Coles Group Limited (CLEGF) Q1 FY2026 Earnings Call Transcript & Summary

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 Coles' first 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, 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 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 and Digital Officer; and Claire Lauber, 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 Supermarkets, 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 Grill'd Retail range and Coles Pistachio Spread, which is already one of our top 10 selling spreads. We achieved our highest level of monthly availability since pre-COVID 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 CFC 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 Liquorland 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, Supermarkets 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 at home 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 two 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, Leah, 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 Aldi, Chemist Warehouse? I'm just curious around how Coles is managing a more promotional Woolworths and one 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, Shaun. 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 of mind 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 wary 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.

Your next question comes from Tom Kierath with Barrenjoey.

Just one 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 out in a bit more detail, please?

So this might be a good one for Claire 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 CrowdStrike 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 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, one seemed to one retailer has got it, the other one doesn't. You've called out that your delivering in full on time or defect 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 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 up the ante on ambition internally and I get a bit more pressured. So thank you very much for that. 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 full 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 accounts and it's freeing up the store teams and it's freeing 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 CFCs 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 peak 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 floods 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's 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.

Your next question comes from Adrian Lemme with Citi.

Leah and team, I was interested that the exclusive to Coles sales are growing a little bit weaker than the Supermarkets sales ex tobacco. So I was just 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 seen in the quarter is continued strong promotional activity from some of the proprietary brands. So that's been good in terms of driving top growth and good for customers, but does as we know it can impact our own brand performance. Really pleasingly, Coles Finest 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 drives 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 Finest. 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 some really strong brands through Ultra and CUB. 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.

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 to neutralize some of what Woolworths is doing in terms of their investments, which 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 usual 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 emergency action. So for those customers where they live a lot closer to a competitor store to us, that convenience 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 like a 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 Coles 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 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 Dollars off shopping 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 by any chance? Is one 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 two 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.

Leah and team, a bit of a follow-on on the CFC, obviously, a positive signal to see that you've expanded the customary there and gone to the same day in Melbourne. Just be keen 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 it. Was that right?

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

Yes, sure. So we're certainly seeing strong growth in the CFCs 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 CFCs. And the reason for that is the experience that customers get through availability, through extended range through increased freshness of the orders. So I'd say all the indicators of what we're seeing through the CFCs 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 CFCs, 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 Marquee.

Leah, can I ask a question around online? Maybe just stepping back a little bit. Obviously, great e-commerce sales growth of circa 28%. 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 growth. 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 CFC volumes have really helped us to drive some of that volume growth from the store-based pick into the Click & Collect and rapid deliveries, which is fantastic. I think the question on where the penetration is going to 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 CFCs 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 are 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 only one thing I would add to that comment is, pleasingly, when you look at the top line growth ex tobacco of 7%, 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 & 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 Click & Collect percentages.

Your next question comes from Richard Barwick with CLSA.

Just a question on the CFCs again and 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, then sort of try it with 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 CFCs because, as I mentioned, earlier in response to Caleb's question, we know when customers are shopping there 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 us 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 those CFCs?

So we try ourselves on being able to have our full range offered through the CFC, which is one 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 try 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 ranges that currently sits in the CFCs.

Your next question comes from Ben Gilbert with Jordan.

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 park because you're curating 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 Woolies 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 where there has obviously been some quite large cuts in terms of ranging. China is a bit in there, but just effectively how you're planning for if we do see this upswing in behavior as 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 to 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 time 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 during 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 friends, 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 Anna 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 store-specific 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 supplied?

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 the old manual world.

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 troughs 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 fill, which is store ramp. So that's another efficiency benefit that we get out of it as well.

Great. And you're sort of at the beginning of the journey, I suppose, like if you've done 70 of the 200-odd sites, you 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 Phillip 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, has 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 it 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. There used 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], Shaun. 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 range, 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 and 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 off 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 Vintage Cellars and First Choice stores, what sort of uplift should we be banking on -- should we be factoring in? I think you mentioned Vintage Cellars has been pleasing but 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 Cellars conversions to Liquorland Cellars have performed probably ahead of where we expected them to be.

[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 CFCs 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 will not put those into Sydney, but that is certainly the plan. We're just trying to test it and refine it in one market. And then I think more broadly, 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 range. And we are really focused on being the place you come for inspiration for entertaining at home as we go through this period. Our Coles brand single smoke TAM 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 Coles Finest Boneless Chicken, which is stuffed Prosciutto-Wrapped d'Affinois 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.