs that are kicking in, where are you at right now in terms of this? Because I'm assuming that you're only just starting the journey of getting the productivity from from the ADCs. And where are we going to see this? I mean, obviously, we're seeing it in sales, but can we actually expect to see improved margin performance from this improved availability because my assumption is, is that the cost of moving a carton must be improving significantly as we go through this increased availability and improved default. Can you open that discussion up, please? Because this, to me, is probably where there's a bit of sugar there in terms of earnings. I know it's a sales call, but this is where there must be a bit of sugar there because if this default is continuing to improve as we're in the early stages of your ADCs then obviously, we'd like to see it in margins as well as just sales improvement. So if you could answer that, that would be really appreciated.

Thanks, David, for the question. It's Matt here. And I do like that when we do these calls, the questions of the Anton ambition internally, I get a bit more pressure. So thank you very much for that. The availability piece. The availability piece has been a long road, and I will describe it in 2 parts, really. It's really pleasing that we are back to pre-covid levels. And I would think of that in 2 ways. The first is the result of the changes we made to the operating model. So if you think about a year ago, we went to functional expertise. So that is the commercial teams the supply chain teams and the store operations teams really getting back to being in the detail of how a retailer runs. And I would describe that as an improvement of the 1 percenters -- so whether that's better planning, better collaboration, better forecast, better store execution, that consistent approach has definitely driven a part of the improvement. And then if you think about a business of our size and complexity, there is always more to be done there. So that will continue. The 1%.

The second part then, as you rightly said, is some of the benefit from the structural change we've made through automation. And we know that our ADCs have produced 20% better availability, almost 30% on promotional lines by having the range in fall closer to the stores and on a higher frequency. And then the CFCs, whilst they're delivering a perfect order that's twice the rate of the stores to the customer, they're taking that demand that would have been in stores for home delivery counts and it's freeing up the store teams and free up the inventory in the stores for either immediacy or for store posting by our customers. And that's making a big difference, too. So that capacity in our bigger traders, particularly on weekend in peak that the CSCs have absorbed, that's moved the dial.

Now I think over time, I've spoken about before, we will optimize these assets in a more integrated way, and we'll use data to make sure that we've got a really dynamic view of the right customer outcome and availability at the right efficiency profile. But where the start of that journey, there's lots more to do that we're quite excited about. -- but the availability job is never done. And as we head towards fleet trade, we are really pleased with where we are, but we're super paranoid that it could change very quickly. It only takes a rail outage or a big active flubs or fires, and we have to be prepared for that. So we've got lots of contingency, lots of focus lots of people in process working with technology, and that's driving the results, and we think we can keep going.

Seems like it's just not something you can turn on and off like a tap Matt. It's something that -- so if someone says, we want to increase our availability, it's not something that you can just readily do. It's a long journey by the sounds of what you're talking about.

Well, it is, and it's more complicated than ever because if you think now you have to service an omnichannel customer that's got different levels of expectation on immediacy, click and collect, home delivery, to purchase in store. All of those demand signals are coming through multiple places. And so you have to be able to respond really quickly. And to do that, you need the technology and the automation and you need the people that know how to optimize that. and that 8 years to really fine tune. So you can definitely get better, but whether or not you can get good enough is another matter.

Sounds like you're executing really well, Matt. I really appreciate it.

Your next question comes from Adrian Lee with Citi.

I was interested that the exclusive to Coles sales are growing a little bit weaker than the supermarket sales ex tobacco. So is this interested -- are you starting to get more shelf space to brands? Or is there something else driving this, please?

I might take that one, Adrian. It's Anna here. Thank you for the question. I think, first of all, we're pretty pleased with the own brand performance. But what I would say is that we will always be customer-led on how we lay out our stores and how we think about the customer offer regardless of where or the ownership of any brand that has to be customer first. I think if we look at our own brand revenue, it's 5.3% in the quarter, but what we have in the quarter is continued strong promotional activity from some of the proprietary brands. So that's been good in terms of driving crop growth and good for customers, but does as we know it can impact our own brand performance.

Really pleasingly, Coles Find It continues to perform extremely well. That was up 15% in the quarter and it's playing a really key role for us at the moment. around customers that are seeking restaurant quality food to eat at home, but also they will play a much stronger role in moments that matter for customers, they think kind of seasonally Christmas, Father's Day. Easter and we're pretty excited about what's to come there. And we also believe this is a real point of difference for us and drive loyalty. I think Well, we're looking at it probably more importantly than the growth rate is what role or reach the brand is playing and simply continues to grab our momentum at the entry price point for customers, making sure customers have no reason to shop elsewhere.

We've got the steering in terms of mid-tier and then fine. So we are also pleased, I would say, with some of the nonfood performance and we're seeing it coming through strongly in such categories as kind of baby and cleaning, where we've got really strong brands through Ultra and cards. So they're really resonating. We've always got more work to do. And we'll always be focused on how do we get the right range, the right architecture and value and quality. So pleased with the portfolio, always more to do, and we see this as a big opportunity into the future.

Your next question comes from Bryan Raymond with JPMorgan.

One just on the sort of the balance of 2Q. And you guys quite rightly called out industrial action needs to be cycled. And you called that out last year with $120 million sales impact. Are you comfortable with that just sort of flowing back to Woolies or given -- in order to maintain a certainly a rational environment? Or do you need to do something incremental -- is your intention to continue to cycle over that and continue to outgrow your competitor? And if so, do you need to do something incremental to achieve that investment in flybuys, maybe private label. Do you feel like some of what Woolworths doing in terms of their investments, they talked to yesterday?

Yes. Thanks for the question, Bryan. I think -- when we think about that period last year, there were really 3 groups of customers that shopped with us during that period. So there were customers who couldn't get what they were looking for at their multiple store and that competitive store was much, much closer to them than what 1 of our stores would be. And so they came to us really as a bit of an agency action. So for those customers where they live a lot closer to a competitor store to us, that convenience is will be the primary driver of where they probably choose to shop. And so it's likely a lot of those customers have reverted back to the behaviors that they had previously.

The second cohort of customers were customers who were very loyal to our competitor, but they have a close choice between us and that competitor maybe in a regional regional shopping center. And for those customers, we really have been introduced into their repertoire shopping over the last 12 months, and we can see from our data that we have retained some of them. The other place where we have retained customers is in the online space. And so when we look back, it was probably very fortuitous that the CFCs went live just before this happened. And it did mean that a lot of customers who had had maybe a poor experience with called online previously or had not shopped with us, got the chance to try it coming into Christmas last year and found that they actually really quite liked it.

And so again, from the customer data, we can see that many of those customers have continued to shop with us over the last 12 months. So I think as we cycle over this period, I don't I don't think we have an expectation we can retain all of those customers that came, but we can definitely think that we've got some of that in there. And I think what we are really focused on for this period is the things that we can control. And so we can control great execution and availability is a big part of that. And you've just heard Matt talk about that the big focus that we continue to have in that space, and we know that builds trust with customers because there is nothing more frustrating than having a list of items coming into the store and not being able to find the thing that you want. But we're also very focused on the value proposition. And obviously, there is a big component of that, which is price. And we are focused on that, as I mentioned before, looking at a suite of competitors.

But we know that there are other elements of the value proposition that are equally as important. And so we continue to invest in our loyalty program. And you've seen over the last couple of years, we've had some really good gains in terms of our active flybuys members and the members that are actually engaging around redeeming Jolsoshop in store. But we've also got a fantastic range of products, quite a few own brand ones in there as we come into Christmas, which we know are very convenient from the perspective that they ease the prep but they are also fantastic quality with quite a few interesting elements to them as well. And I think when you start to put that all together, we are feeling that we've got good momentum going into the period, and we've got a good plan to keep that maintained. But obviously, we need to go over the top of that industrial action, and we will focus on the things that we can control as we do that.

That's very clear. Would you be able to have a go at sizing each of those 3 buckets of customers for any chance? Is 1 particularly bigger than the other or are they evenly distributed? How should we think about those 3 buckets you outlined before?

Yes. I mean, I think probably when you put together the where we think we've retained customers, that is a bigger group of customers than the ones that have reverted back.

Your next question comes from Caleb Wheatley with Macquarie.

A bit of a follow-on on the CFC, obviously, a positive signal to see that you've expanded the customary there and on to the same day in Melbourne. Just being if you can provide any comments on capacity as you've transitioned to that same day in particular in Melbourne. And any shift if there has been a shift on customer performance, customer satisfaction metrics, please?

Yes, Caleb, it's Michael here. Thanks for the question. If I heard you correctly, it was around level of capacity in the CFCs as well as customer reaction to -- was that a .

Yes, that's correct. And if there's been any shift on customer satisfaction as you've gone to Sandy?

Yes, sure. So we're certainly seeing strong growth and we have the capacity to do more volume. And it is really pleasing to see that with that strong growth, the strong improvement in customer satisfaction as those orders have transitioned from stores into the. And the reason for that is the experience that customers get through availability through extended grains through core freshness of the orders. So I'd say all the indicators of what we're seeing through the CSAs at the moment. We're very pleased with because we know that it's providing a better customer experience. And what's also relevant to that is the point that Matt mentioned earlier before as well, is that when those orders have transitioned into -- the NPS scores in those stores then go up as well because there's less congestion in stores, better availability. So I think that's really a testament to the fact of having a strong omnichannel offer and network.

Yes. It seems like it's really helping both the digital and the in-store. So I appreciate the response.

Your next question comes from Craig Woolford with MST.

Can I ask a question around online? Maybe just stepping back a little bit. Obviously, great e-commerce sales growth of circa 28%. The -- is there any way you sort of feel where penetration rates may settle? How do we think about the outsized growth that may be attributable to the higher CFC capacity and just understanding the mix between delivered versus pickup in online?

Thanks for the question, Craig. I think, obviously, we're very pleased with the e-commerce broke. The CFCs, as Michael has just managed and part of the outperformance there, but we are continuing to actually see growth across the board in all of our channels. So Click & Collect is continuing to grow rapid or immediately is also continuing to grow. And actually, the capacity that we've released in the stores as a result of moving the CSD volumes have really helped us to drive some of that volume growth from the store-based pick into the Click and Collect and rapid deliveries, which is fantastic.

I think the question on where the penetration go settle is sort of a million dollar question, right? I don't think we'll really know where that's going to get to in Australia. Obviously, the CSPs have helped us to do a meaningful pickup in penetration over the course of the last 12 months. What we continue to do is just focus on what we can do to ensure that the offer is something that customers fairly satisfied with. As Michael said, one of the pleasing things as we've ramped up the CFCs has been seeing the customer satisfaction increase at the same time. and being able to bring same day into that network, I think, is a great add for customers as well. So I think whilst we're continuing to have capacity to continue to grow. And while we're continuing to consistently set on service, whether that's through the digital engagement on the website or the app but also then in the experience that customers get with the order I think we will continue to see growth in the area. I think it's just we don't know where it will top out.

And I think, Craig, the 1 thing I would add to that comment is, pleasingly, when you look at the top line growth ex the back we not only saw strong growth in the e-com channel. We actually saw a strong growth in store as well. So it was really across the -- so it was really a strong omnichannel growth that we did see over the last quarter and into the first 4 weeks of Q2.

In the past, you've given us a pickup versus -- or like a click-and-collect proportion, where is that sitting at the moment for online?

It hasn't materially changed what we've talked about in the past, Craig, it sits somewhere between 60-40 or 65-35. That's really been the sort of home delivery versus clean and collect percentages.

Your next question comes from Richard Barwick with CLSA.

Just a question on the again, in the sort of shopping behavior that you're seeing, can you give us a bit of detail around how -- I guess, if this I don't know how loyal these shoppers are. So just wondering, if once people try it, what proportion of those people who try at once are going back, buying again, so repeat purchasing. And then is there any sort of evolution that you can talk to in terms of basket size because from what you're saying, if it is delivering the shoppers are seeing a better experience than a sort of try it in something small and then go larger over time. So anything you can talk to there?

Richard, it's Michael here. Thanks for the question. I think what you're asking there, some elements of that are how well we optimize over time. And what we're really focused on at the moment is exposing more customers to the offer that is in the CSCs because, as I mentioned, earlier in response to Caleb's question. We know when customers are shopping at that we're getting very high satisfaction scores. So at the moment, our focus is having customers try the offer when we see them try the offer, we're getting good retention of customers, which is great.

We're also continuing to find ways to increase the units per order for customers that are shopping with because it really does cater to that big basket shop, which is a very valuable mission for us. So when we think about the different types of missions that customers have across immediacy same day and next day. Those next day orders for us tend to be the larger shops and hence, very valuable -- and the CFCs in Melbourne and Sydney are obviously now a key part of servicing that. And we're really pleased that we continue to see increased satisfaction, which we think over time will just continue to lead to more volume.

And range, Michael, must be key there. Can you give us an update on the range? Maybe I know you can talk SKU count through the CFCs and how that compares to what would be an average store in the catchment of the CSP?

So we prior ourselves on being able to have our full range offered through the CFC, which is 1 of the key customer benefits. And I would say that this is a space where we're still learning, Richard. So there is opportunity for us to continue to expand range in the CFCs, and we continue to trial different concepts around that, whether that's expanding through areas like international ranging or whether it is how we might look to do events differently. These are things that the team are focused on trialing each quarter to see what works and what we can scale up.

So I think that is something that we don't have all the answers for yet because we're continuing to learn from the customer behavior. But it's something we remain focused on trying to get benefits from.

Richard, what we have reported in the past is the average SKU count is about 30% higher in the CFCs than they are in the average store. So it gives you an idea of the sort of extended rains that currently sits in the CFCs.

Your next question comes from Ben Gilbert with Jordan.

Monte -- just interested in just some of the behaviors you're seeing around consumer shopping habits. Obviously, finance is going phenomenally well. It obviously you always sort of hit the ball on the part because you're curing private label. But I think on -- you talked to it in the past as consumer spending sort of normalizes confidence improves as an opportunity to sort of upgrade or people might move to more normal habits, which, in theory, yourselves and Willis should benefit much from. We're seeing a bit of that in the U.K. I was just wondering if you're seeing any signs of that happening now or willingness to trade up or willingness to add another item to basket some more confident shopping and how you plan for that? And specifically, in the context of the work you're doing around store-specific ranging webe's obviously been some quite large cuts in terms of ranging. So I know it's a billion just effectively how you're planning for if we do see this upswing in behavior -- is there any evidence that are coming through? And what sort of impact do we think that could have to Coles?

Yes. Thanks, Ben. I'll start and then I might hand to Anna to just build on the store-specific ranging part -- from a customer behavior perspective, the last cost of living survey that we have done just recently has indicated that we're starting to see a bit of a shift with behaviors what we would describe as sort of normalizing back to behaviors that we saw pre cost of living challenges. And so some of the things that would feed into that is, first of all, prioritizing the customer prioritizing their own fine. -- a little bit more, which means the extent of shopping around at lots of different retailers start to reduce and they consolidate shops. Because that's more convenient for them to do. And we definitely see that playing out in the U.K. over the last year.

The other one, of course, is a bit of a reversion back to the same consumption that they had previously. So that will be getting back to things that they may have cut back on curing cost of living challenges like bottled water but also things like eating out. And so we definitely are seeing that there's more customers telling us that as cost of living eases and sentiment starts to improve, that they expect to start embracing that. Now it's a real sweet spot for us at the moment because customers are feeling a little bit more confident. And so coming into Christmas, they are more likely to do entertaining, gatherings of brands, gatherings of families than they might have been willing to do last year. because of budget constraints in the household. And that, we believe, is part of what is driving a stronger grocery market at the moment.

But as you rightly identify, there's lots of opportunities for us to be tailoring the range as we start to go through this transition. I'll get -- and maybe to talk a little bit about that.

Yes. Thanks, Ben. I think the way I think about it is we have to have the right tiering at every price point with the right quality and the right value in every category, and that's going to be critical to make sure that we can tailor irrespective of where the customer is at, at any given point, and we future-proof ourselves. And I think what we are really making strong progress on is that tailoring of the range. As said in the release, we've landed probably about 70 categories to date now of our 200 that we will do on our ranging.

And I should give you a bit of a sense of what does that mean and how we're looking to get very sophisticated on making sure we have the right customer offer. Our range optimization tool now uses 10 different AI tools and looks at about 300 million data points. So it's pretty sophisticated and much more sophisticated than we've been able to achieve in the past. And actually, what that means is we're getting the right range in the right stores coupled with the work we're doing on the right tiering across the category. I'd say we're seeing really positive results when it comes to customer satisfaction, particularly in the range that we have tailored in the categories but there's a lot more to do. And I think we feel pretty excited about what can be achieved both as we go through all of the categories, but actually, we continue to optimize this technology. And I think what really energizes us is how we link this back into an operational perspective to really step-change that end-to-end piece as well, both from a customer but a business perspective.

And I might throw it to Matt to just talk about how the range work is actually linking back into the upside of being supply?

Yes. Thanks, Anna. It's a good build on the earlier question that we had around availability once you start to have that level of store specific ranging you have to be able to execute it and you have to be able to execute both the transition and then the ongoing complexity that, that was through the supply chain. And really, that's where we see the automation that we've invested in having further value because it can handle that complexity in a really consistent way and execute then for the store team members and for the customers and give us that consistency of availability in the new offer. It's quite a lot harder to do that in your manual words.

Does that answer your question, Ben?

Yes, that's really helpful. So if I think about it, then in terms of the benefits as U.S. Coles says, you get better engagement from a consumer around pricing and really having the right product right price right time. You get less peaks and trust through the supply chain more consistency. You've got better cost management through your supply chain and obviously, all that then wraps up in availability, which ultimately then improves your comps because the less gaps on shelves. Is that conceptually how to think about the loop?

Yes, that's a pretty good summary. The only thing I'd add is that it enables you to get the right shelf space by products in the store as well. So you're more likely to hold the shelf capacity for the whole day and not end up with a gap, which you then have to feel, which is store ramp. So that's another efficiency benefit that we get out of it as well.

Great. And you sort of the beginning of a journey of like if you've done 70 to 200-odd sites, you're still got a decent amount of runway to go.

Yes, there's still a lot of opportunity. And I say every time we do one, we learn, then we iterate and build on the next one.

Your next question comes from Philip Kimber with E&P.

I just had a question around tobacco. I mean you called out there a 57% decline in sales in the quarter, which I think is, if anything, accelerating the declines. Is there -- are there any signs of stabilization? And when we think about over the coming year, is there a period where we start to cycle and potentially see some stabilization? I know it's only 2% of your sales, but it's still having a decent drag on your overall number.

Yes, the impact Phil, largely happened post the implementation of the legislation, so sort of beginning of July. And I would say it's actually been pretty consistent from always day 1. So although the drag number does look large, actually, the dollar sales that we're putting through on tobacco each week is almost rock solid straight line through the whole of the first quarter and into the second quarter. And so we do feel like it has reached a stabilization point.

Okay. So basically another until July next year and then the cycles on itself?

That's right.

Your next question comes from Shaun Cousins with UBS.

Great. Maybe a question for Anna. Can you talk a little bit about efforts to remove off-location displays here there to be a degree of discussion in the trade around this. How do you think about balancing the potential damage it could do to sales growth in terms of removing availability of products for some particularly, I guess, expandable categories. but then I assume you're doing it because there's a benefit there. So hopefully, you can sort of talk a little bit about that, please?

Yes, [indiscernible], Sean. I think what I would say is we are looking at how do we use in a smart way, our secondary space and locations. The last thing we will ever do is impact sales. We want to make sure that actually we put the right products in front of customers in a truly disruptive way. And that actually, as we're optimizing rains, we're using the same thinking to optimize our secondary space, which actually should give better customer satisfaction, better uplift on the products we do should drive the top line harder and that is the work we are doing. There seems to be narrative out in the supplier world, which actually is probably not representative of where we're going. But the objective is how do we sweat of secondary space as much as we are sweating our total macro space and actually how do we make that work to both sales and for customers and actually to drive an uptick in sales is the primary objective of doing that.

Your next question comes from Bryan Raymond with JPMorgan.

Just on liquor, just the 60 conversions in the quarter of the [indiscernible] and First Choice stores, what sort of uplift should we be banking on the should be factoring in? I think you mentioned vintage sellers has been pleasing the not First Choice. I just want to understand sort of that given in the context of the slowdown in overall sales momentum.

Yes. We haven't disclosed the number, Bryan. I mean, obviously, we have a business case around this, which drives a sales uplift across the network. To date, the conversions we have done are tracking in line with that. So it is performing to expectations. And I think the pleasant surprise in there has been that a number of the vintage sellers conversions to the clan sellers have performed probably ahead of where we expected them today. .

[Operator Instructions] Your next question comes from Michael Toner with RBC.

I have another CFC question, and please correct me if I'm wrong, but I believe Sydney is still on next-day delivery. Is there a plan like sort of time line on moving to same-day delivery for Sydney. And if so, could that. And just quickly as a follow-up on the move in Melbourne. I know that CFCs have typically been geared towards weekly stock-up type customers. But are you finding that you're able to service those weekly top up and eventually maybe even rapid and immediate need type customers out of the CFCs where the margins are typically a bit thinner. You've spoken to the impacts on customer experience, but I'm sort of interested in how it might change the unit economics on top of sort of freeing up availability and customer NPS, as you've already highlighted. .

Sure. Thanks for the question, Michael. So as you've mentioned, Sydney is just still on next day. At the moment, what we're doing in terms of introducing it to the Melbourne catchments is just seeing what is it that we're able to service in terms of same day. So that's determined by 2 things. Firstly, the level of demand for it that we have through a same-day offer. And then where can we have the cutoff times for same-day orders to be able to meet customers' expectations.

So obviously, we can service much more orders if the cutoff is earlier in the day. We're trying to push the cutoff to later in the day. So until we land on what we think is the right offer that we can scale in Melbourne. We don't put those into Sydney, but that is certainly the plan. We're just trying to test it and refine it in 1 market. And then I think more broadly, our our intent over the long term is to be able to maximize the capacity that sits in the CFCs as much as possible. And the reason for that is because we do see it as being the best of our offer because of all the benefits through availability through range, through freshness. So it would be too early to call out where we see that as a mix over time, same day or next day. But what we are focused on doing as a team is looking to make sure we can expose it to as many customers as possible across different shopping missions.

There are no further questions at this time. I'll now hand back to Ms. Weckert for closing remarks.

Well, thanks so much for your time this morning. I think overall, we're really pleased with the quarter, particularly on the back of our strong value proposition and the strength that we saw in e-commerce. And we're excited to be entering the festive season. We've got more than 340 new owned brand products and specialty drinks that are being launched as part of our Christmas ranch. And we are really focused on being the pace comfort inspiration for entertaining at home as we go through this period.

Our Coles brand single Smart Cam at $8 per kilo is fantastic value. And if you're looking for something a little bit special and a little bit different, then I will recommend to try our coal fine at Boneless Chicken, which is staffed Pasto-Rat-Dafen or cheese. It is a real showstopper for the center of the table. So thank you, and I look forward to speaking to you again at our half year results, and I would like to take the opportunity to wish you all a happy and safe festive season. Thank you very much.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Coles Group FY '25 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Leah Weckert, Chief Executive Officer. Please go ahead.

Good morning, and thank you for joining our full year results call this morning. Before I begin, I 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.

Several members of our executive leadership team are with me in the room today. Charlie Elias, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Croft, our Chief Commercial and Sustainability Officer; and Michael Courtney in his new role of Chief Customer and Digital Officer. We also have Claire Lauber in the room with us today. Claire commenced in her role as Chief Executive Liquor at the end of June.

Moving now to Slide 2. We are now 2 years into our Refresh strategy, and I am really pleased with the positive momentum that we're seeing in the business. This has been achieved through a consistent focus on executing against our strategic priorities. As we entered FY '25, we were clear that value, quality, availability and the overall customer experience were going to be key areas of focus for us, and we have made good progress on each of them during the year. Importantly, not only has this been reflected in our financial performance, but we have seen it through the increase in our customer satisfaction scores, particularly in terms of store look and feel, range and online. We are also seeing the benefits from both our ADCs and CFCs now being fully operational with ADCs delivering improvements in availability and cost efficiency and our CFC is supporting strong growth in e-commerce sales. And we've delivered record cost savings of $327 million through our Simplify and Save to Invest program. Strategically, it has been a significant year for our liquor business with the commencement of our Liquorland banner simplification program. At year-end, we had converted 52 stores, and I'm pleased to say the results have been encouraging so far. Finally, we could not have achieved any of these highlights without the support of our more than 115,000 team members. Through our MySay team member engagement survey, we asked our team members to share specific feedback on their experiences and challenges, and we've been working hard to respond to these. This has delivered our highest-ever team member engagement score, placing us in the top quartile of Australian companies.

Moving now to Slide 3 and the financial results. As you will no doubt recall, FY '24 was a 53-week year. So when we talk about growth rates through this presentation, we will be focusing on normalized growth, which removes the impact of the 53rd week from last year. The dark gray bars on this chart are the normalized figures.

On a normalized basis and excluding significant items, group EBITDA and EBIT from continuing operations increased by 11% and 7.5%, respectively. And underlying EBITDA and EBIT increased by 10.7% and 6.8%. Underlying NPAT from continuing operations and excluding significant items, increased by 3.1% to $1.2 billion, and reported NPAT inclusive of significant items increased by 2.4%. Charlie will talk more to the financials in his presentation. But now let's move on to Slide 4.

As I said at the start, we maintained a consistent focus on executing against our strategic priorities throughout the year. I won't spend too much time on this slide. But as you can see, once again, this year, across all 3 pillars, we have made meaningful progress. Whether that's in the value we provided to our customers through our great value hands down of campaigns in supermarkets, the investments we made in our e-commerce and digital offering or the new stores and renewals across our store network. And what makes these achievements even more pleasing is that we were able to achieve all of this while successfully navigating a period of increased public focus.

So let's get into a bit more detail, starting on Slide 5 with our first pillar, the destination for Food & Drink. From our customer surveys and insights and with interest rates easing, we saw a modest uptick in customer sentiment towards the end of the year. However, there is no doubt that value has remained front of mind for our customers, and we have continued to work hard on providing a compelling offer with quality products across all price points. During the year, in supermarkets, we expanded the number of products on everyday low prices to more than 4,700, up from around 4,000 products last year, and we reduced the number of promotional tickets we have on shelf. That made the remaining promotions deeper and more relevant for customers. At the same time, we have maintained our Great Value Hands Down seasonal campaigns that customers love where we reduce hundreds of prices on products that we know matter most across different price points in the year.

Whether this is our best-selling single smoked with half leg ham at $8 a kilo over Christmas or our Coles beef sizzle stake, which was part of our spring value campaign, just in time for families and friends entertaining for finals.

In Liquor, we have also strengthened our value proposition with consistent and competitive pricing under 1 brand and 1 website, all underpinned by our new Price Match Promise. We have also continued to grow our exclusive brand portfolio during the year, and we know this is a real point of differentiation for us.

In supermarkets, we added new products across multiple categories, including in our ultra life Coles Finest and wellness road ranges. While in liquor, you can see on the Slide 3 international laggers, which we have introduced. Subroto Mexican, Allen Austria, Italian and NamakaJapanese lager, which was actually our top new product launch in the beer category in terms of sales in FY '25.

And we have received more than 600 awards across our exclusive brands, including 12 products of the year awards for products such as our biodegradable water wipes.

And finally, when I think about being a destination for food and drink, I think about key events through the year, such as Christmas and Easter when so many people entertain at home. And we've continued to focus on innovation and execution so that we are front of mind during those times.

Since we launched our New Street Flowers brand last year, we have also sold old thousands of floral arrangements, particularly around Mother's Day and Valentine's Day. Smith Street is a great example of how we are innovative through our exclusive brands. We have a head florist who curate a fabulous range of flowers for our stores, and we have seen significant growth in this area over the last 12 months.

Moving now to Slide 6. We are also well progressing on our journey of resetting our range and spacing stores. Space in our stores is a scarce resource. And as we mentioned at our Investor Day in November, we are using advanced analytics to ensure we have the right range and the right space for the demographic of every store, which is a good outcome for our customers and a good outcome for Coles.

During the year, saw specific ranging was rolled out to more than 40 categories, including in the nonfood space as well as other categories such as flower, canned vegetables and milk. And we have focused on innovation and expanded space in certain areas, such as our authentic Indian range. On the slide, you can see our new range that we introduced in partnership with Sanjeev Kapoor, India's most celebrated celebrity chef. This range was crafted with Chef Kapoor's signature spice blends and deep culinary expertise. We have also continued to optimize our range to reduce unnecessary duplication, allow space for new products and improve availability and efficiency. An example is in the soaps and body wash category, where through range optimization activity, we removed the duplication, simplified our Own Brand offering and updated the layout, which made it easier for customers to shop. Pleasingly, we are seeing the positive impacts of this work showing through in both our sales and also in our range NPS metrics. We've still got work to do and this isn't a set and forget strategy, but we have made good progress this year.

Moving now to Slide 7 and the next pillar of accelerated by digital. The performance of our e-commerce business was a highlight for FY '25, and we reported another strong year of growth with 24.4% revenue growth in supermarkets and 7.2% growth in liquor. We invested in our own website to improve the customer experience, delivered greater personalization and increased loyalty. Through our Coles and Coles subscriptions, membership more than doubled and we saw a 6% increase in Flybuys swipe rate and a 13% increase in customers redeeming Flybuys points through a Coles supermarket.

In terms of network expansion, we introduced a windowless rapid offer in home delivery and Click & Collect and extended our home delivery catchment areas in Melbourne and Sydney. Overall, online NPS saw a meaningful uplift driven by improved availability, fulfillment and the overall digital customer experience. With our CFC customers in Melbourne and Sydney recording the most significant gains, which brings me to our CFCs on Slide 8.

We delivered a major milestone during the year with the opening and successful transition of our next-day home delivery volumes in our Melbourne and Sydney CFC catchment. Our CFCs are already delivering a strong set of outcomes, as you can see on the slide. We are really pleased with how these facilities are performing and how they're transforming the experience for our customers. During the year, CFC fulfilled sales growth exceeded the already strong growth in our overall e-commerce channel. Perfect order rates were more than double the national home delivery rate. The range in our CFCs is already 33% larger than our average in-store range and includes new SKU in nonfood, global cuisines and big part value categories. We also have over 2,500 SKUs where we offer a minimum life so that customers can be confident to afford purchase for the week. And all of this has led to a significant uplift in customer satisfaction.

In addition, relative to Ocado's international partner benchmarks, our facilities have seen the fastest growth in volumes in the first 6 months of operations, and we are operating in the upper quartile across a number of key efficiency and last-mile metrics.

Finally, we are seeing broader network benefits. By opening up capacity in store, we have seen strong growth in same-day immediacy and Click & Collect orders. We have seen improvements in store level NPS in CFC catchment areas as a result of less congestion in store. And as we said at the half year, the CFCs allowed us to ramp volumes quickly to respond to peaks in demand, such as during the competitor supply chain disruption in November and December. So overall, we're pleased with the progress to date.

Moving now to Slide 9 and our delivered consistently for the future pillar. As I said earlier, we delivered record cost savings of $327 million through our Simplify and Save to Invest program this year, which helped to offset inflation and allowed us to reinvest in the business. Consistent with previous years, there were many initiatives across different parts of the business that contributed to the $327 million. But I would say that a common thing which supported a lot of them was the use of AI and other technology automation to improve the effectiveness and efficiency of processes. Our focus on continuous improvement and cost control has been a muscle that we have built now over many years, and I would say it is certainly embedded in the way in which we operate.

Moving on to Slide 10. We successfully completed the ramp-up of our New South Wales ADC in January in line with schedule. Both our ADCs are now fully operational and delivering strong results with cost per carton benefits in line with business case and improvements in-store availability. During the year, our supply chain was tested on a number of occasions with severe weather events in Queensland and New South Wales and the market disruption in Victoria in November and December. And we were able to see how valuable these facilities are in a way they allowed us to respond at pace to these peaks in demand in a way that would not have been possible with our manual DCs. You will also recall that in October, we announced the development of a third ADC in Victoria, and we are now well underway with consistent -- photos on the slide.

Moving now to Slide 11. Before handing over to Charlie, I would like to cover off some of our achievements from a team member, supplier and community perspective, the progress we've made on sustainability as well as some comments around the regulatory environment. I'll start with our team members. Our team member engagement score was a real highlight for me this year. And with our team members being a reflection of the communities in which we operate, it was also great to see how we have progressed in our diversity and inclusion strategy, including women in leadership and the representation of our indigenous workforce. We have also been working closely with our suppliers this year on a range of initiatives. But once again, one of the highlights was $3.5 million that we are awarded to 11 small- and medium-sized businesses to drive innovation and sustainability as part of the latest round of the Coles Nurture Fund, bringing total financial support to more than $40 million since 2015.

Alongside the support we gave to local communities as part of disaster recovery efforts in Queensland and New South Wales this year, we were once again the #1 corporate giver in Australia as a percentage of profit for the fifth consecutive year. And we generated the equivalent of 39.1 million meals to SecondBite and Feed Bank.

We've also continued to progress our sustainability initiatives. In FY '25, we reduced combined Scope 1 and 2 emissions by 71.4% from FY '24, sourced 100% renewable energy and set an SBTI validated flag target to deliver a 30.3% reduction in Scope 3 flag sector emissions by the end of FY '30. You can read more about these highlights and achievements in our sustainability report, which was also released today.

Finally, on the regulatory environment. The ACCC released their supermarkets inquiry final reported February 2025, citing no evidence of price gouging or land banking. We are continuing to work constructively with government and industry stakeholders in relation to the recommendations in the report.

There's also been a lot of commentary in the market recently on tobacco. The new packaging law came into effect on the 1st of July. And this, along with the growth in the illicit market, is continuing to result in a decline in tobacco sales for us.

With that, I'll now hand over to Charlie, who will take you through the financial results in more detail. Thanks, Charlie.

Great. Thanks, Leah, and good morning, everyone. I'm now on Slide 13, which details the group results. As Leah mentioned, FY '24 was a 53rd week year. So the normalized growth rates that I'll refer to in my presentation are adjusted for that 53rd week. I'll also talk to these results on a continuing operations basis, which excludes the significant items.

So let's get to the results. During the year, we saw group sales revenue increased by 3.6% to $44.4 billion, and group underlying EBITDA and EBIT increased by 10.7% and 6.8%, respectively. Earnings on an underlying basis adjust for major project implementation costs dual running and transition costs in relation to our ADCs and CFCs as well as nonrecurring expenses, such as those in the Liquor division of $8 million. This year, we incurred $103 million in project implementation costs and dual running and transition costs. These will fall away in FY '26. Underlying NPAT increased by 3.1%. And off the back of these results, the Board has declared a fully franked final dividend of $0.32 per share, bringing total dividends declared for FY '25 to $0.69 per share fully franked, an increase of 1.5% compared to the prior year.

Moving on to our segment overview on Slide 14. Starting with supermarkets. Sales revenue increased by 4.3%, supported by solid volume growth with growth across both transactions and basket size, all underpinned by our focus on value, quality, availability and the overall customer experience, as Leah talked to earlier. Excluding tobacco, sales revenue increased by 5.7%. Underlying EBIT margin increased by 21 basis points with gross margin efficiency initiatives and operating leverage more than offsetting cost inflation and the investments that we made in value. In liquor, sales revenue increased by 1.1%, while the liquor market remains subdued, sales growth was supported by new stores, including our Tasmanian acquisition, as well as strong trading across key events such as Christmas and Easter. Our Simply Liquorland banner simplification also commenced with positive early metrics around sales, transaction growth and customer NPS. Pleasingly, operating leverage improved in the second half with underlying EBIT increasing by 6.8% as a result of stronger sales revenue growth supported by new stores, coupled with the simplification in the above store operating model. In Other, EBIT result was impacted by an increase in insurance-related costs and an increase in property-related expenses.

Now turning to cash flow on Slide 15. Operating cash flow, excluding interest and tax, was $4 billion, with a cash realization ratio pleasingly at 102%. The working capital movement was driven by higher payables largely due to the timing of year-end payments, partially offset by an increase in inventories to support availability. These movements also impacted inventory and trade payable days, which you can see on the slide here as well. The movement in provisions and Other was largely driven by the utilization of provisions relating to the New South Wales manual DC closures following the opening of Kemps Creek ADC.

Now I'll take you through CapEx on Slide 16. Gross operating capital expenditure on an accrued basis was $1.3 billion, a decrease of $134 million compared to the prior year. This was largely as a result of the reduction in capital investment related to the Kemps Creek ADC, loss technology and service transformation, partially offset by the milestone payments relating to the construction of the Victorian ADC.

Capital expenditure falls really into 4 key areas: store renewals, growth initiatives, efficiency initiatives and maintenance. Within store renewals, we completed 178 store renewals across our network consisting of 60 supermarkets and 118 LIC stores, which included the 52 Simply Liquorland conversions. Pleasingly, our optimized renewal program which we discussed at the Investor Day last year enabled us to renew more stores compared to last year at a lower capital cost. Within growth, we opened 8 new supermarkets and 16 new liquor stores. We also continue to invest in e-commerce, including our digital platforms and completion of the CFC program and invested in the integration and growth of MilkCo and our Tasmanian liquor store acquisitions. Efficiency initiatives included our capital payment in relation to Kemps Creek ADC, milestone payments for Victoria and ADC as well as additional stock loss technology and front-end service transformation. Our maintenance capital, which is the fourth bucket, includes our ongoing refrigeration, electrical replacement programs and life cycle replacement of store and IT assets, including our master data management system and group cyber control investments. We continue to optimize our property portfolio with net property capital expenditure increasing by $36 million primarily due to the lower proceeds from property divestments compared to the prior year. In FY '26, we expect capital expenditure of $1.2 billion as we continue to invest in store renewals, digital technology and growth initiatives and enter the second year of our Victorian ADC development.

Now finally, turning to funding and dividends on Slide 17. Our funding position remains strong. We have extended our debt maturity profile and continue to maintain access to diversified funding sources. Note that the $150 million repayment that is occurring in August was prefunded as part of the most recent $300 million issuance in April '25.

At year-end, our weighted average drawn debt maturity was 5 years with undrawn facilities of $2.6 billion.

As I said earlier, the Coles Board declared a fully franked dividend of $0.32 per share in terms of a final dividend and a payment date of the 22nd of September 2025. This takes total dividends for FY '25 to $0.69 per share fully franked and is within our annual dividend payout ratio target of 80% to 90%.

Finally, we have retained hedge room with our ratings agency credit metrics and a strong balance sheet to support growth initiatives with our current published credit ratings of BBB+ with S&P Global and Baa1 with Moody's.

I'll now hand it back to Leah to take us through the outlook and concluding comments.

Thank you, Charlie, and I'm now going to turn to the outlook on Slide 25. In the first 8 weeks of FY '26, supermarket sales revenue increased by 4.9% or 7%, excluding tobacco. This was supported by continued strength in volume as we continue to invest in customer value and experience. Our e-commerce sales have also continued to benefit from the investments we are making in our digital offer. Strong growth in sales has been partially offset by a further decline in tobacco as a result of the impact of the new tobacco legislation and growth in the illicit market.

In FY '26, our ADC program will deliver its first full year of annualized benefits. And we will also continue our disciplined approach to cost control as part of our Simplify and Save to Invest program.

With our CFC volumes continuing to increase, we are also on track to deliver improved earnings from these facilities across the course of the year. In addition, in FY '26, no implementation dual running or transition costs in relation to our ADC and CFC program will be incurred.

In Liquor, in the first 8 weeks, sales revenue growth was flat. Whilst the market remains subdued, the convenience of our offer and the investments we are making in Simply Liquorland and in streamlining our operations will enable us to benefit from improved operating leverage as cost of living pressures ease. Simply Liquorland is expected to be completed by the third quarter of FY '26 and incur one-off costs of approximately $20 million.

You can also see on the slide further details on our store openings, closures and renewals as well as capital expenditure.

So overall, we're pleased with the results we've delivered in FY '25 and have had a good start to FY '26. And with that, I'll now hand back to the operator for Q&A.

[Operator Instructions] The first question today comes from Tom Kierath from Barrenjoey.

Just a question on the trading performance in the fourth quarter and then into the first quarter. It looks like it's improved quite a lot. Is that trade up or consumers just putting more in their basket? Or is it more to do with traffic that you're seeing in the stores?

Thanks for the question, Tom. Yes, so very pleasing growth in the fourth quarter, and that has continued into the first 8 weeks. I think there's probably a couple of things at play. So I think, first of all, we are continuing to see strong execution. So we've had a real focus on availability. Our availability metrics are probably now at the best we've seen them since pre-COVID, which is very pleasing. And the ADCs are definitely driving improvements in New South Wales and Queensland, particularly on our promotional stock, which is fantastic. We're continuing to invest in value, and that's really resonating with the customer. And we have got the strong online growth, which is really supported by the CFCs. So I think on the things we can control, we're executing well.

I think the other side of the story, though, is that from our customer surveys and some of the data we're seeing now, we're definitely seeing some green shoots in terms of customer sentiment. So that really has come from the interest rate cut and people starting to feel a bit more optimistic about household budgets going forward. If you look at the ABS data for June, total food spend was up at 6.3%. And I think that's indicative of a customer that is just slightly starting to feel like they can spend a bit more, particularly on things like entertaining. But we're still very cautious in a lot of the behaviors that we've seen and revert to over the last couple of years. So entertaining at home, eating at home instead of eating out, shopping mobile retailers, that's all still quite prevalent. And actually, you put those 2 things together, and that's a combination that's working quite well for us as a supermarket. I guess the question is going to be longer term is as that confidence grow, will we start to see some of those behaviors reverse and will we see a bit more eating out? So we've definitely got that sort of front of mind as we head into the remainder of the year and into Christmas and definitely very focused on the fact that we need to focus on what we can control, and that's how our customer offers.

The next question comes from Shaun Cousins from UBS.

Great. Another question on supermarkets, Leah. Just maybe can you talk a little bit about the impact of the lower shelf price campaign from Woolworths dropping their, I think, now 700 SKUs. Just curious if Coles has had to match all these prices? Or is this a degree some of those price reductions playing -- pardon me, I'm saying Woolworths come down to you. I guess our concern has been around Woolworths potentially deflating the category. But given the trading update you delivered, that doesn't appear to be the case, it might be an issue for them. But just how has that changed in the competitive approach from Woolworths impacted your business, please?

So well, first thing I'd say, Shaun, is we've been saying for some time that we are going to make sure that we're competitive. And we actually look at a fairly broad range of retailers now when we think about that competitiveness, including discounters and nonfood specialists, food specialists. So we're taking into account a significant amount of different information on price, and we will always take note when a competitor launches a new value campaign.

Having said that, I think my observation would be, we've seen a cycle over the last couple of years of a number of retailers making investments on a seasonal basis into relevant SKUs. And so we would look at over the last sort of 6 months and say that really isn't that different from what we have seen over the last couple of years. We also don't expect that to change going forward. And you would have seen this morning that we've actually launched price drops on another 240 lines, which are relevant for spring, which is actually cycling the campaign on this that we had last year.

The next question comes from David Errington from Bank of America.

Really encouraging set of numbers. Very pleasing to see. If I could delve into your gross margin in supers, which was another very strong second half performance after a pretty strong first half. Now you call out the buckets there. I note that your wastage or your losses dropped 10 basis point improvement in the second half, but you're also -- you're gaining some good benefits in Coles 360, you've also got you Simplify, Save and Invest in there, and you've got the strategic sourcing.

Where I'm going with this, I want to try to work out how much more you've got there in '26 and '27 in terms of opportunities to keep improving that gross margin because that's the thing that's really pleasing me the most, offsetting your cost of doing business growth, you're getting really good supportive gross margin improvement on a good sales growth basis, which is even more pleasing. So can you go into those buckets, please, of gross margin and give us an idea as to the ability to continue to grow that gross margin in those particular buckets. If you know where I'm going with that question, if you could give us that, that would be great.

Yes, no problem. Thanks, David. So let's start with FY '25. So the big building block for gross margin in there. So we had 28 basis points of improvement in the decline in tobacco sales. There was 25 basis points across the course of the year for total loss. Although I will note that, that was flat 39 basis points in H1 and 10 basis points in H2. And then we also had benefits flowing through from Simplify and Save to Invest. Now historically, we've had about 1/3 of Simply and Save to Invest that has gone into the gross margin line. In FY '24 -- FY '25, I should say, that was slightly more weighted to CODB than the 1/3. You then had the benefits coming through from the ADCs. And from a phasing perspective on the ADCs, we've had some benefits come through from Redbank in FY '24, we had benefits in FY '25 from Redbank and the start of Kemps Creek starting to transition. And then into FY '26, you're going to see the cycling of that, that you'll see benefits coming through from Kemps Creek. And then I think the other 2 big ones, which you mentioned are the Coles 360 and the strategic sourcing. You put all that together in the growth margin bucket, the thing that is offsetting that is the investments that we're making in value. So that was kind of the shape of FY '25.

If I then go to your question on the FY '26 margins outlook, probably start by saying we are very focused on competitiveness and ensuring the offer is sharp. And we are going to continue to invest to keep that top line momentum going that we've got. But you have seen us doing that now for some time. So that's not really a change, but you can expect us to keep that up.

In terms of what the margin will benefit from I think, firstly, you've got both ADCs fully operational. And as I mentioned on the phasing, I'd almost think about it as a -- in terms of the benefits fund through 1/3, 1/3, 1/3, FY '24, FY '25, FY '26.

The second big one is tobacco. So tobacco, we expect will continue to decline, which will benefit the margin rate. However, it is going to be diluted from a dollar's impact on gross margin and on EBIT -- sorry, on gross margin dollars and EBIT dollars. We have an aspiration to keep growing loss. But as you've seen from that impact that we got in H2 of 10 basis points, I think it would be safe to expect that, that's a less material component of this equation going forward. And so we'll see improvements that they're likely to be much smaller.

I think the couple of exciting things we've still got coming ahead are Coles 360. So we are looking to bring on more assets and improve some of our measurement and reporting capabilities this year, which we think is going to continue to support really good growth in that space. We'll also have the third year of the SSI program, of which we will get probably around 1/3 that will flow into the gross margin line. And then we continue to do the work with our suppliers on strategic sourcing. So a lot of positive drivers that will help to benefit that gross margin line and give us then that flexibility to continue to invest in the offer and keep that momentum going in the top line.

Yes. It seems like there's still a lot there, a lot of tailwinds still. So we can expect to see that growth continue to rise without wanting to nail you because you can't give forward-looking statements, I understand. But yes, there's a lot of optimism there that, that margin will continue to rise at a fairly high clip. That's why I'm reading it so.

We're very focused on making sure we've got the right building blocks to give us that flexibility going forward.

The next question comes from Ben Gilbert from Jarden.

Just on the trading update and just how we think about that looking forward. Just is maybe some of the consumer behaviors you're seeing. I know you've talked to sort of cooking at home a bit more. But in terms of the essentials category, things like cleaning, pet, et cetera, where there's been sort of well-documented leakage. Are you seeing starting to get that back? I've also sent some data suggesting that people are now doing 1 and 2 shops and they're not shopping across 3 and 4 stores. And I suppose as we look forward and hopefully, we move into a period of normality, whatever that is, do you think we see shopping behaviors move more back to where they were at pre-COVID because we're seeing some of those trends in the U.K. and it's here, it's pretty supportive of a business like yours and your friends up north in Sydney as well.

Yes. Thanks for the question, Dan. I think we might take this in 2 parts. I'll cover off the customer behavior piece, and then I might get Anna to talk about the nonfood aspect of your questions.

So look, as I said, on the question about the trading outlook, we are definitely seeing the early signs, but I'm going to call them early on green sheets around customer sentiment. And as you said, we do look to other markets that are maybe 6 to 12 months ahead of us in terms of the interest rate cuts. The U.K. would be one of those, where they have definitely seen benefits of customers reverting back to behaviors of consolidating shops because that's just a more convenient way for them to operate. Time will tell as to how quickly that starts to play out. What we're really focused on is making sure that as they start to do that, our value proposition really resonates.

Anna, did you want to cover nonfood and where we're at with that?

Yes, happy to. Ben. As you know, nonfood has definitely been an area of focus for us, and we are continuing to look at how do we best structure our offer. We did actually think we are the very most -- the most convenient place for customers to buy nonfood. So for us, it's going to be critical that we give customers no reason to go anywhere else.

It really, though, isn't a one size fits all in each of these categories. We're taking a category or category on an approach to work through what's the right range, what's the right customer proposition and doing that really collaboratively with our price. I would say we've landed some fairly big change on range and pricing in certain categories, whether that's bigger pack, better value, more EDLP, more innovation where it matters most to customers. And obviously, I won't go into too much detail because of the competitive nature of it, but it's fair to say we are seeing some of the metrics moving in the right direction, but there is a lot more to do, and we remain incredibly focused on that and making sure that customers do a one-stop shop with us.

Would your pet and cleaning -- I appreciate not on a breakout category, but would they be materially off or weaker than your total number now they'd be closing because obviously, I think you've reported a period there in decline and then move back closer to flat.

I'm not going to add specific category details. And what I'd say is we are the green shoots so to talk about in terms of some of the activity is playing out in some of what we call the real core areas that we must win to customers, of which both of those categories you talked about. So there's a lot of work going on in each of those spaces, and we are seeing some of the metrics moving. It's very early days, and we've got an awful lot more to do.

The next question comes from Adrian Lemme from Citi.

I just wanted to focus on the balance sheet and how the Board is thinking about it. You've noticed some improving signs from the customer. Leverage ratio came down to 2.6x. This result, I think the 5-year average is about 2.8. And in '26, we should see further decline in that number given the earnings picking up from the nonrecurrence of one-off cost CapEx is coming down. Is this something we should expect to think about in '26 as the earnings curve comes through, please?

Adrian, in terms of the balance sheet, you're right. One of the things that we've really been focused on is ensuring that we continue to maintain a really solid balance sheet. That's important and well within our credit metrics. And we are -- so yes, we are BBB+, as I mentioned, with S&P Global and Baa1 with Moody's.

So look, from our perspective, it's our strategy to continue to maintain that, continue to actually ensure that, that is solid. We're also very disciplined in terms of how we allocate capital as part of that program. And not only that, also our promise to shareholders, if you like, with a target payout ratio of 80% to 90%. That's as much as I sort of go into the balance sheet at this point. And one of the things that, again, we're all focused on as well is to get that cash realization ratio to 100%. And pleasingly, in FY '25, we delivered another 102% in terms of realization ratio.

So that's sort of the broad parameters of how we look at the balance sheet, Adrian, and what our return to shareholders are.

The next question comes from Michael Simotas from Jefferies.

And well done on the result. My question is just around the cost bridge and how we think about the various parts into FY '26. So firstly, on the implementation costs, they came in a little bit lower than what you'd guided to for FY '25. Just want to confirm that they do completely fall away?

And then related to that, you've made the comment that you expect improving profitability on CFCs. I presume that's separate to the $40 million implementation OpEx that you took in the FY '25 year.

Yes. Thanks for the question, Michael. So look, can I go first to the implementation cost? Absolutely, they fall away in FY '26. That's very clear. I think both Leah and I mentioned those several times in our presentation. So they will fall away. And look, they were $103 million for the year. I think pleasingly, just to give you a bit of a split to say you're aware of that's coming from. 60% of the implementation costs were in relation to the CFCs. They're all about the transition costs, so nothing to do with ongoing operations. That [ will ] purely the transitioning of our e-commerce next into those CFCs and you're running and the like, and 40% related to ADCs. The actual implementation cost, we did a little bit better with them because, look, the team did an amazing job, they really did, treating every dollar as their own, looking at how they can actually reduce those costs. And we use the learnings from our Redbank transition there. So really pleased, but they go away, which is great for FY '26.

In relation to CFCs, the CFCs, if you like, financial performance that we'd outlined for '25 pleasingly. I mean, Leah talked through all the sort of benefits that we're receiving from a customer, from an operational perspective. So we're really pleased with how they're performing. And more importantly, they perform from a financial perspective in line with our expectations in FY '25. What can we expect in FY '26 is as these CFCs increase in volume, and we are seeing strong volume growth from the CFCs. So I think we noted that the e-commerce growth rate in the CFCs is actually ahead of what our e-commerce growth rate of '24 was for last year. So we see that continuing. So we would expect a better financial performance in the first half of '26 compared to second half '25, but also, again, a further improvement in the first -- in the second half of '26 as well. So we would expect, if you like, that $40 million drag that we called out from an EBITDA perspective to progressively improve throughout FY '26.

And Michael, can I just build on that. When you asked the question, you described the negative $40 million as implementation OpEx. We don't think about it that way. There was the implementation OpEx, which was in the [ 103 ], of which the CFCs were about 60%. That was what it took to transfer all of the volume in and to run fuel operations in the store and the CFC alongside each other while we were making the transition.

Once the transition occurred, though, we had we guided to an EBITDA drag into the P&L of negative $40 million for the remainder of the year. And what we're saying is that as we go into FY '26, we're expecting that earnings of the actual running of the CFC. So not the implementation costs that they're running off them to improve over the course of the year as we continue to grow volume. Does that make sense?

That does make sense. And then just the last bit I've got on that is most of the D&A on both the assets and the leases was in the P&L in '25, right? So there might be a tiny bit of step up, but the big step change has already happened.

Yes. So let me take you through it then. That's probably -- obviously, the look. So in '25, we actually saw a step-up in D&A of around $230 million. So $100 million of that, Michael, related to the ADCs and the CFCs, right? And then the balance related to our broader CapEx program. But -- and as you know, with our CapEx program, as I mentioned, we have mentioned previously, we're spending about $1.1 billion, excluding sort of our investments in the sort of automated facilities. And then finally, you get depreciation from things like right-of-use assets as we renew stores, as we bring new to stores on board and the like. So the good news is for FY '26, we won't see the same step-up that we saw in FY '25, and in fact, I sort of guide you to where FY '26 might land, you'd expect a step-up around half the step-up that we saw in FY '25. So just to repeat that, about 50% of the step-up that we saw in FY '25.

The next question comes from Richard Barwick from CLSA.

You just sort of touched on it a second ago, Charlie, I just wanted to talk about the impact that the CFCs are having in terms of driving the online growth. So obviously, there's very, very strong online growth overall. But to what extent is that growth being skewed to New South Wales and Victoria? And then there's a bit of a flow-through for that. To what extent of CFC's really underpinning the overall top line. So I'd be curious to get a sense of how that was looking for the fourth quarter. And if you -- if you're willing to talk to the impact for these first 8 weeks because obviously, the sales growth are looking very good. So to what extent the CFC is actually driving that.

Right. Well, look, I'll touch at a sort of a high level and then sort of pass it on to Matt Swindells to give us a bit more color.

So as I said, we're really pleased with the volume growth at CFC. So we have actually seen strong growth. You saw across all our e-comm channels, growth in FY '25 was about 24.4%. And we are pulling out that obviously the CFCs grew at a bigger rate than that. And part of it is, we're seeing that through the improved customer experience across things like availability, the perfect order rates, the freshness and the extended range, which is all sort of resonating with our customers, and we're seeing that through our customer NPS scores through the CFCs, which are actually higher than our online CFC scores there as well. And also from a performance perspective and operational performance perspective, I think Leah mentioned as part of the presentation that the operating performance and the transition compares favorably with some of the overseas CFC implementations, which we're really pleased about. And we are seeing not only that, the growth, though, what the CFCs have done. And we called this out, I think, not only our Strategy Day, but since. What we have seen is less congestion in our stores as we transition the home delivery. That's resonating at a better store look and feel and customer experience, which has been positive, but we've also been able to open up more slots in stores for things like immediacy and same-day type home delivery, which we have actually seen some very good growth. But Matt, with that, would you like -- anything you'd like to add to that?

Look, I think, Charlie, you've covered the key points, which is the performance of the CSCs has been really pleasing for us. And yes, they have significant capacity. So in New South Wales and in Victoria, they are delivering growth that's ahead of the other states. And that is because we are seeing them play a role more of a network play in those catchments. It enables the stores to have capacity for better Click & Collect, for better immediacy offers and also better in-store execution for customers that still shop the store. So our availability has improved, and the congestion is removed. And then the capacity in the CFC themselves to do that home delivery with the customer proposition, the specialty market, is also then driving a lot of that growth. So I think we're very pleased with the CFC performance and the growth, but we're also really encouraged by the impact it's having on the wider network in those catchments and is supporting capacity and given us the ability to grow even further.

And just sort of to clarify a follow-on, a sense of the momentum there. So are you seeing like that idea that the New South Wales and Victoria is growing ahead. Is that accelerating as the CSCs ramp up? Or have you sort of reached a level where it's a bit more normalized?

I'm not sure we've reached a normalized level yet. You've got to bear in mind, we're still in the early days post the ramp-up of driving growth. And there's a lot more work to do on the extended range on really thinking about how we get better efficiency and better service deliveries. There's more to come. We have also got further automation in the next year. So for those of you that were at the investor tour of the Victorian CFC with the robo arms, there are 20 robo arms currently in that big CFC ready for implementation through the year. And so we expect to see some further performance improvement in the operation.

Where it will end overall, I think we're just pleased we've got capacity and we've got the right operating metrics and the right customer outcomes, and we can meet the customer where the customer wants to shop across all those modalities, in-store, Click & Collect, immediacy and home delivery with the best offer in the market. So the growth opportunity is there. Where it will then cap out, I guess, over time, we will see.

The next question comes from Craig Woolford from MST Marquee.

I just wanted to follow up with another question on the cost outlook. It was a great result in FY '25 on that Simplify Save to Invest to $327 million. What do you see as the implications for FY '26? You sort of have less than a quarter type run rate left over the next 2 years, but just interested in that. And also just dealing with the fairly high retail award wage increase that's [indiscernible] FY 26?

Great. Thanks for the question, Craig. Look, the SSI program. Just a bit of a reminder. We announced that back in August '23. It was a full year program where we were targeting $1 billion over the 4 years. We generally target about $250 million a year. Look, some years we do a bit better, and FY '25 was a great case in point where we delivered $327 million, but other years a little lower. And one of the things that we will see in the 2 years, we have delivered about $560 million of benefits. We'll obviously look to do more where we can. We see $1 billion as a bit of a floor, not a cap. But I would also just caution that $327 million was a fantastic result. And yes, it would be ambitious to think I think we can deliver that again in '26. That doesn't mean we aren't going to try, but I would be generally working towards a target of more than $250 million or thereabouts.

In terms of costs that we see in CODB, I think, look, pleasingly, our CODB just generally went up by about 59 basis points. Pretty much most of that was the DNA step-up, right? So from a cash CODB perspective, we're actually seeing that to be relatively in line with sales, which is pleasing. That being said, we do see pressure on costs in 2 key areas: Wages, as you've caught out there where, yes, the fair work wage increase that was announced; but also energy costs. Energy costs continue to be something that we navigate, but we see that as part of our SSI program as well. And I think Leah mentioned it earlier, historically, with SSI, 1/3 of the SSI tends to work its way into gross margin and about 2/3 into our cost of doing business. Although in FY '25, it was a little higher in the cost of doing business in terms of what we realized.

The next question comes from Bryan Raymond from JPMorgan.

My question is just back on the CFC. So I just wanted to get maybe just step back a bit. We talk a lot about the underutilization and the $40 million cost base there in '25. Interested just to understand the sort of the economics of those transactions going through those 2 [ sheds]. Are they -- is the $40 million loss reflective of them being those transactions being actually loss making at the moment until you're exerting scale? Or is that relative to theoretical earnings you should be making on those transactions? I just want to understand if you're better off at the moment, putting those from an earnings perspective, putting those online sales through CFCs versus through store based on EBIT margin, EBITDA margin now if you like to look at it?

Yes. So Bryan, look, thanks for the question. Look, the number the same. When we implemented the CFCs, clearly, it was implemented for growth. We actually put those CFCs that provided capacity for us to grow not only our next-day home delivery service in Sydney and in Melbourne, but also, as I said earlier, it allowed us to grow in stores. So to put it really simply, the $40 million, yes, when you invest in facilities like these, there are a certain amount of fixed costs that relate to those facilities. And what we said was operationally, post transition, to repeat Leah's words earlier, post the transition element last year in FY '25, so this is effectively from November, end of November through to June, the drag on earnings, if you like, was about -- in terms of EBITDA, was about $40 million. And what I've said is, as we see those facilities increase in volume, and Matt took you through a little bit of what we see in terms of the outlook there, we would see a progressive improvement in that -- in those earnings through FY '26. And we're really pleased with how they are actually improving from an earnings perspective through that. And we would see a better second half '26 and we'll see in the first half of '26, and the first half '26 is an improvement on where we found ourselves in FY '25 as well. So we're really pleased with the financial performance. But you need to think about those. They're not theoretical. It is a $40 million, if you like, drag that we are improving through FY '26.

Okay. That's helpful. But just to clarify then, just on the $40 million. I assume that was quite skewed to the second half given the timing, as you mentioned, late November when you started -- they started kicking in those under utilization costs. Should we -- for example, whether you want to clarify or not that if it was, say, $10 million first half, $30 million second half, should we be expecting that $30 million to annualize up to $60 million and then start reducing? So into FY '26, it could, in theory, be more than $40 million given that second half would have been higher than half of the $40 million. Does that makes sense, Charlie?

Yes. Look, Bryan, I don't -- I don't intend to go into sort of splits between half, et cetera. I think your early comment about more skewed to the second half, there are more trading days post transition in the second half and the first half. So that would be safe to assume that, that was larger in the second half than the first half impact. But in terms of all I was talking about in terms of FY '26 is we would, as volumes grow, we'll see a significant improvement in the first half of '26, and that will further improve in the second half.

The next question comes from Phil Kimber from E&P Capital.

I mean, great result in supermarkets. I was going to move over because there's been lots of questions on Liquor. You're obviously going through a lot of change there, and you've assumed another $20 million cost sort of one-off in FY '26. I mean should -- given the sales momentum in that business, is it going to be difficult just mathematically to generate ex that $20 million underlying profit growth? Or should we be assuming that given the tough trading conditions, probably the underlying profit flat or goes backwards to be [indiscernible] and then you add the $20 million one-off cost to that

Thanks for the question, Phil. We're really confident that what we're investing in Simply Liquorland that we're going to get very strong returns on that capital, everything that we're seeing from the stores we've converted to date suggest that. I think that in terms of us transitioning into the first half of FY '26, I think the key message is that you should take from second half '25 is that really, there's one factor that is out of our control at the moment, which is how much will the market recover and by when. But there are 3 really important factors that are in our control, which have been our focus, which has been to make sure we're improving the customer value proposition, which we've certainly done a lot of work on that through the second half, whether it was moving to one price file and promotional plan earlier in the half, we're now kicking off the rollout of Simply Liquorland, and we think that everything we're saying that, that has been a good thing for us in terms of sales.

We think in terms of costs, we had a very strong result in the second half, which is pleasing. That's a result of some measures that we implemented in the first half that we got a full run rate of benefits for in the second half. And then there's also, as we roll into Simply Liquorland, there's some more cost benefits that started to come through in the second half also. And so when you look at those things and when you look at what we think was a very pleasing result in terms of gross profit to still be slightly up year-on-year in the second half at a time when we heavily invested in value through moving to one price fall and promotional plan as well as bringing other mechanics that have had a real impact with customers in terms of our value perception, we think that even in a softer market than we would have liked to have underlying earnings growth in the second half of 6.8% is a very pleasing result. And we -- and that has the team feeling optimistic around our opportunity to continue to improve moving into FY '26 and then we'll just watch to see what the changes in consumer behavior are and when these cyclical headwinds start to abate, but we think we're very well positioned for that.

The next question comes from A.J. Mareswami from Macquarie.

My question is around the Coles Finest brand and continues to be a strong growth contributor there. Can you just talk to some of the key drivers for this? And how are you seeing equivalent branded products performing in that upper tier? And is it due to a bifurcation of consumer behavior between different income brackets or particular areas? And can this be an offset to customers?

I'll take that. Look, we are very pleased with the Own Brand performance and actually across all the tiers, what we're seeing is volume outstripping proprietary brands. And as you say, Finest was a standout of 13.6 for the year. The key driver of that really being the focus on innovation and quality, and we'll continue to do that. Actually, we -- it's not in every single category. So we've got a significant amount of headroom going forward to grow the brand. And actually, what we're really focused on is what is right in every category and what's the right tiering from Simply reap and Finest. And what we're seeing and how we're bringing that brand together are collective and certainly through seasonal moments, the real opportunity to divide kind of restaurant quality meals for customers at home. And I think you're seeing categories that are emerging so freezer categories where we've had big and sustaining ranges or some of whether it's the Coles Finest Risotto real coming through in terms of driving new occasions and actually driving customers to the fixture where they haven't previously been shopping. So we're really energized around what that brand can do in the future, but we're really focused around all of the tiers on Own Brand and how we make sure that we get it right in every category, and we look to continue to strike volume and value and make sure we're delivering the right proposition for customers.

The next question comes from Nicole Penny from Rimor Equity Research.

And just further on Own Brand and as that scales further, do you see the engagement with branded suppliers change materially? And just to confirm that you've seen the demand for those labels continue to increase in quarter 1?

And just secondly, yes, compared to 2 years ago when you took positions, what changes in the operating environment across customers, competitors and suppliers have been most material in changing your thinking? And what do you need to do differently in response to ensure continued success over the medium term?

Thanks, Nicole. I might pass to Anna to your third question on the Own Brand, and then I'll come back and answer the one around the changes over the last couple of years.

I'd say, look, as we've just mentioned, the Own Brand, we think, has significant opportunity to fill white spaces and categories. But this is about getting the right offer in every category, and our brands play a very important role for that. And customers are seeking brands, but they're also seeking private label opportunities. And where we can innovate, we believe are actually together between branded and private label, we can grow categories, and that's how we're working. So we actually don't see them competing in that way. What we want to do is grow the thinking about it, and we're thinking of a category by category level. And it's also worth noting that many of our Own Brand suppliers are also branded suppliers as well. So a significant opportunity, we think, by really focusing. So we are seeing good growth, and we have got big plans in this space, but we're working very collaboratively with our players, and we think we've got the right offer, we'll get the right offer in every category, whatever the tiering and whatever the brand will be driven by the customer need.

Nicole, on your question on what has changed? Well, I think it's actually been quite a turbulent period with the early part of that with the inflation that we were seeing coming through. Many customers have radically changed their behavior in how they shop, whether that's trading down to more affordable options, shopping across multiple retailers actually cutting back on a lot of lines like liquor or treats, even things like bottled water. And so we've had to work hard to respond to that changing customer needs, and we've really refined our customer proposition to line up with that.

We've also very significantly changed the business in the last couple of years with the introduction of 2 automated DCs and to customer fulfillment centers. And that has given us lots of flexibility to feed into that customer proposition that was talking about, but also build for the future. And as we look ahead, we think there's further opportunities to go after in areas like the Coles 360 and retail media. Thank you.

The next question is a follow-up from Shaun Cousins from UBS.

Just a question for Charlie. Just on net interest. Should we apply the similar approach for fiscal '26 that you suggested for D&A in that we look at half of the increase in fiscal '25 should be coming through at fiscal '26. I'm just conscious that I can see -- that I see consensus estimates at around 548.5 for fiscal '26 in your net interest fiscal '25 is 541. I may have my numbers off there, but just any clarity that you can put on the record around net interest guidance would be helpful, please.

Not a problem, Shaun. Thanks for the question. Look, in terms of interest, you will recall in [ FY, ] we did see a step-up in interest, and that was more related to AASB 16 as we brought the large transformation programs onto the balance sheet. But really look at interest into 2 buckets, if you like, the debt-related interest. And if I sort of break up the F 1 '25 in $117 million of the interest related to -- or about 20% related to the debt facilities and the balance of that $424 million related to the leases. So if I look at those components, with respect to the leases, apart from the normal lease -- at least churn through store renewals and new stores coming on board, we don't actually expect a significant change in the interest related to financing cost related leases. So I guess that's bucket one. The other side of it, it really is the interest on our debt facilities. And you need to look at it on 2 ways. One, we will see some benefit from lower interest rates. About 50% of our debt is actually floating. So we'll see some benefit there. But you also have to factor in effectively the annualization of the new note that we issued back in April '25, the $300 million. So net-net, I actually expect interest to be broadly in line with FY '25.

The next question is a follow-up from Ben Gilbert from Jarden.

What strategic sourcing means within submarkets? And how big or material an opportunity is strategic sourcing?

Yes. When we think about that, Ben, it's how do we partner with our suppliers, we're looking at longer, deeper partnership that really drive long-term value for the customers, for our partners and for the business, and we are really moving in that direction to partner to unlock end-to-end efficiencies all around actually that changed the customer proposition. So that's the direction we are taking, and we've had some good success for this, this year, and we'll continue to do that over the long term to step change the customer proposition.

How progress I think did you start that back at beginning sort of late March quarter. Is that right? So I suppose in terms of probably tax a bit is time for that to come through and then annualize, so is it relatively early days on that front?

Look, it's kind of an always-on program, and we're making progress over the last kind of 18 months on that, but we really want to continue as BAU to really think about how to really use partnerships to unlock greater customer opportunity and differentiation. So it's always on, but we're probably kind of 12, 18 months into this way of working.

The next question is a follow-up from Tom Kierath from Barrenjoey.

I'm just thinking about the half-to-half profit growth in '26. I guess based on the ADCs taking a bit longer to kind of contribute and then in the first half, you're lapping the Wooly supply chain kind of stuff. Is it fair to assume that you kind of get growth in first half but then faster growth in the back half?

So you're talking from an earnings perspective, Tom?

Yes. Sorry, yes, yes, sorry, yes.

Yes. I mean we probably won't be spending a whole heap of time breaking it down by half. But I think a few things to probably think about. One is exactly right on the ADC, which is from a phasing perspective at the back end of FY '25, we did have Kemps Creek starting to deliver. And so you're probably going to see a bigger contribution of that in the first half and early part of the second half before we cycle that. From a CFCs perspective, as Charlie described before, we expect as we continue to grow volumes throughout the year, the earning trajectory on that improves. And so you would expect to see a bigger drag in the first half than the second half in that. And then the other factor, which within last year that we will cycle over the top half is the competitive disruption that was in November to December last year. But equally, there were some significant weather events in January, February and March in FY '25 in New South Wales and Queensland.

The next question is a follow-up from Bryan Raymond from JPMorgan.

Just another clarification question. Just on corporate costs into '26, there was a reasonable step up there in '25, particularly in the second half. How should we think about 2H annualized? Or should we be taking kind of FY '25 as a good baseline for '26?

Yes. So Bryan, corporate costs did step up a little in FY '25. They're actually higher because of higher insurance costs after the year. So they stepped up about $107 million. Look, in terms of corporate costs as part of the other division, I think you should think of that as pretty much flat year-to-year from '25 into '26.

Right. And so for the overall other line, other earnings should be sort of -- I think it was $109 million loss this -- in '25 should be sort of broadly similar to that $109 million in '26, just to clarify.

Yes. Well, Bryan, I think that's a good way of looking at it. And let me just break it up though into the 4 components because I think there's 4 elements to it. One is the supply contract that we have with Viva, the product supply agreement. As you know, that's the revenue line in the other, and that's obviously been impacted by tobacco sales. So you should expect that from a sales revenue perspective to decline because of the tobacco sales. But the actual earnings on that, about $9 million, that doesn't change really from year-to-year because it's sort of a flat fee, if you -- is the way to look at that. So that should be the same.

Corporate costs, which is the other element I spoke about, that would be flat.

Flybuys. So flybuys, it went about pleasingly. The net loss was about minus 5, which is better than the '24 number. And that's some great work that the team had been doing with flybuys and flybuys itself in relation to improvements in simplifying the operating model, which was positive.

And then the swing factor really is property, right? So in '24, we had a gain in property. In '25, there was a $6 million net loss. As I look forward, I wouldn't expect too much difference from a property perspective in FY '26 at this point.

Sorry, too much difference to '25? Or just a flat outcome or like 0?

Flat outcome to '25 in properties.

The next question is a follow-up from Phil Kimber from E&P Capital.

So my follow-up was really just around -- you talked about the green shoots and you've done an amazing job really simplifying your range and leaning into the consumer preferences that we've seen in the last few years. Just trying to get a sense of how quickly, if those green shoots pick up, can you pivot back the other way. I don't know whether it's adding more range and things like that. Maybe just talk conceptually about that?

Yes. Thanks, Bill. I think from a range optimization perspective, we've had a big push on this in the last 12 months in terms of building our capability, but we would now consider it to be sort of always on. As I said in my initial comments, it's not something you can just set and forget. You've got to constantly be working at it to optimize it for every store and every sort of customer community that shops at that store. And so we see that as an ongoing event that we'll be doing year in, year out from now on. And that really is about removing duplication to give space to bring new innovation in and simplifying the offer so that we have it simpler for customers to shop. And as I said in the presentation, we've seen some really good early results from this. So we're very pleased with how it's going. We're about 40 categories in at this stage that we've done in the last 12 months, and so we'll be looking to roll out more as we move forward into this year.

The next question is a follow-up from Craig Woolford from MST Marquee.

Just a quick one on that trading update with the strength of sales of 7% ex tobacco was a good number. Is there any other color you can provide on, say, fresh versus packaged performance trends? And any inflation impacts in the sort of momentum that you're seeing?

Probably limited color on a breakdown from a category perspective. Happy to talk a little bit about inflation, though. I think we obviously have quite stable inflation in Q4 at the 1.5% or 1.2%, if you take tobacco out. As we're starting to look ahead now on what's our expectations of what might be coming through in FY '26, we are seeing lamb starting to experience some supply constraints, and that's putting a bit of pressure on prices. Probably the big one, though, that we're watching very closely is beef because export demand out of Asia is putting pressure into production and process capacity here in Australia. And I think on the other side of the ledger, we're starting to see some deflation in chicken and pork, which is pleasing from a customer perspective, but potentially looking into a bit of a remix of what customers are buying as those prices settle into the system [indiscernible]

Okay. Yes. I mean, the nature of the question was the 7% sales versus 1% -- ex to the 1.2% ex tobacco inflation. It's a very healthy volume figure, probably feels better than green shoots, Leah, in terms of...

Look, it's been a pleasing start to the year. It was a pleasing Q4. It really is continuing that momentum that we had from Q4 into Q1. I think it's our job to be cautious about that and be thinking ahead at what the customer is going to want, particularly as we head into the really important trading period for Christmas. And so we're really focused on what is that customer proposition that we need. And how do we need to make investments to keep that momentum going in the top line, but we are pleased with it, Craig.

At this stage, we're showing no further questions. I'll hand the conference back to Leah for any closing remarks.

Thank you very much. Well, I think in summary, we're pleased with the strong financial results and the strategic achievements that we've delivered over the course of the last year. As we look to the year ahead, we're pretty clear on what our priorities are. We will remain focused on ensuring our value proposition and offer resonates with the customer, and that includes delivering consistent quality and availability and continuously improving the customer experience in store. We also will continue our laser focus that we have on costs and really focusing on unlocking the full benefits from our ADCs and CFC investments, both for the benefits of customers but also shareholders. And excitedly, we'll look to continue to grow the Coles 360 retail media business, which we think is a big opportunity for us in the year ahead.

So thank you, and I look forward to speaking to you again not so far away at our first quarter results in October.