Woolworths Group Ltd · ASX:WOW
Woolworths — Investor Day (May 2015)
149 slides from Woolworths's investor day presentation, May 6, 2015
Slide 1: ASX announcement cover letter: Investor Strategy Day
1 Woolworths Way, Bella Vista New South Wales 2153 Australia Telephone +61 2 8885 0000 Facsimile + 61 2 8885 0001 woolworthslimited.com.au For personal use only 6 May 2015 The Manager Companies Australian Securities Exchange Limited Company Announcements Office Level 4, 20 Bridge Street Sydney NSW 2
Slide 2: Woolworths Investor Strategy Day May 2015
For personal use only Woolworths Investor Strategy Day May 2015
Slide 3: Grant O'Brien, Managing Director and CEO
For personal use only Woolworths Investor Strategy Day Grant O’Brien Managing Director and Chief Executive Officer 2
Slide 4: Q3'15 Sales
Q3’15 Sales For personal use only 2015 2014 Easter Adjusted Third Quarter Sales ($ million) (13 weeks) (13 weeks) Increase Increase (%) Australian Food and Liquor 10,621 10,382 2.3% 1.7% Petrol (dollars) 1,181 1,822 (35.2)% (34.8)% Petrol (litres) 977 1,234 (20.8)% (20.2)% Australian Food, Liquor an
Slide 5: Q3 Sales Commentary
Q3 Sales Commentary For personal use only • We were disappointed with Australian Food and Liquor sales in December and January. February and March have shown improvement as we commenced the actions announced in February, however April has been more subdued • Liquor continues to perform strongly • Pe
Slide 6: Key messages
Key messages For personal use only Woolworths is We are We are taking a strong absolutely aware the steps business with of the challenges required lots of potential to realising that potential 5
Slide 7: Our retail portfolio model brings competitive advantage
Our retail portfolio model brings competitive advantage For personal use only 1 Seamless customer Our Customers experience • Across channels, • Across occasions & missions 1 Home General Food Liquor Improvement Merchandise Hotels 2 Active portfolio management • Build businesses to Bricks & mortar le
Slide 8: We have strong market positions, affording many opportunities for further growth
We have strong market positions, affording many opportunities for further growth For personal use only Position Further Growth Opportunities Food - Australia Australia’s largest supermarket operator Share gains in a fragmented food sector 14.6m customers on average per week Share of wallet gains 20%
Slide 9: We are a growth business, regardless of the environment
We are a growth business, regardless of the environment For personal use only ERA I: 2000-2005 ERA II: 2005-2010 ERA III: 2010-2014 Consolidating into a Building from a strong Refocus on core and national food and position, turbocharged investing liquor retailer by acquisition (NZ) in future growth
Slide 10: Key messages
Key messages For personal use only Woolworths is We are We are taking a strong absolutely aware the steps business with of the challenges required lots of potential to realising that potential 9
Slide 11: A new era brings new retail challenges
A new era brings new retail challenges For personal use only Era I, II Era III & beyond • Advantage built on • Lower inflation requires scaling up fixed cost real-dollar cost out across Investing in our both COGS & CODB base, relying on Cost offer to our • Scalable platforms fractionalisation in a h
Slide 12: Six challenges to realising our potential
Six challenges to realising our potential For personal use only Regaining momentum in ➡ Building customer trust 1 Australian Supermarkets ➡ Maintaining focus and consistency in execution ➡ Extending market leadership Continuing to outperform ➡ Dealing with a low growth market environment 2 in Liquor
Slide 13: Key messages
Key messages For personal use only Woolworths is We are We are taking a strong absolutely aware the steps business with of the challenges required lots of potential to realising that potential 12
Slide 14: Group-wide transformation to turbocharge a 'lean retail' model
In 2014 we kicked off a structured Group-wide transformation to turbocharge a ‘lean retail’ model For personal use only Fuel For Growth Program Woolworths' Lean Retail Model A continuation of our historical approach of driving growth via seeking efficiencies and investing them in our customers OFFER
Slide 15: We are exercising capital discipline
We are exercising capital discipline For personal use only • Woolies is a • Skewing capital allocation to Supermarkets • Reduce Masters investment until the model is proven • BIG W capex being curtailed until transformation complete • Further efficiency in Stay in Business capex and heightened revie
Slide 16: Each business leader has a mandate to realise full potential
Each business leader has been given the mandate to realise the full potential of their businesses For personal use only Home General Food Liquor Improvement Merchandise Hotels 15
Slide 17: Key messages
Key messages For personal use only Woolworths is We are We are taking a strong absolutely aware the steps business with of the challenges required lots of potential to realising that potential 16
Slide 18: Agenda for today
Agenda for today For personal use only Time Topic Session Led By 9.30 – 10.15 Q3 Sales & Introduction Grant O’Brien 10.15 – 11.45 Food Brad Banducci, Dave Chambers 11.45 – 12.15 Liquor Martin Smith 12.15 – 1.00 Lunch 1.00 – 2.00 General Merchandise Alistair McGeorge 2.00 – 3.00 Home Improvement Matt
Slide 19: Woolworths Food Group
For personal use only Woolworths Food Group ! Brad Banducci Dave Chambers Managing Director Director Woolworths Food Group Woolworths Supermarkets 18
Slide 20: Observations weeks in
Observations 10 weeks in For personal use only • A strong franchise - with good people, assets and capabilities • A clear strategic plan with significant potential • However, we have lost focus on our customers and this needs to be addressed with some urgency • What needs to be done is clear but it
Slide 21: Woolworths is a strong business franchise
Woolworths is a strong business franchise For personal use only We have frequent interaction with our customers • 14.6m customers shopping with us 1.3 times per week1 Customer • 500,000+ unique online customer visits per week engagement We know how our customers shop at a local level via our 8.5m Ev
Slide 22: We have a lot of white-space to grow
We have a lot of white-space to grow For personal use only Australian Food Spend by Customer Segment 100% of customers food spend Others Share 30% 24% 24% 20% 20% Woolworths Share 100% of 21% 34% 45% Woolworths Budget Mainstream Premium sales Customers Customers Customers SOURCE: Nielsen, ABS, Every
Slide 23: Our customers are not particularly satisfied with us
However, our customers are not particularly satisfied with us For personal use only Woolworths Customer Satisfaction Overall and by Fresh Department: February 2015 (%) 63 62 60 53 50 Overall Bakery Deli Meat Fruit & Veg customer satisfaction SOURCE: Voice of the customer, February 2015 22
Slide 24: No clear points of difference with our major competitor
We do not have any clear points of difference with our major competitor For personal use only Woolworths vs. Coles: F15 Q3 Brand Perception1 Value 100 80 Shopping Community 60 Experience 40 20 0 Inspiration Service Woolworths Coles Fresh Range SOURCE: Woolworths Brand Tracker (1) Percent of customer
Slide 25: Our plan of action is to get customers to put us 1st
Our plan of action is to get our customers to put us 1st For personal use only OFFER Improving our core offer so customers put us 1st Creating a lean, customer Customer centric 1st organisation Innovating model our offer to meet more of our customers’ EFFICIENCY needs GROWTH
Slide 26: How do we get customers to put us 1st?
How do we get customers to put us 1st? For personal use only Customer Supermarket Shopping Decision Criteria (% relative importance) Comm- Our Strategy 6% unity 9% Inspiration 9% Service Differentiate 15% Range, especially fresh 27% Shopping experience 34% Price/value Deliver Primary driver Location
Slide 27: Our customer proposition
Our customer proposition For personal use only Customer 1st Customers know Customers have a Customers perceive they get good consistently great Woolworths to have prices across their shopping experience the best quality and shopping basket across all touch points – range, especially in supermarkets,
Slide 28: Actions already started in the second half
We have already started to take action in the second half For personal use only • Invested $125m in lower prices Good Prices • Lowered online prices to match store pricing Great • Invested 58,000 team member hours per week focussed on priority areas Shopping Experience • Added extra ½ day of stock i
Slide 29: Improving our core offer is a critical precondition
Improving our core offer is a critical precondition to everything else For personal use only OFFER Improving our core offer so customers put us 1st Creating a lean, customer Customer centric 1st organisation Innovating model our offer to meet more of our customers’ needs 28
Slide 30: Customers need confidence in good prices
Customers need to be confident they get good prices at Woolworths For personal use only What our customers told us Actions since January Priorities • Woolworths needs more • Invested $125m in lower prices • Neutralise Coles and contain competitive prices Aldi on pricing • Removing ‘price irritants’
Slide 31: Improved pricing will grow items per basket and occasions
Improved pricing will grow items per basket and shopping occasions For personal use only Share of customer wallet ! Price per item Items per basket Shopping occasions Our Rising by Declining by Marginal growth performance in more than more than but significantly year to competition competition below
Slide 32: Customers should expect a great shopping experience
Our customers should expect a great shopping experience For personal use only What our customers told us Actions since January Priorities • Woolworths service needs to • Put 58,000 hours back in • Invest a further 63,000 hours improve stores at times when stores in stores next year busiest - focused
Slide 33: We are investing in our stores – quick wins
We are investing in our stores – quick wins For personal use only 32
Slide 34: Rebalancing investment in new versus refurbished stores
We are rebalancing our investment in new versus refurbished stores For personal use only Our Strategy 32 34 Continue to 22 25 25 21 17 open 20 – 30 Net new store 13 supermarkets per 8 7 6 openings annum in line with (1) -1 population growth -21 and network gaps (21) Increase refurbs Number of to 80+
Slide 35: Customers have high expectations in terms of range
Our customers have high expectations from us in terms of range For personal use only What our customers told us Actions since January Priorities • Have high expectations of us • Fruit and vegetables actions • Consistently deliver the to deliver the best Fresh and – Layout, pricing, ranging, freshest
Slide 36: Actions taken in fruit and vegetables
We have taken a number of actions in fruit and vegetables already For personal use only •Reinvested COGS savings in better prices We won’t be •Launch $1 specials beaten on price •Launch of Odd Bunch Great products •In-conversion Organics launch across total •Exclusive varietals & new products range
Slide 37: Improving the products customers value most
We are taking actions to improve the products that customers value most For personal use only Customer Research: Fruit and Vegetable Quality and Freshness Priorities SOURCE: Woolworths team analysis 36
Slide 38: Tailored customer ranging pilots: Long-Life milk example
Tailored customer ranging pilots are showing promising results: Long-Life milk example For personal use only Non-Dairy Cluster (e.g. Double Bay store) Increased range and space for non-dairy products – 92 SKUs Promising results with 3.9% sales uplift in Long- Powder Metro Cluster (e.g. Eight Mile Pl
Slide 39: Innovating our offer as customer needs change
Customer needs and shopping habits are changing, we are innovating our offer For personal use only Improving our core offer so customers put us 1st Creating a lean, Customer customer centric 1st organisation Innovating model our offer to meet more of our customers’ needs GROWTH 38
Slide 40: Innovating our offer is an important longer term priority
Innovating our offer to better meet our customers’ needs is an important longer term priority For personal use only What our customers told us Actions since January Priorities • They are increasingly time • Continued online innovation – • Continue to improve our online Delivery Saver, Website user e
Slide 41: Online customers reward us with more of their basket
Online customers reward us with more of their basket For personal use only Woolworths Online Customers’ Annual Spend +27% Average Store Customer Spend = 100 Online Store Before Online After Online ! SOURCE: Quantium 2014; Woolworths Brand Tracker 40
Slide 42: Creating a world-class online and mobile experience
We are creating a world-class online and mobile experience For personal use only Website1 Apple Watch app Lists Product View Store info (1) TAS launched 28/04; WA, QLD, SA, NT to launch on 04/05, and NSW, VIC, ACT to launch on 11/05 41
Slide 43: Significant white space in Food
There is significant ‘white space’ for us in Food if we can better serve more of our customers' food shopping missions For personal use only What’s my mission? Food For Main Shop Top Up Impulse Now/Later Online ! ! Premium ! ! Requires new ! ! products and ! formats for ! Who am I? Standard Worth $2
Slide 44: Partnering with local producers on fresh convenience foods
Woolworths is partnering with local producers to dramatically improve the quality and taste of fresh convenience foods For personal use only Example: Beak & Johnston Partnership • B&J’s “City Kitchen” production facility in Western Sydney opens May 2015 • Will employ 250+ people • Facility will make
Slide 45: Small urban food stores a growth opportunity
Small urban food stores represent an exciting incremental growth opportunity For personal use only Central Station Convenience Store Coogee Small Supermarket Thomas Dux Rose Bay Convenience Store 44
Slide 46: What is different this time? Organising for success
What is different this time? We will organise ourselves for success For personal use only Improving our core offer so customers put us 1st Creating a lean, customer Customer centric 1st organisation Innovating model our offer to meet more of our customers’ EFFICIENCY needs 45
Slide 47: Organising our business around delivering customer value
We are organising our business around delivering value to our customers For personal use only What our team/suppliers told us Actions since January Priorities • Customer is not a key • New customer focused store • Bed down the organisation and performance measure scorecard is being rolled-out custom
Slide 48: Store metrics and incentives reflect importance of customer
Our store metrics and incentives now reflect the importance of customer For personal use only Store Team Member Scorecard Metrics Customer Voice of Customer (33%) On-shelf availability Team Engagement Score Operations & People Safety (33%) Shrinkage Sales Financial (33%) Total Controllable Expenses
Slide 49: An organisation structure that improves accountabilities
An organisation structure that improves accountabilities For personal use only Woolworths Food Group ! Director Director Director Mng Director Woolworths Woolworths Woolworths Countdown Supermarkets Small Stores FoodCo Supermarkets Dave Chambers Michael James Steve Greentree Steve Donohue • Includes
Slide 50: We have opportunities to become more lean
We have opportunities to become more lean For personal use only Improve in-store processes Customer Streamline in-store production 1st (meat, deli, bakery) Better leverage in-store technology (e.g. checkouts) Current Improve end-to-end processes (e.g. shrink) cost base Store focused support function
Slide 51: Journey to get customers to put us 1st
We are on a 3 year journey to get our customers to put us 1st For personal use only Innovate our offer Improve our offer 2017 Excel on the fundamentals 2016 2015 “My Woolies makes eating & “A quality fresh food living well affordable & easy” What our “Woolworths is changing for experience at prices
Slide 52: Outlook for the Woolworths Food Group
Outlook for the Woolworths Food Group For personal use only • We need to earn our customers’ trust and are focused on doing so • We will make further investment in price, service and availability in FY16 and continue to remove waste from our operating model • Our investments will be carefully target
Slide 53: Questions
For personal use only Questions ! Brad Banducci Dave Chambers Managing Director Director Woolworths Food Group Woolworths Supermarkets 52
Slide 54: Woolworths Liquor Group
For personal use only ! Woolworths Liquor Group Martin Smith Managing Director 53
Slide 55: Overview
Overview For personal use only • Woolworths Liquor Group is a strong business with a track record of 17 years growth that has resulted in a $7 billion business and more than 1,400 retail stores • We are determined to extend our market leadership despite a low growth market through: - Meeting and ant
Slide 56: Woolworths Liquor Group is a 17-year Australian success story
Woolworths Liquor Group is a 17-year Australian success story For personal use only WLG Sales FY02-FY14 120 stores 648 stores 1,077 stores 1,355 stores 1,435 stores Pre-1998 2003-2004 2006-2008 2009-2013 2013-2015 1961 Woolworths LE Grog SA Taverner Hotel Group Woolworths opens 2 new My Dan Murphy’s
Slide 57: Low growth market with declining consumption offset by population
We are operating in a low growth market where declining consumption is being offset by population growth… For personal use only Per Capita Alcohol Consumption In Australia Absolute Consumption Of Alcohol In Australia (Litres Of Pure Alcohol; Adult) (Million Litres Of Pure Alcohol; Adult) 182 184 186
Slide 58: Increasing sophistication of Australian drinkers
…by catering to the increasing sophistication of Australian drinkers For personal use only Beer Wine Spirits Beer shoppers switching their Three of every 10 bottles of Whisky over $50 growing five baskets from more traditional sparkling wines sold are times faster than under $50 segments to craft be
Slide 59: Building a seamless relationship with customers
We have built a seamless relationship with our customers by… For personal use only 1 2 3 4 Addressing all Building a Participating Tailoring our our customers’ powerful online along the value range occasions proposition chain Understanding the Creating a set Building a Identifying that we different
Slide 60: Addressing all our customers' occasions
Addressing all our customers’ occasions 1 S t o re In For personal use only On Premise n t hly on op BY M Sh io O at Co tin nv Des eni s sion OccaBig thro ence Drivugh e up Clic ect Coll Top- k& Co W il n e nn in ff oi e - o e ls ss n n O dea O eu r Direct convenience 59
Slide 61: Building a powerful online proposition
Building a powerful online proposition 2 Online sales growth For personal use only Dan Murphy’s online is an award winning channel Dan Murphy's Food and liquor market • Online Retailer of the Year – 2013 • Best Online Retail Marketing Initiative – 2013 200% • Canstar Blue, Most Satisfied Customers 2
Slide 62: Building a powerful online proposition: capabilities and platforms
Building a powerful online proposition 2 Significant capabilities and platforms underpin our online proposition For personal use only Australia’s largest New Zealand’s largest Big brands, boutique & Australia’s largest Brand Australia’s leading fine small parcels of wine at wine and spirits retailer
Slide 63: Tailoring our range
Tailoring our range 3 Tailoring ranges store by store to suit customers For personal use only Understanding customer demographics and …which is delivering uplift in sales growth and shopping missions to tailor our range by store… margins for BWS stores 4% higher than non-tailored stores 4.0% 3.0% BW
Slide 64: Participating along the value chain: Pinnacle
Participating along the value chain 4 Pinnacle is the vehicle we use to deliver exclusive brands to our customers For personal use only Exclusive Distribution in Australia Exclusive IP or We have worked hard to We own the brand and We own the brand get exclusive rights to make it and someone else so
Slide 65: Participating along the value chain: selective investments
Participating along the value chain 4 With Pinnacle, we are able to selectively participate right back along the value chain For personal use only 13,500 tonne winery 25% share in 10.5m case Marlborough (Barossa) a brewery bottling plant Winery and Vineyards ! ! ! ! Dorrien Estate Gage Roads Brewery
Slide 66: We have many more opportunities to grow
We have many more opportunities to grow For personal use only 1 2 3 4 New stores Multi-channel Premiumisation New markets & lifestyle Significant and Digital remains Social trends are Summergate a evolving pipeline of fastest growing part creating strategic investment new stores planned of the marke
Slide 67: New stores
New stores 1 Continuing pipeline of new stores planned for both Dan Murphy’s and BWS For personal use only Woolworths Liquor Group store Current store network growth (net) 50 BWS Dan Murphy's BWS: 15 38 BWS: 355 DM: 47 BWS: 117 DM: 15 25 BWS: 92 DM: 13 BWS: 326 DM: 56 13 Planned new store growth BWS
Slide 68: Multi-channel
2 Multi-channel We will capture multi-channel growth through providing more choice for our customers For personal use only More range Better Delivery • Same Day • Next Business Day Online • Pick a Day options • Standard 2 – 4 days • ShipSmart Home delivery Click & • 2 hours • 7 days (back order) Col
Slide 69: Premium & lifestyle
3 Premium & lifestyle Premium and lifestyle offer further growth opportunity For personal use only Growth in Glass Spirits at premium price points Low Carb and Mid Strength Beer are demonstrates the propensity of shoppers to growing in popularity and gaining share trade up, especially during key eve
Slide 70: Overview
For personal use only Overview • Woolworths Liquor Group is a strong business with a track record of 17 years growth that has resulted in a $7 billion business and more than 1,400 retail stores • We are determined to extend our market leadership despite a low growth market through: - Meeting and ant
Slide 71: Questions
For personal use only ! Questions Martin Smith Managing Director 70
Slide 72: General Merchandise
For personal use only !! General Merchandise Alistair McGeorge Managing Director 71
Slide 73: Overview
Overview For personal use only • The Discount Department Store (DDS) sector has been resilient but needs to evolve • We have approached this business with an aggressive re-set posture • We are clear on how to build the new BIG W customer proposition and why we can win • We understand and are address
Slide 74: The DDS sector is resilient, but needs to change
The DDS sector is resilient, but needs to change For personal use only Sector Sales $Bn FY 09 Govt Stimulus Package 14 BIG W Kmart Target • The DDS sector will always 12 have a role as long as it evolves to meet customer needs 9 7 • The sector thrived in the 2000s driving categories that 5 were rele
Slide 75: Aggressive re-set posture for BIG W
For personal use only We have approached BIG W with an aggressive re-set posture People Cash Trading Test and learn capability 74
Slide 76: People
People The level of capability in BIG W has been significantly improved For personal use only A team with world The right The right class experience capability structure • Renewed Executive team with • Recruited people with re-set • Immediately reviewed 4 of 5 new to BIG W experience support functio
Slide 77: Cash
Cash Focus on cashflow For personal use only Stock Costs Capital • Reducing stock holding by over • Minimising costs through • No new stores unless already $100m through: committed - Lowering headcount - Creating Drop Zone space in all stores to clear non - Focussing on essential spend • Other capit
Slide 78: Trading Capability
Trading Capability Improving our ability to plan, buy, allocate and replenish in a more effective manner For personal use only Merchandise Systems Supply Capability Chain • Five month intensive • New merchandise system, • Increase in Group direct sourcing merchandise analytics capability Galaxy, imp
Slide 79: Test and learn
Test and learn We’ve already tested and proven a number of changes which we’re now rolling out across the business For personal use only Space Changes Back of House New Categories Online • Reduced space across • Redesigned processes • Preparing to seize share • New online platform Motoring, Hardware
Slide 80: The new BIG W and how we will bring it to life
The new BIG W and how we will bring it to life For personal use only Ambition: To be the number one choice for Australian families in general merchandise We’ll win by bringing back excitement and discovery to shopping 1 2 3 4 5 Broadest range Best offer of Great customer Newness Surprisingly of choi
Slide 81: Video
80 For personal use only Video
Slide 82: Broadest range of choice: nine destination categories
1 Broadest range of choice Nine destination categories will provide the broadest range of choice for core family customers For personal use only Apparel Childrenswear Intimates Party Toys Books Home Small Appliances Beauty 81
Slide 83: Creating true destinations in Fashion
1 Broadest range of choice Creating true destinations in Fashion For personal use only Apparel Childrenswear Women’s Intimates Childrensw Intimates Intimat ear es • Emerson becoming proven brand • Expanded Lee Cooper into Kids • Expanded Emerson Intimates range range July’14, sales $11M YTD August’1
Slide 84: Hardgoods destination categories
1 Broadest range of choice Hardgoods destination categories we can own with authority For personal use only Party Toys Books • 23 party stores in network with • Market leading share • Australia’s No. 1 book seller 63 to be rolled out by June’15 and • Lego exclusives • Launching Australia’s top 100 a
Slide 85: Developing categories with existing strength
1 Broadest range of choice Further developing categories where we already have strength For personal use only Home Small Appliances Beauty Intimat Boo esks • Launched Peter Morrissey Home • Contempo own brand • Launched BOE private label February’14, sales $6M YTD launched September’14, sales (good)
Slide 86: Good, better, best product
1 Broadest range of choice All ranges will have elements of good, better, best product For personal use only Best Better Good 85
Slide 87: Best offer of national brands
2 Best offer of national brands A wide portfolio of national brands, complemented with our own power brands For personal use only National Brands BIG W Own Brands More recently added Our price guarantee: Our price guarantee: Unbeatable value for money Unbeatable value for money 86
Slide 88: Great customer experience: visual merchandising
3 Great customer experience Bringing discovery and inspiration back to shopping through better visual merchandising For personal use only Womenswear Childrenswear Women’s Intimates We are creating a step change in customer The first three softgoods categories we have experience by: trialled are show
Slide 89: Visual merchandise changes across hardgoods
3 Great customer experience Now rolling out visual merchandise changes across hardgood categories For personal use only Toys Small Appliances • New layout with clear differentiation • Bringing brands and range alive between age groups, signage through better signage and fixturing and branded pop-out
Slide 90: New online offer
3 Great customer experience The new online offer will provide a seamless customer experience across all channels For personal use only BIG W Online Range • The customer experience will improve through: 50,000 At May 2015 - increased level of product By Dec 2015 39,000 - Drop Ship Vendor (DSV) 30,000
Slide 91: Newness & innovation: events
4 Newness & innovation A step change in events from September ’15 For personal use only ! • Events represents an unutilised opportunity in Australia. We plan to make BIG W the home of seasonal and special events • Creating shop in shop look and feel to make events come alive • Collaborating with ven
Slide 92: Surprisingly helpful service
5 Surprisingly helpful service Investing in service to make it easier for customers to buy For personal use only Clearing stock, better stock management and staff training will release more hours per store per week to reinvest in customer engagement in FY16 This will enable us to: • Re-energise our
Slide 93: Lowest price at all price points
Broadest range of choice Lowest price at all price points on the BIG W ladder For personal use only $24 $35 $19 Best Better $11 $24 $10 $5 $16 2 Pack Good $10 Our price guarantee: Our price guarantee: Unbeatable value for money Unbeatable value for money 92
Slide 94: Short term challenges
While we understand what we need to do to win, we recognise there will be short term challenges For personal use only Brand People Product Capital • The BIG W brand is • While we have improved • We are accelerating • We have the appropriate currently being refreshed capability through recent clearin
Slide 95: Overview
Overview For personal use only • The DDS sector has been resilient but needs to evolve • We have approached this business with an aggressive re-set posture • We are clear on how to build the new BIG W customer proposition and why we can win • We understand and are addressing the key challenges • We
Slide 96: Questions
For personal use only ! Questions Alistair McGeorge Managing Director 95
Slide 97: Home Improvement
For personal use only !! Home Improvement Matt Tyson Managing Director 96
Slide 98: Overview
Overview For personal use only • The rationale for entering the $45 billion market remains compelling • We have learnt a great deal and have adapted our model • We are making good progress on the activities outlined last August including: - Ranging - Value perception - Format evolution - Store netwo
Slide 99: Home Improvement market remains highly attractive
The Home Improvement market in Australia remains a highly attractive opportunity because of its size, growth and level of fragmentation For personal use only A large and growing fragmented market… Size of market and market share of players by category (FY13) Other (78%) 5% average $45b market annual
Slide 100: Masters & Home Timber & Hardware bring scale and coverage
The combination of Masters & Home Timber & Hardware (HTH) brings scale and coverage to compete in the Home Improvement market For personal use only We are quickly building a sizeable operation ... … covering all key segments of the HI market $M TBD 2,000 Masters Home, Timber $1,527 1,500 & Hardware
Slide 101: Four areas to enhance the Masters model
We have identified four areas to significantly enhance the start-up Masters Model For personal use only 1 2 3 4 Mix & Store Flow Range Authority Value Perception Store Roll-out ! ! ! ! Challenges Initial store layout too project - Some range gaps in Low customer value Quick initial roll-out to focus
Slide 102: Mix & Store Flow
1 Mix & Store Flow The new format has improved store performance by re-allocating space and enhancing flows and adjacencies for key categories For personal use only New store layout principles Examples of key categories • Re-allocated space and improved store category mix • Enhanced store flows and
Slide 103: Mix & Store Flow: layout changes
1 Mix & Store Flow The layout of key categories has drastically changed in the new format stores For personal use only Former Store Format 2.0 Format Impact Strong sales and Tool shop traffic improvement Strong margin Paint improvement driven by mix Flooring Perception c. +20% 102
Slide 104: Range Authority
2 Range Authority A comprehensive review of our range is well under way – new range will be progressively rolled-out in new and existing stores For personal use only Enhanced Range Additional Iconic Brands Comprehensive Roll-out Key Categories Reviewed Hardware c. 5,300 new lines Paint (net increase
Slide 105: Value Perception
3 Value Perception Masters recently launched national campaigns with positive impact on traffic, sales and value perception For personal use only Campaigns Impact on Traffic & Sales 1 • +90% weekly sales in Paint interior paint in first 3 weeks campaign • Average interior paint sales (one-off, per s
Slide 106: Store roll-out
4 Store roll-out Masters will have 59 stores open by the end of FY15, including 22% new format stores For personal use only New Stores FY15 (new 2.0 format, including By end of FY15 5 stores without new range) 59 stores 22% new format 1 Existing Stores FY15 1 ! By end of FY16 c. 50% new format 1 Per
Slide 107: Heavy cannibalisation in Victorian stores is unwinding
4 Store roll-out Heavy cannibalisation impact in Victorian stores is unwinding For personal use only Masters stores in Melbourne Year on year compared average sales growth (VIC vs Others) In the first three years, Masters stores in Store openings 1: high cannibalisation impact causing lower sales Me
Slide 108: Scaled down roll-out plan
4 Store roll-out We have scaled down our roll-out plan in the coming years to focus primarily on high potential locations For personal use only Rationale Decision Impact • Masters now has a good • Decision to re-focus roll- • Number of stores opened understanding of future out plan until the success
Slide 109: New talent and developed people to grow capabilities
We have attracted new talent and developed our people to grow our capabilities For personal use only Increased Home Improvement capability Matt Tyson David Walker Dion Workman Gillian Davie Dean McMillan Talent Managing Director GM Finance GM Marketing GM HR Head of Format Development Acquisition Cu
Slide 110: Demonstrating improvement from the new model in FY16
We are implementing a large number of changes and will be able to demonstrate improvement from the new model in FY16 For personal use only FY15 FY16 May Jun 22% of the fleet will have new 2.0 format by New format end of FY15 stores roll-out 5 New 2.0 stores (c. 50% by the end of FY16) 3 Retrofit sto
Slide 111: Overview
Overview For personal use only • The rationale for entering the $45 billion market remains compelling • We have learnt a great deal and have adapted our model • We are making good progress on the activities outlined last August including: - Ranging - Value perception - Format evolution - Store netwo
Slide 112: Questions
For personal use only Questions Matt Tyson Managing Director 111
Slide 113: Enablers of Competitive Advantage
For personal use only !! Enablers of Competitive Advantage Grant O’Brien, Penny Winn, Emma Gray & Matthew Stanton 112
Slide 114: Overview
Overview For personal use only • The scope of Woolworths’ retail portfolio allows us to secure productivity and growth opportunities that are not available to our competitors. It also provides the basis for superior economic returns • Our model allows us to create opportunities through - Leveraging
Slide 115: Initiatives to deliver the next step-change in productivity and growth
An exciting set of initiatives underway to deliver the next step-change in productivity and growth For personal use only Home General Food Drinks Improvement Merchandise Hotels A Click & Collect network B Mercury 2 C Data A B Retail Services C D Fuel for Growth & Support D 114
Slide 116: Click & Collect: largest domestic online retail business
A Click & Collect We have built the largest domestic online retail business in Australia For personal use only Spend per customer cross-brand and Online sales cross-channel +110% Customers shopping Online sales +25% +19% 2 brands $1.5b 1,459.4 +50% +50% 1,226.6 $1.2b +33% +42% +89% Customers 819.5 $
Slide 117: Cross-banner Click & Collect network
A Click & Collect We have built a unique cross-banner Click & Collect network as a platform for further growth For personal use only Click & Collect Locations1 1,000 1000 900 900 788 789 711 711 3 3 3 208 207 400 600 500 800 708 581 135 500 400 708 581 400 200 135 FY13 FY14 FY15f FY16f FY17f FY13 FY
Slide 118: More than one third of people stay to shop in-store
A Click & Collect More than one third of people stay to shop in-store For personal use only % Online Sales as Click & Collect (FY15) C&C Customer Measures 40% – 50% 30% – 50% >30% of C&C customers stay >30% of C&C to shop in store C&C Net Promoter with basket customers stay sizes ~50% Score +36 to s
Slide 119: Partnership with eBay
A Click & Collect We are open to new ways of working to satisfy our customers’ changing needs For personal use only Our partnership with eBay allows us to • Accelerate the scale-up of our Simply Collect platform • Attract new customers into our stores + + • Jointly learn and partner with other leadi
Slide 120: Mercury: Supply chain excellence
B Mercury 2 Supply chain excellence For personal use only Outcomes from Mercury 1 2000 vs 2006 The original Mercury CODB 2.6% pts of sales program provided a significant competitive Outbound service levels 4.5% pts advantage for Supermarkets Store out-of-stocks over the last eight years 5.0% pts Wit
Slide 121: Mercury will be global best practice
B Mercury 2 Mercury 2 will be global best practice For personal use only Cross-brand End to End Strategic principles Growers Fastest fresh Step change in Vendor collaboration vendor capability International flow Shelf ready devices Network Enabling range Less manual International consolidation/ grow
Slide 122: Mercury will drive network productivity and availability
B Mercury 2 Mercury 2 will drive network productivity and market leading availability For personal use only Wave 3 New infrastructure and systems (FY18+) Wave 2 Wave 1 Build new capabilities • Customer insights and data driven Optimising today (FY16-FY18) demand (FY15-16) • Network infrastructure to
Slide 123: Tailored customer ranging will step change productivity
B Mercury 2 Tailored customer ranging will step change store productivity and customer offer For personal use only New Network New infrastructure and systems (FY18+) New Technology (FY18+) • Leveraging the new network to Build new capabilities (FY16-FY18) ensure we have capacity to Tactical expand r
Slide 124: Data: Quantium analytical backbone
C Data Quantium contributes a deep analytical backbone to decision making For personal use only Data Software Web-bot Software Unstructured data tools team (50) Bespoke software Bespoke Auto Telco Other… software Analytics Customer Market & Analytics Customer Financial Decision Industry Competitive
Slide 125: Insights to respond to and predict customer needs
C Data Our insights allow us to respond to and predict customer needs more effectively For personal use only 50% of Woolworths Actual transactions (baskets) 67% captured by EDR cards of Woolworths behaviour sales ($) captured vs. Claimed behaviour by EDR cards 8.5 million Credit card registered Ever
Slide 126: Better insight shifts capability and culture
C Data Better insight helps us shift internal capability and culture to serve customers better… For personal use only On shelf Tailored availability Forecasting customer effectiveness ranging More accurate Better network replenishment planning Improved More effective pricing and marketing promotions
Slide 127: Data enables more informed decisions
C Data … and make more informed decisions For personal use only Postcode 2070 Postcode 2066 (Lindfield) (Lane Cove) 18% $36m 31% $135m Postcode 2067 Postcode 2067 (Chatswood) (Chatswood) 15% $66m Total Lindfield 25% $50m Total Lane Cove Residents’ Retail Residents’ Spend Postcode 2000 Retail Spend $
Slide 128: Tools to co-create with suppliers
C Data With Quantium we have also developed tools to co-create with our suppliers For personal use only • User-friendly, intuitive and interactive • Suppliers have full visibility of categories for the first time – product level, store level, and online • Access to the dataset of 8.5m Everyday Rewar
Slide 129: Video
128 For personal use only Video
Slide 130: Fuel for Growth: approach to cost
D Fuel for Growth Our approach to cost, which we established in July’14, aligns to the new market context For personal use only • The retail landscape is evolving as consumers’ Woolworths' Lean Retail Model preferences change: - Offers focused on value and distinctive, OFFER Context tailored experie
Slide 131: Cost reduction program with over $500m benefit planned
D Fuel for Growth This focussed program is driving cost reduction across the business with plans now in place to deliver in excess of $500m benefit For personal use only Rigorously managed through stage gates and delivery cadence, using dedicated Transformation Office tracking software (Delivery Off
Slide 132: Overview
Overview For personal use only • The scope of Woolworths’ retail portfolio allows us to secure productivity and growth opportunities that are not available to our competitors. It also provides the basis for superior economic returns • Our model allows us to create opportunities through - Leveraging
Slide 133: Questions
For personal use only !! Questions Grant O’Brien, Penny Winn, Emma Gray & Matthew Stanton 132
Slide 134: Group Financial Overview
For personal use only !! Group Financial Overview David Marr Chief Financial Officer 133
Slide 135: Overview
Overview For personal use only • Strong financial position providing flexibility to address current performance challenges • Strong cash generation with $20bn of operating cash flow to fund new businesses, capex, dividends and property development since the beginning of FY08 • Disciplined capital al
Slide 136: Attractive financial profile and balance sheet strength
Attractive financial profile and balance sheet strength despite investment for future growth For personal use only Key Financial Metrics FY08 FY14 CAGR1 • Solid growth profile with leading market positions Sales ($m) 47,035 60,773 5.2% • Strong cash generation EBIT ($m) 2,529 3,775 8.7% • Scale and
Slide 137: Delivering sustainable returns to shareholders
Delivering sustainable returns to shareholders Sustainable sales growth For personal use only driving robust earnings growth Strong cash realisation Free cash through flow to fund working dividends capital SHAREHOLDER management and capital VALUE . management Disciplined capital allocation to best r
Slide 138: Sustainable sales growth driving robust earnings growth
Sustainable sales growth driving robust earnings growth For personal use only Group Sales and EBIT (before significant items) 70,000 3,800 Group Sales • Long-term track record of Group EBIT strong sales growth driving EBIT growth 52,500 2,850 • EBIT growth has averaged CAGR: 8.7% 6% from FY10 despit
Slide 139: Strong cash realisation through working capital management
Strong cash realisation through working capital management Earnings converted into operating cash flow, we see further opportunity in Net Investment in Inventory over medium term For personal use only Cash Realisation 3,600 130% Net profit pre depreciation and amortisation Operating Cash Flows 115%
Slide 140: Disciplined capital allocation: capex breakdown
Disciplined capital allocation to best returning opportunities Capital investment reflected evolving property network strategy with recent focus on new stores For personal use only Capex Breakdown FY08 – FY15F1 New Stores Refurbishments/Extensions Home Improvement Other 100% 35% 34% 34% 36% 35% 38%
Slide 141: Disciplined capital allocation process in place
Disciplined capital allocation to best returning opportunities Disciplined capital allocation process in place For personal use only Capex Principles Enhancements Implemented or Underway Medium-term Implications Alignment to • Closely align capex to best strategic opportunities • Skew to Australian
Slide 142: New stores continue to provide strong returns
Disciplined capital allocation to best returning opportunities New stores continue to provide strong returns on capital For personal use only Australian Supermarkets’ Sales Per Sqm – New Stores Vs. Established Stores • Sales per square metre has Fleet average been impacted by: - Higher relative numb
Slide 143: Free cash flow to fund dividends and capital management
Free cash flow to fund dividends and capital management Strong free cash flow despite net property investment of $2.7 billion from FY08 For personal use only Cumulative Free Cash Flow: FY08-FY141 30,000 • Group has generated $20bn of operating cash flow from beginning of FY08 22,500 • Operating cash
Slide 144: Strong dividend growth with 70% payout
Free cash flow to fund dividends and capital management Strong dividend growth with 70% payout balancing funding for growth and shareholder returns For personal use only Dividend History 3.0 • Consistent dividend growth In-specie underpinned by solid 2.3 Buy Back earnings growth and dividend Final p
Slide 145: Balance sheet strong but little headroom under credit ratings
Free cash flow to fund dividends and capital management Balance sheet remains strong but little headroom under current credit ratings For personal use only Fixed Charges Cover (S&P) 3.5 Maximum threshold 2.6 • A- (S&P) and A3 (Moody’s) in place since 2001 and 2005 Times 1.8 respectively 0.9 • We hav
Slide 146: Debt profile with staggered maturity profile
Free cash flow to fund dividends and capital management Debt profile is carefully managed with a staggered maturity profile For personal use only Debt Maturity Profile – Six Month Intervals 800 2014 Syndicated loan 2011 US144A 2010 US144A 2005 US 144A • Our hard maturity debt is well WOW Notes II US
Slide 147: Overview
Overview For personal use only • Strong financial position providing flexibility to address current performance challenges • Strong cash generation with $20bn of operating cash flow to fund new businesses, capex, dividends and property development since the beginning of FY08 • Disciplined capital al
Slide 148: Questions
For personal use only Questions David Marr Chief Financial Officer 147
Slide 149: Woolworths Limited contact details
For personal use only Woolworths Limited 1 Woolworths Way Bella Vista NSW 2153 ! woolworthslimited.com.au