Wesfarmers Limited (WES) Earnings Call Transcript & Summary

Well, welcome to everyone that's attending here today in person, but also to everyone that's joining us online via the webcast. As I said, out of Preston, my name is Mike Schneider, and I have the privilege of being the Managing Director of Bunnings. And thank you so much for the opportunity of speaking with you today, and we are incredibly pleased to have had such a strong response to the day, both here physically and also online. We are really proud of our stores and our team, and we're really happy to take all of you that are in the room today through our Preston warehouse earlier, and we really hope you enjoyed the visit and spending time with some of our amazing team. So we're going to start on Slide 2. I'm joined here today by my executive leadership team, and you're going to hear from a number of those: Rachael McVitty, our Chief Customer Officer; Ryan Baker, our Chief Operating Officer; and Genevieve Elliott, who's our Chief Information Officer. And there'll be plenty of time at the end of today for questions. So we'll move to Slide 3. Last year, we marked a special anniversary as we celebrated 30 years of our iconic warehouse format. And whilst our business has grown and matured over the last 3 decades, there is an incredible opportunity to continue to drive sustainable sales and earnings growth over the long term. This includes expanding and innovating our offer to remain relevant, optimizing space through ranging and technology, more deeply personalizing the experience for our customers and improving labor productivity right across our business. The success of our category expansions and space management trials have been really pleasing and have laid a really great foundation for the years ahead. We continue to see a strong runway of growth across our commercial business as we find better ways to meet the specific and the tailored needs of our builders, trades and organizations customers. Our investments in people, technology and range position us really well for the next phase of the housing construction cycle. Over the last 5 years, we've fundamentally transformed our tech capability. We've done this quickly and with a really disciplined approach to capital allocation and the impact to the organization and also for our customers has been really profound. These investments in digital and data continue to drive a better customer experience across all of our channels, allowing us to tailor and personalize our offer based on actionable insights. It also unlocks significant productivity opportunities as well as our ability to deliver our Retail Media program at scale, and the team will share more detail on this later in the session. Driving deeper on productivity, the resilience and sustainability of the business model is underpinned by our relentless cost discipline and focus on keeping things simple right across the operating model. We've achieved substantial structural cost reductions in recent years through investments in technology and process efficiency, and there's plenty to share on that today. We'll turn now to Slide 5. The sustainable success of our business depends on our ability to create value for all of our stakeholders. For our customers, we're unwaveringly committed to consistently delivering the lowest prices, the widest range and, of course, the best experience, while continuing to evolve to meet the ever-changing needs of our customers. Never more so than at present, we understand that this is integral to brand trust and credibility. For our team, providing a safe, inclusive and rewarding workplace is not only the right thing to do, but it enables the team to deliver world-class service. We're proudly a house of brands, and we foster collaborative and mutually beneficial long-term partnerships with a diverse pool of global and local suppliers. We partnered with around 2,000 suppliers, 1,500 of those suppliers from their businesses here in Australia and also New Zealand. And being a meaningful contributor to the local communities we serve is core to our DNA. It provides -- our team provides support for tens of thousands of community activities every year. Put simply, the way we describe it is, we live here too. And finally, when these elements come together, it allows us to generate consistent superior financial outcomes for our shareholders. We'll turn now to Slide 6. Our sustained success over the past 3 decades has been built on delivering this value and staying disciplined to our strategic pillars. Our commitment to offering our customers the lowest price every day is core to our offer and also our low-cost operating model. We offer the widest range comprising of what is now close to 300,000 home, commercial, and lifestyle products in our in-store, online and marketplace offers. Our offer is diverse. It caters to both consumer and commercial customers for essential maintenance and repairs as well as for more substantial projects. And we strive to deliver this range by offering our customers the very best experience every day. At Bunnings, we employ close to 54,000 team members, many of them have deep trade or industry experience. And our investment in our team, digital channels and supply chain capabilities enable us to fulfill this commitment to our customers, regardless of the channel in which they're engaging with us. We'll turn now to Slide 7. Our unique team and culture and enduring source of competitive advantage. This starts with an unwavering focus on safety and inclusion. Our unique enterprise agreements enable us to provide industry-leading benefits and development opportunities that allow our team to put down roots and grow and thrive in the organization. All of this feeds our culture of empowerment and high performance, which enables us to deliver and evolve our business and drive strong execution across the entire offer. The high retention of our permanent team offers a genuine cost of doing business advantage. We also embrace the role we play in engaging and assisting the communities in which we serve. Whether it's through the thousands of community barbecues raising funds for local groups every weekend, the partnership with larger organizations like the Good Friday Appeal, Share the Dignity or the Red Shield Appeal, we strive to make authentic and meaningful contributions to the communities our team live and work in. From a sustainability perspective, we've delivered on our ambition to source 100% renewable electricity across our business, and we're also really well advanced in our journey to achieve Net Zero Scope 1 and 2 emissions by 2030. Turning now to Slide 8. Our commitment to our team and our local communities was demonstrated in recent weeks as we've navigated the profound impacts of ex-tropical cyclone Alfred. At the height of the weather event, we had more than 40 sites closed between the Sunshine Coast and Grafton, with many team members and suppliers impacted across the region. Over the course of the weekend, as the conditions change, our team worked to safely reopen sites, many with adjusted trading hours to ensure that we could provide customers with access to the essential products they so desperately needed. We work closely with our suppliers to ensure stock flow of essential items and ensure our local communities could prepare and respond to the event. Our local leadership teams also provided varying levels of support for our team members that were impacted, including financial assistance and natural disaster leave, if needed, as well as access to counseling. At the community level, our stores worked alongside local community groups and emergency services, providing product donations access to essential supplies and gift cards. Last Friday, our nationwide community barbecue saw our teams in stores right across Australia run barbecues. We raised over $285,000 for Givit, who are managing the donations of essential goods and services for those communities that have been impacted. Turning to Slide 9. This commitment to our team and local communities comes together with the other elements of our model to drive long-term value for all stakeholders and deliver strong and sustained financial outcomes for our shareholders. Since the inception of the Bunnings Warehouse model back in 1994, we've delivered uninterrupted revenue and earnings growth. To illustrate the magnitude of this growth, we recently reported a half year revenue result of over $10 billion. This represents a comparable revenue result for the entirety of FY '16, and it was a similar story earnings-wise. Now to Slide 10. The other enduring feature of our model is its ability to innovate and evolve allowing us to continually expand the addressable market in which we participate. Our business today is clearly more diverse than back in 1994, but it reflects the expansion of our offer and our formats over this time. So today, the addressable market we see is around AUD 110 billion across Australia and New Zealand, split broadly evenly between our consumer and commercial businesses. The market is growing through new and expanded product ranges, categories and services, along with new formats and channels across online, on site, in home and of course, in store. It earns us the right to be chosen by our customers more often as well as attract new customers to the Bunnings business. Turning to Slide 11. Competition has never been stronger or more diverse. The playing field spends geography, product assortment, formats, channels, including traditional hardware, big box, specialty retailers and of course, pureplay online, which continues to grow strongly, led by international players. What's important for us to recognize is that if a customer is building or renovating at their home, they can shop for literally everything at Bunnings right from the front gate to the back fence. But equally, they can shop for nothing at all. We believe that this choice is really important and great for customers and it inspires us to relentlessly improve our offer every day to win our customers' trust, and to be chosen for their project. We'll turn now to Slide 12. Our market is underpinned by strong long-term fundamentals, many of which are countercyclical. The Australian and New Zealand populations continue to grow. This growth is further accelerating demand for housing, which, as we all know, remains chronically undersupplied. For those households who own their home, demand for repairs, alterations, addition activity remains strong, and it continues to grow. Lifestyle and demographic trends present changes to housing composition and requirements, which create opportunity for us to evolve our ranging and our service offers accordingly. And finally, the pace of technological innovation presents opportunities for us to participate in new categories that didn't exist 10 or even 5 years ago. Moving now to Slide 13. These market drivers and the diversity of our offer create a resilient business model that delivers sustained growth through all phases of the economic cycle. By investing in our offer, better meeting the needs of our commercial and consumer customers as well as driving productivity, we've delivered resilient sales and earnings performance. This resilience was illustrated in recent years where we've continued to grow despite a number of trading headwinds that have seen most of our global peers who we deeply respect and admire contract. Turning to Slide 14. Before I hand to the team, I'd like to share some perspectives on how we think about the significant opportunity in terms of space and space optimization. We've had a lot of success over many years of improving our return on space, and we see space optimization as a material opportunity for Bunnings in the future. In the last decade, sales and earnings have grown well ahead of space growth. From FY '15 to FY '24, we delivered a 99% increase in sales while space grew by just 27%. This was a result of relentless focus on category overhauls to ensure the strongest possible offers for our customers with new categories, category expansion and ranging optimization. The significant investments into digital and personalization see our online penetration growing week-on-week. And lastly, we've grown overall sales density as well as gross margin return on space, and we're accelerating these opportunities. This acceleration is enabled by our more recent investments in core space planning capability. This capability is powered by tech and data that provides us with a lot more sophistication to determine ranging layouts and spacing. This provides the ability to tailor ranging to local catchments and refine ranges for our smaller stores. The range refinement in our smaller stores is delivering growth through higher sales of core ranges while leveraging our online offer for the wider product needs of our customers. Turning to Slide 15. Despite these improvements over the last decade, we know from our relationships with global peers that the space opportunity ahead of us does remain significant. While the slide here illustrates this opportunity in terms of sales density, it's important to acknowledge the significant differences in local market characteristics and operating models that go a long way to driving some of these outcomes. And similarly, we don't intend to narrowly fixate on a single metric like sales per square meter. If we did that, we may not always make the best decisions for long-term shareholder value creation. And I thought I'd sort of build that out this morning with a couple of examples. We're starting Sydney with our Ashfield warehouse. Ashfield came into the family in 2001 with the Howard Smith acquisition. And for many years, it delivered one of the highest sales density outcomes right across our network. And whilst that's a great outcome, it also plays substantial pressure on our store operations team and it also restricted our ability to deliver a fantastic customer experience. So in 2022, when we opened our small format store down the road in Rozelle. It allowed us to bring a more convenient offer to our customers in the inner-west of Sydney, but also relieve some of the pressure on Ashfield while driving absolute sales and earnings growth for the business. And unsurprisingly, now, both stores have increasing sales and sales densities. [ Wallace ], the microphone? My apologies if someone loses the people online. I could do a stand-up comedy act, if you want. Do you want to just give me a handheld? I can work off a handheld, if you want. [Technical Difficulty] Can they hear online? They can still hear. We're back. All right. So if I keep going on sales density for a moment. The second example we had is our approach to new stores in growing catchments and the way that their space grows over time. And I thought I'd use Marsden Park, also in New South Wales is a good example of that. So when we opened that store 10 years ago in 2015, the surrounding catchment in Sydney was still expanding out in terms of housing growth and density. So we're one of the first major retailers to establish a presence in that local market. And since then, sales per square meter have increased by over 110%. The growth has been enabled by the growing and maturing catchment in that part of Sydney as well as our customers becoming more familiar with our stores. And likewise, the story is benefiting in that time from our investments in new and expanded ranges, improvements to our digital offer and better commercial capabilities. So for me, that's been a really good investment that's been driven by long-term thinking. But examples aside, the reality is that there's an enormous upside in working space harder, and we are actively going after that. Using our investments in space planning technology, merchandise planning and visual merchandising capabilities, they're very much now a core part of our growth agenda. And examples like the tool shop renewal that some of you saw today and our expansion into automotive are showing sustained uplifts with the transactions and basket sizes lifting, while the assortment choices by our category teams are delivering very strong uplifts in inventory productivity. Complementing these with deeper personalization means our customers are learning about these faster and engaging in these categories more deeply, and we're seeing this through our customer and sales data. I'm now going to hand you over to our Chief Operating Officer, Ryan Baker, to take you through some more specific examples of how we're enhancing the offer. He will also dive more deeply into how we're driving space harder at both the micro and macro [Technical Difficulty]

Thanks, Mike, and thank you, everyone, for your time today. I'm really pleased to have the opportunity to share an update [Technical Difficulty] We're always looking for new ways to innovate, expand and launch new product ranges in a way that's customer-led and informed by data. I'll expand on this later, but our investment in space productivity and optimization over the past several years has given us the opportunity to think more strategically about how we design, curate and expand our offer both in stores and online. This has allowed us to bring new categories and ranges to our stores, and we've got a strong pipeline of opportunity ahead. By way of example, our smart home offer continues to resonate strongly with customers. We're continuing to refresh our offer with a focus on smart security and smart door locks, anchored by improvements in this technology. Since the launch of our expanded pets range in 2023, the offer has continued to evolve and expand through new accessories and pet food office and is delivering strong sales growth year-on-year. For our customers in regional locations, we're actively exploring -- oh we're back. We're actively exploring product development in the rural category, and you all have seen firsthand earlier today the expanded offer we're rolling out in the automotive space. Likewise, our new offers across EV charging and household renewables are an exciting entry into these categories that support our customers, reduce their household energy bills and play our part in the energy transition. These are just a few examples of our opportunity and progress, and there are many more in our pipeline over the next 5 years. Over to Slide 18. Mike mentioned the scale of our addressable market earlier. Within that market are many key categories where we know we have more opportunity to participate and bring more choice to our customers. From humble beginnings, we've grown our kitchen range and service offer over many years, and have been able to make affordable kitchen renovations a reality for so many Australian and Kiwi households already. However, we know there are large customer segments within this market who we don't currently serve well. And we're investing in product innovation and more seamless design and installation experience to better meet their needs. Looking at plumbing, and we're continuing to expand our offer and introduce market-leading brands that resonate with plumbers, such as Vinidex, Brasshards, and SharkBite. We have increasing stock depth of key lines to ensure that plumbers can purchase the products they need in the quantities they want supported by our extended trading analysts. Our electrical and lighting range presents an opportunity to serving the needs of our customers. Technology and energy use is rapidly evolving, both inside and outside of the home. Energy-efficient options are an increasingly important part of our offer, while we're positioned to adapt to a lighting standard changes by having an extensive offer across a wide range of styles and price points. Turning to Slide 19. I mentioned our Pets expansion earlier. When we launched in 2023, Pets was the biggest category expansion in 2 decades. We committed to a significant increase in our pet range across bedding, toys, accessories and food, going from a small assortment to over 800 products across both leading brands and our own brands. Our offer has brought more choice and value to customers through bulk pack sizes and compelling everyday low prices across the range. The offer is clearly resonating with our customers and driving new customers to our stores. And we haven't stopped there. The strong initial sales performance has continued to grow as we further evolved and expanded our initial offer since launch. Over to Slide 20. And it's important to emphasize that it's not always about new ranges. We've had a relentless focus on driving growth by evolving our offer in some of our core categories to remain relevant to both consumer and commercial customers. The work we're doing in tools is a great example of this. Since last year, we've completely reinvigorated our tool shop layout, ranging and displays to bring a more compelling offer to our consumer and commercial customers alike. Our space optimization capability will allow us to unlock over 1,600 additional bays and range approximately 1,500 additional SKUs all in the same tool shop footprint. This makes better use of our space in store, taking advantage of our vertical space by using higher racking and showcasing our leading brands through branded fixtures. The customer response and associated sales uplift from our completed stores has been compelling, and we're already rolling out the concept to our wider network. Over to Slide 22. Those who joined our store tour earlier will have seen that our paint department is one of our core categories located in the middle of many stores. We're always working to ensure our paint ranges are the best in the market and bringing innovation to our customers. We recently reintroduced the iconic water range to our offer across over 250 stores. The response from our customers has been overwhelmingly positive. The pretended range is making life easier for our customers and already driving better productivity through our paint department. Beyond this, we're continuing to explore opportunities to expand our trade paint offer. Over on Slide 23. And looking ahead, we have a strong pipeline of category innovation. As you saw this morning, our expanded automotive assortment brings a compelling range and value to the category, including leading brands such as Armor All, Meguiar’'s, and Nulon. Our national rollout commenced this month, and we're progressing well to have all stores completed before Easter this year. Again, it's our investment in space planning that's enabled us to capitalize on this opportunity by reallocating space from the adjacent flooring department to bring the offer to our customers and unlock a higher return per bay. Turning to Slide 24. Energy & Renewables is another great example of our ability to respond to changing customer needs and preferences. We know we're already deeply connected with our customers' homes and they've told us we play an even more meaningful role through this category. We're pleased to be launching an initial offer of EV charging and household renewable solutions and also rolling out a fleet of EV chargers in our car parks to provide greater convenience for EV owners on the go. While it's early days, we're also developing a deeper offer for our commercial customers as well as innovative finance options for households. This is a really big opportunity. And for us, it's full steam ahead. Turning to Slide 25. Complementing this category innovation are a range of exciting initiatives to drive growth and improve our customer offer. As a house of brands, we're committed to giving our customers access to the leading brands in each and every category. Our portfolio of more than 40 owned brands such as Mimosa, Matador and Trojan allow us to complement these leading brands by delivering exclusive market-leading product innovation at compelling price points. As a customer-obsessed business, we know that changing levels of DIY capability continue to support demand for our suite of over 50 service offers from designing, delivering, assembling or installing a customer's product purchase, we're making it easier than ever for our customers to complete their project regardless of their DIY confidence. We're also growing our supply and in-store offers for commercial customers with windows and joinery being two great examples of this. And finally, our marketplace offer continues to grow rapidly. We've seen incredible growth in GMV and transactions over a sustained period. We now have over 140,000 SKUs complementing our core merchandise offer in store and allowing customers to complete their entire project in one transaction. The offer is a profitable, scalable model that continues to expand our participation in some nontraditional categories while maintaining a curated assortment and commitment to quality that our customers expect. I'll change focus now to cover the opportunity we have in our store network. To Slide 27. We've invested in developing our warehouse, store, trade center and specialist formats over several decades since opening our first warehouse store in Sunshine, not far from here in 1994. This network enables a compelling customer proposition, showcasing our offer and delivering a unique customer experience in enabling our customer fulfillment offer. Our network provides multiple platforms for growth. We continue to expand our footprint into new catchments, and larger formats to meet customer demand, while at the same time driving our existing space harder. Collectively, our network provides significant opportunity to drive growth throughout the next decade and beyond. Turning to Slide 28. Space growth has been a key growth driver for us over several decades and remains a material opportunity ahead. We have an active and disciplined approach to long-term network planning and property management. And our anticipated range of space growth over the next 5 years of between 1% to 2% per annum remains broadly in line with the growth we've delivered in the past 5 years. While some of our network projects were delayed or affected by higher construction costs and COVID-related disruptions over the historical period, we have confidence in our strong pipeline of over 100 property projects. These projects include new and replacement stores as well as opportunities to expand or upgrade our existing network to support growth and expand our offer. Over to Slide 29. We saw a great example of a store replacement earlier today. Northland served the local community from 1996. As the catchment grew, the store became constrained and undersized. Our ability to secure and develop a replacement site nearby in Preston has unlocked nearly 6,000 additional square meters of retail space and given us the ability to range nearly 5,000 new products for the community. This expansion has resulted in a better offer for local customers, delivering a strong sales uplift since opening in 2023. To Slide 30. Complementing this growth in overall retail space is our investment in driving more from our existing footprint. Mike shared an overall perspective around how we think about this opportunity earlier and I'd like to share more around how we achieve this in tangible terms. The reality is we have a few levers to pull. Firstly, with the growth in our digital and last mile capability comes opportunity to curate ranges in our small format stores. Our investment in space productivity, data and insights gives us the ability to consolidate ranges and be even more relevant to each local catchment and curate our offer in favor of products and ranges that local customers purchase the most. We see a really big opportunity through our initial trials to drive sales uplift as well as better in-stock outcomes and more efficient stock replenishment. We're now rolling out these changes to the rest of our small format network. Over to Slide 31. And for the rest of our network, we're able to allocate more space to new and expanded categories that enhance our overall customer offer. We're able to create this space through data-led insights that identify areas of lower sales density in our stores for us to repurpose. Our cleaning and automotive ranges expansions illustrate this opportunity. In cleaning, we introduced 250 new cleaning products by consolidating the space allocated to our window furnishings range. The results have been significant, generating sustained uplift in sales per bay, higher customer visitation and the introduction of new customer segments to our stores. It's a similar story for automotive, where we've consolidated our flooring offer to allocate over 1,300 bays to our expanded automotive range. And over to Slide 32. We've got substantial opportunity to better curate existing ranges to drive additional sales growth from each bay without allocating any additional space. We've already talked about tools and paint which have yielded strong sales density improvements without any additional space allocation. Beyond those examples, small domestic appliances and fixings are two examples where we've utilized existing space to reconfigure and expand ranges without requiring additional floor space. There are more opportunities like these that we continue to explore across our stores. I'll now hand to our Chief Customer Officer, Rachael McVitty, to share more about our commercial growth plans.

Thanks, Ryan, and welcome, everyone. Starting on Slide 34. Commercial is a key growth driver of our business and has grown in the past decade to now represent 38% of total sales. The addressable market is large, fragmented and growing. And we have lots of runway and opportunities to participate in this market more deeply. Our commercial business comprises of three core customer segments: builders, trades and orgs, and we have clear plans to grow each of them. For builders, we have our Whole of Build strategy, which is focused on developing a full credible offer across all stages of the build, frame, to fit-out to finishing. As part of this, we leverage our Beaumont Tiles and Frame & Truss offers. For trades, it's all about ensuring we've got the products and tools to get the job done. Trade is our largest commercial growth -- group and have the value of our broad product range and convenience store network. Here, our Tool Kit Depot business supports our Bunnings offer by enabling a deeper range of trade quality brands and service. Now for orgs. This group represents a diverse mix of customers from small business operators to large complex business and government. Here, we're targeting growth sectors, education, hospitality and healthcare. Turning to Slide 35. The diversity of our commercial business across trades, builders and orgs and our office servicing a broad range of needs from new build activity to ongoing repairs and maintenance supports resilience in our business through the cycles. Even in subdued phases of the building cycle, our commercial offer remains resilient and growing. Market fundamentals are supportive of future growth with a shortage of housing stock and early signs of growth and approvals and commencements, while demand for repairs and renovations to existing homes remains robust. Our focus on long-term growth means we invest in improving our offer across all points in the cycle, allowing us to be well positioned to participate and grow as the building activity increases. Moving to Slide 36. The investments we are making to further strengthen our commercial offer span all aspects of the customer journey and needs. Building on Ryan's examples earlier, we're committed to expanding the product range for commercial customers with more trade quality brands and options and allowing us to participate across all stages of the build. We continue to strengthen our sales and service model. We've dedicated account managers on the road, trade specialists in store, and our U-Trades assist on the phone service together with our commercial only digital tools like our PowerPass App. We know one size does not fit all so we're focused on tailoring the service in all channels to meet customer needs. We're also improving our digital ecosystem for commercial customers to remove friction points and improve transaction experience. This means easier ordering, tracking, account management and integration into their business systems, all to help our customers run and grow their business. Now we know delivery really matters to our commercial customers, having the materials delivered to the job site when they need it to get the job done. Our delivery offer continues to develop offering faster options, better delivery windows and status tracking. Lastly, we are very excited by our plans to renew our PowerPass loyalty program. We're progressing plans to better incentivize and reward our commercial customers through personalization and membership tiers to support stronger engagement and drive commercial growth. Turning to Slide 37. We are also focused on our strategic investments we've made to access specialist formats and capabilities to better serve commercial customers. Our frame and trust capability is well established and we have invested to expand our network in recent years to seven plants and installed market-leading robotics into our use sites. These plants play an important role in our Whole of Build strategy providing access to plans at the start of the build and enabling the opportunity to drive additional sales across the rest of the build. Tool Kit Depot is an important complement to our Bunnings tool shop offer and gives our commercial customers an even deeper and wider range of specialist tools and brands. We've been pleased with the strong online growth and account managed sales through this platform and we'll continue to build out the network strategically in key catchments. And finally, we continue to grow and invest in Beaumont Tiles as a leading flooring specialist. We continue to expand the network in WA, leverage our opportunities across Bunnings commercial customers, and have introduced new ranges in timber and hybrid flooring. We're also looking to further leverage opportunities across the Bunnings Group and we'll be trialing a store-in-store concept in the near future as just one example. Now I'll pass you to Gen Elliott, our Chief Information Officer, to share more about our plans in digital, data and retail media.

Thanks, Rachael, and good afternoon, everyone. Starting on Slide 39. It's no secret that our digital capability has evolved rapidly. As a business, we were relatively late to digital and e-commerce channels, and we've moved quickly since our first steps in 2018. We paid attention to what others had done, the good and the less good. We adopted a test-and-learn mindset, and we got comfortable with not getting it perfectly right, first half every time. And we scaled quickly. Through one of the most disruptive periods the retail sector has ever experienced, we fundamentally overhauled our technology platforms, architecture and capability and we now operate four websites and four customer-facing apps, collectively handling more than 500 million sessions per year and processing more than 650,000 transactions every month. These investments in an expanded digital experience have resulted in significant growth in our digitally enabled sales from $0 in 2018 to more than $1 billion per year today. Turning to Slide 40. These investments in technology matter for our customers and our business. Our omnichannel model delivers real value and reinforces the role our store network plays in our customers' shopping repertoire. Analysis of our Australian Flybuys customer base indicates that 90% of the customers who shop with us online, also shop in store. Introducing new channels to browse and shop our range 24/7 provides customers with flexibility to move across and between channels based on their individual shopping preferences. We can see that of the customers who do shop across two or more channels with us, they spend approximately 2.5x more and visit our stores twice as often compared to a single-channel shopper. This connection across all channels is critical to driving higher customer engagement during their shopping journey and higher overall customer lifetime value. Whether it's inspiration, product advice search or checking availability before the -- during the pre-shop phase, store navigation, self-check during the shop or DIY advice after purchase, our digital channels elevate and complement our unique store experience. Turning to Slide 41. Complementing this digital capability is our investment in collecting and harnessing data to deliver a more relevant and connected customer experience. This investment also helps to inform decision-making as a business. At its highest level, our approach to customer segmentation with the lens on homeownership, life stage and household composition allows us to make more informed decisions about our ranging, format and experience. Through our participation in the Flybuys, OnePass and PowerPass customer programs, we have more than 6 million known and contactable consumer and commercial customers. This has really unlocked additional opportunities to connect with customers, allowing us to engage with them on topics, projects and products that we can see are important to them. At a customer level, understanding preferences and purchasing habits allow us to deliver individually personalized content across our e-mail, website and social media channels. We now send out more than 300,000 different versions of our monthly digital catalog with products presented to customers that are tailored to their interest and their history with us. Collectively, these capabilities deliver not only a better customer experience, but tangible sales growth. Our known customers spend 25% more every time they shop with us and have significantly grown their average annual spend at Bunnings since 2022. On to Slide 42. On this slide, we have provided an example that illustrates how we're personalizing our customers' experience across multiple channels, both owned and not owned. Based on what a customer has purchased, we will know whether they have a lawn. They may have purchased from the lawn care range, but we'll also look for signals such as lawn mowers or wiper snipers from our Power Garden range. If we have seen a customer buying these items, they may be included in one of our dynamic customer segments, Lawn Care Enthusiasts. They do exist. Hopefully, there's some in the room. At certain times of the year, we may target this audience via channels outside of our ecosystem, such as social media. And you can see an example of this in the pre-shop image. If the content resonates with the customer and they come to browse on our website, we can then use the product recommended feature to suggest other products that may be useful to them. Equally, if they come into store, one of our helpful team members will also provide this insight and advice. Once a customer has purchased, we can then send them content that's helpful to them to help maintain their lawn. Our Lawn Care Enthusiasts program now operates across an annual cycle tailored to the location of the customer and it is a combination of helpful information and suggested product purchases at the right time of the season. This is just one example of many of the journeys we have established, and it demonstrates how we're leveraging our rich data and insights to deliver a more connected and relevant customer experience across all of our channels. Of course, we recognize the privileged position we're in with customers trusting us with their data. To this end, our approach to collecting and utilizing customer data is based on a robust privacy and data governance framework. Turning to Slide 43. Our investment in data and team capability has positioned us well to embrace the power of generative AI quickly, but thoughtfully. There are many examples -- there are many global examples of Gen AI being used by retailers to leverage content and to drive productivity. We believe that Gen AI presents opportunities to further enhance our customers' experience with us across digital channels and in store. With these factors front of mind, we've been trialing a customer-facing AI chatbot, ask Bunnings AI, for logged in customers on our website since 2024. The tool helps customers understand what they might need to start and complete their projects and discover related products that they may also need. This tool has been trained on our existing content library, the Bunnings How To videos, meaning our customers receive the same advice and tone of voice, no matter what channel they engage with us on. This service or tool has really resonated with our customers with over 12,000 conversations since launch. And we have seen a more than 30% increase in online conversion from the customers that have used it. As we do for all the experiences we design for customers, our approach to customer-facing Gen AI opportunities has been to maintain and preserve the unique and differentiated experience our customers expect. Privacy and data security by design is at the heart of our solution as well as maintaining appropriate governance and oversight. We're continuing to expand the rollout of this capability to all customers on our websites and apps as well as extending its functionality to make it even more helpful and engaging. Turning to Slide 44. Our Retail Media journey has rapidly evolved. While Retail media is not new for Bunnings, we've had a very successful magazine since 2019. We are expanding into new channels. Our investment in gathering and understanding customer insights and our enhanced digital platforms puts us in a great position to evolve and accelerate our Retail Media offering for suppliers, which accommodated in the launch of Hammer Media last week. As we call out on the slide, Hammer Media will be powered by the broader Wesfarmers Group Retail Media Network called OneReach. Turning to Slide 45. If you look at our various channels, in-store, on-site and off-site, you will see that they capture a large amount of the advertising inventory that many of our customers will see on a high-frequency basis. We've recently incorporated digital advertising into the Bunnings website as well as across a fleet of 300 in-store screens into our offer today. We also have access to extensive off-site inventories, such as YouTube and social media. The customer reach achieved with this inventory is significant, and it enables us to serve our customers with the right message at the right time. Our offer provides a holistic omnichannel experience and comprehensive ecosystem for suppliers across the channels, their customers and their prospective customers are most likely to engage with. Better still, the customer wins because of the tailored and relevant content and experience that guides and supports their shopping journey. Over to Slide 46. Why do we believe that our Retail Media offer is an attractive proposition to suppliers and advertisers. Well, it starts with the trust customers have in our brand that we've worked so hard to earn over several decades. This is underpinned by our extensive network of 350 warehouses and smaller format stores across Australia and New Zealand. And then finally, layered over the scale of our digital ecosystem and loyalty programs with both the number of customers as well as the extent of their engagement with our brand, our products and our services. Collectively, these elements come together to provide a compelling Retail Media destination for brands. This is amplified even further when combined with the other Wesfarmers retail divisions through OneReach. We've been blown away by the interest in the take-up from our supplier partners who have opted to participate in our initial campaigns. It's still early days, but we can't wait to see where we can take it. Now I'd like to hand you back to our Chief Customer Officer, Rachael McVitty, who will take you through productivity enhancements. Thank you.

Thanks, Gen. Starting on Slide 48. Our team delivers on the customer offer of price, range and experience and drive growth in our business every day. As Mike noted earlier, our approach to driving growth and performance starts with attracting, retaining and developing the best talent in the market that represents the diverse communities we live and serve. We invest significantly in our training programs to build capabilities and career pathways for our team with the vast majority being employed on a full-time basis. This training, together with our industry-leading benefits and flexibility, drive high engagement and retention. We then enable our team with the right tools to do their jobs safely and efficiently and have frameworks in place to reward and recognize when we deliver great outcomes for our customers and business. And likewise, when there's opportunities to improve and learn. When all these elements come together, we are able to deliver the best customer experience at the lowest cost. Over to Slide 49. We are pleased by the progress we're making to help our team be more productive. A key part of this is how we roster smarter. This is all about ensuring we've got the right team rostered in our busy trading periods like weekends with DIY or early mornings for trades as well as the right team rostered to complete all the tasks to keep our stores full of stock and running smoothly. We have recently implemented a new rostering platform. This new platform gives us greater insight how to better match customer demand with our team's skill set and availability. We are also improving our workforce capacity planning to better execute, meet new initiatives like range of use at scale and pace and lower cost into our store network. Pleasingly, from the initiatives so far, we have achieved record labor productivity metrics. And what we're most pleased about is the customer outcomes we have also delivered. Moving to Slide 50. These benefits are compounded by the strategic investments we make in data and in technology that support us to reduce or remove task altogether. At the front line of our operations, the scale of our team provides a material opportunity to improve the efficiency of our store applications, that our team use often many, many times a day while on the shop floor. At the back end of our operations, we're implementing new demand and inventory planning systems which improves in-stock positions and lift stock productivity. Building on Gen's examples earlier. We're using Gen AI to lift productivity and drive better decision-making across all parts of our enterprise. We've seen some really positive results across a number of use cases and have a clear road map ahead. Lastly, we're pleased by the productivity benefits and recent trials of electronic shelf labels. This is removing the need for our team members to manually monitor and replace price labels. We have started a rollout nationally in select categories across our warehouse. Now over to Slide 51. We have some strong plans in place to improve the productivity of our supply chain. Our supply chain model has served us well over many decades and supported us with significant growth. We see that as a business continues to evolve, investing in and optimizing our supply chain presents an opportunity to unlock material benefits for our team and customers. Importantly, our supply chain underpins our business strategy. The steps we are making enables our customer offer of price, range and experience. Our supply chain strategy is focused on three key areas and is planned in incremental steps over a multiyear period. Firstly, we're focused on enhancing the direct import distribution center network to support future growth. Secondly, we're making store replenishment better by consolidating and blowing stock into our stores more efficiently. And finally, we're improving customer fulfillment to support the growing demand in the space for our online channels and commercial growth plans. Turning to Slide 52. To illustrate the opportunity further, let me take you through our current model in more detail. Today, the vast majority of our stock is delivered to our store network for a decentralized supply-led model. This has enabled rapid growth over many years and continues to serve us well. However, it does mean many part fill truck deliveries to our store. As our business continues to grow and mature, we see opportunities to work with our suppliers to drive lower costs by consolidating orders and optimizing delivery times. Moving to fewer, fuller trucks to our stores will also improve safety outcomes and reduce store costs from better stock flow. As noted before, this is an incremental multiyear journey where we're partnering with our suppliers to collectively deliver the benefits and ultimately enable the customer offer to be even better. Moving to Slide 53. We completed around 2 million customer deliveries in the past year and expect demand for Click & Collect and delivery only to continue. Our offer is diverse from parcels and new size orders through the truck and crane deliveries for large, big and bulky orders for our commercial customers. To fulfill this, we're leveraging our network of Bunnings warehouses, trade centers and investing in new fulfillment centers in major metro locations as it makes sense, in line with growth. We have one fulfillment center in Melbourne already, a second in construction for Brisbane and plans to invest in a third in Sydney in the near future. To complete the last mile delivery, we're supported by our fleet of third-party carriers and Bunnings owned you from our stores. We are rapidly improving our offer here to give customers more choice from same-day service to economy options. Now in addition to delivery, we see the 2-hour Click & Collect offer proving very popular with customers given the convenience store network, long trading hours and ease of access. We're finding this also an effective way to bring customers to store to benefit from the store experience and stay longer. To sum up, we see lots of opportunities to improve our supply chain in the years ahead to support productivity and growth. Importantly, we see this as incremental investment to strengthen our customer offer and existing operations and this will be supported by technology and partnering with our suppliers to evolve the model. I will now hand back to Mike to conclude the presentation.

Thanks, Rachael, and thanks to the entire team that's presented today. In closing on Slide 55, it has been a real privilege having the opportunity to share more detail and insights regarding the Bunnings business and our growth plans with you today, both at the Preston warehouse this morning and at the session today. Over the last decade, our business has continued to deliver sustained sales and earnings growth for our shareholders. And our focus on continuing this trajectory over the long term remains unwavering. To that end, I hope that your participation in either or both of these sessions has given you a clear understanding of both the drivers of our business, but also the immense growth opportunities that we're executing on. So to recap, our business model has demonstrated a consistent track record of delivering sales and earnings growth over the long term regardless of the phase of the economic cycle. Our model continues to evolve and expand our addressable market, which is supported by a raft of favorable long-term demand drivers over the medium term. And likewise, the diversity of our customer base, the physical network, our product assortment and digital channels, all underpin the enduring resilience in our operating model. Internally, we have a number of tangible and material strategies to deliver both growth productivity benefits -- growth and productivity benefits, I should say, in the near term. As always, our product and service offer will continue to evolve to reflect the ever-changing needs of our customers unlock incremental sales opportunities and bring new customers to our stores. Underpinning our ability to execute this evolution of our offer is our retail space optimization capability, which continues to mature. Complementing this is our proven capability in growing our network footprint in response to growing customer demand. And for our commercial customers, we continue to improve our offer through new ranges, investments in service and experience, better fulfillments and an enhanced loyalty program that offers even more meaningful value for our commercial customers. We are maintaining our momentum in expanding and improving our digital experience for customers and making their shopping experience even more relevant and seamless across every one of our channels. These investments are enabling the rapid growth of our Retail Media business, and we're excited about the growth that we are already achieving there. And finally, our relentless focus on productivity remains with material opportunity to drive further efficiencies and cost reduction across the entire business, leveraging our strategic and considered investments in technology enablement. Thank you so much again for today. Before I wrap up and go to questions, just in terms of some very quick logistics. At the end, there will be lunch just outside for those in the room. And you're very welcome to join us and the team there. And my thanks to the Bunnings and Wesfarmers team and all the team at ICON Park for the organization today. So with that, the presentation closes, I'm really happy to take any questions that you have.

If you just want to take the microphone and Dan is going to manage that. Is that right, Dan? Excellent.

Michael Simotas from Jefferies. Can we talk a little bit about how your category expansion fits into your strategic pillars and in particular, price and widest range? And the reason I ask is, a couple of the categories that you've expanded into recently, like cleaning and auto tend to be priced on a high-low bias basis by most of your competitors. Presumably, that means you need to be a lot more dynamic in your pricing and change your pricing a lot more frequently. So how will you manage that process? And then on range, a category like auto you're never going to have the same range as the auto specialist. So for example, if they want to do an oil change, I can buy oil from Bunnings, but then I have to go and buy filter from somewhere else. How does that fit into your strategic pillar? Or are you just targeting a slightly different customer?

They're both good questions, Michael, and thank you. I think I'll answer the second one first, you're spot on. I think we understand that customers shopping in our stores aren't looking for us to be the sole destination for automotive. What informed our thinking on auto really came from two different parts of the store. Firstly, the tool shop. And if you think about some of the automotive accessories that we've moved out of tool shop into auto. We were seeing strong participation in that. The second has been the move that we've had over time to garage storage. So we've really built out the garage storage part of our business into what has been a very strong growth driver for us over the last 10 or so years. So large tool shafts, shelving units, those sorts of things. So we knew that we were attracting customers that had an interest in the garage and automotive. So we've expanded that offer out. A little bit like pets, we'll test and learn. We've got about 20,000 customers in, what we call, Bunnings neighborhood. That's a sort of a community in which we can sort of pull impact on ranges and things like that. So we'll be listening, learning and iterating the range. We definitely don't want to be a super cheap or an auto ban or something like that, but we think we can offer the core elements that make sense. And then, on the elasticity of price that you talk about, things like ESL, the Electronic Shelf Labeling program, you'll see that in tools and smart home now, that will go to places like cleaning and also automotive, where there is a lot of high low. So Mark, who you -- those in the room met today at Preston, he's the Category Manager for Auto. He actually put a couple of price changes through first thing this morning, and he actually watched those change while he is in the store. So that speed to adapt to the pricing is there. But we do think about that when we enter the market. So if you were talking to Guy, our automotive buyer, he talks about the fact that he's mapped the market, we enter at a price that is around about where people go to on below. So that's where we're starting. And then, if we have to move, we really only moving incrementally to make sure that we're delivering on our lowest price promise.

Tom from Barrenjoey. Just a couple on Retail Media. Firstly, are there any benchmarks retailers around the world where you look at, where you think you can get to or aspire to be? And then secondly, the supermarkets have said that's an enhancer of their margins. Is that how you guys will look at it? Or will you kind of reinvest any revenues from the media side back into price or service?

Yes. Thanks, Tom. I think we did a really large study tool between the Wesfarmers divisions and Wesfarmers themselves last year to Europe and the U.K. So looked at Walmart, Kroger, a number of other players globally. So we certainly look for best and that really is consistent with our philosophy for everything we're out, traveling the world all the time, trying to find the best whether it's store format, category, customer experience, et cetera. So we definitely have sort of linked into those. We haven't set very clear targets for where we think we will go. But we do think that what we bring to endemic and non-endemic advertisers is a unique point of difference. I think, Gen articulated really well today, just the depth of knowledge we now have around those known customers on the consumer side. we've equally got that on the commercial side. So we've got some significant opportunities. They will definitely flow through to the bottom line. But our real focus is on making sure that the value proposition we offer you as a supplier, whether you're a supplier to Bunnings or someone looking to sort of enter that ecosystem is real valuable, actionable insights so that you all are really confident that investing with us in Retail Media is delivering really tangible outcomes for your business needs. So it's really finding a new customer really to serve and deliver really well for them.

And on the margin, like the drop through?

Yes. Well, it's really early days for us, right? So we'll have to sort of look at. We're still in establishment mode. So if you sort of looked at it as discrete P&L at the moment. It's not quite what you'd want to see longer term as that matures. So a lot of those establishment costs. And I think we'll probably be in a position over the next 12, 18 months to sort of speak more comprehensively to what that's looking like.

Mike, the key message I took away from today was the unrelenting focus on increasing asset utilization, store optimization. That's the message I really took away. Then you confused me a little bit with your example with Ashfield. You threw that one in and you tried to say, well, the whole game is not about sales per square meter. There's other things that we might have to. So what's your key message there? Is that -- is it worrying that some stores are reaching maturation? Or is that just being driven too much by volume? And the second part of the question, I mean, I'm talking to Rachael about it when we were doing our store tour. A pain point for me is getting customers out of the store, pain. Sometimes there's it's just too much congestion. And to me, you don't focus enough on getting customers out, servicing and so. And you talked about store productivity. How do you measure that? Because to me, that's a real pain point. So if you could -- what's your key message with Ashfield? Where are you at with latency in your stores for the store optimization program, how much latency is there? And what are you going to do to this productivity issue? Because that to me is a real pain point?

Yes. And look, you could argue that it's a good problem to have, you got too many customers trying to get in the store. But we do want to make sure that customers have a really seamless experience. So we benchmark our Bunnings operating system for registers called BOPs, Bunnings point-of-sale. We benchmarked that from a technology point of view against pretty much every operator in the world to see if there's a faster register experience. We can't find one that makes sense for us. Our commercial customers now don't need to go to the checkout at all. So our commercial customers that are at the Trade Desk that you would have seen this morning, could actually transact on their device. They can actually do that transaction the night before, coming in the morning, and then put that product in the -- we check it and they're gone. So there is some customers that do want to sort of retain a sort of a consistent experience. We do have mobile FPOS. So we have a capability on a busy day. So Easter weekend is a very busy weekend for us. The team can actually use those mobile devices they have to transact in a moment. So there's more of that happening. Our team members can also do what our tradies can do and self-check. We would like to extend that to more and more customers, what we've got to make sure as we do it in a responsible way so that we know that what's going out the door is being paid for. That's the text there today, what we haven't sold for is how we offer that to more customers. And maybe you can imagine a world in which PowerPass customers, OnePass customers who are reaching a certain spend level, get those sorts of things for certain numbers of products and then expand it out as we go forward. And then on Ashfield, what we're really trying to sort of illustrate is that sales per square meter isn't the be all and the end all. There's an opportunity to make space work harder. So we are absolutely doing that. Some of that is as a market matures. So that's the Marsden Park example. It's Ellenbrook in Western Australia. It's Launceston in Tasmania. We build these stores on urban fringes, because we've seen over time that those stores will actually get to a point where we're ready to go to the next market a bit further out. So I think about Northwest Sydney, you're out from Windsor out to Richmond, there's probably opportunities in those markets. But if the measure that we're working on with sales per square meter, we want to wait to that market and mature before we went in. And we've seen from global peers where they've stopped on that fringe and the fringe moves, other players have moved in Tractor Supply in the U.S. is a classic example of cutting other retailers lunch, because they've made the investment into those markets. So we're comfortable to take pressure off a store and then it reset and regrow. When we open in Coburg, here in Melbourne, and we sort of modeled quite a significant impact to the old Northland store. So for those not familiar with the Melbourne network, where we were today, at Preston just down the road was the fourth ever Bunnings Warehouse in Northland, and we moved down into a bigger site. But when we open Coburg, the impact was far less than we thought, because we were actually missing a catchment. So they're the sorts of things we think about. So it's really just showing that we're prepared to back ourselves to grow rather than fixate on one measure and one measure alone because otherwise, we just limit our opportunity for growth. And then lastly, just on latent space. We haven't really sort of calculated it, but we do know where the sort of flabby space is in the store. The simplest example which we shared with you all when we launched pets was taking kids play gyms out, moving litter boxes and things outside the store, selling those play gyms online and then being really happy with the return on space that pets is driving. But what we love about pets is bring different customers and as you heard the team talk about today.

Shaun Cousins from UBS. Just a question on digital and sort of how you're growing. There's sort of a couple of parts to it. I think you were most recently maybe a 5.5% digital sales and that includes marketplace as well as your own sales. Where do you think you can get that too, and it's related to two other parts. How further or how much more can you push marketplace? Because I would expect a category like refrigeration, it's too slow a turn to sit in the store, but it's finishing off a kitchen. It's something where you've got coffee machines. But where's your marketplace range in terms of where you'd like it to get to or really to sort of complete it? And then moreover, what is the growth in digital? How is that being impacted by your CapEx needs? You can get to a -- like is there a limit where you won't spend a lot of CapEx. So as a result, your supply chain won't be invested enough such that you won't get to depots 15% of sales or Kingfish is about 20%. Just curious around how marketplace growth and then CapEx impacts, how you ultimately grow your digital place?

Yes. So we'll talk a bit more about marketplace in my part of challenging with is what I'm going to talk about in a few weeks' time, that's different, but we're working on that. So on marketplace, it's -- we're very disciplined with marketplace, right? So we don't want to be in everything marketplace where you can buy literally every product under the some, we're very disciplined around range curation in there. And it informs our thinking of what we want to range in store as well based on performance of categories. And at the moment, bedrooms, bedsheets, those sorts of things tends to dominate what we're seeing in marketplace. The sellers we work with are really trusted that they go about their business really well. And you can obviously -- if anyone's used our marketplace, you actually transact that product inside a normal Bunnings transaction, which I think is a really nice differentiator to some of the other marketplaces out there. So there's no sort of limit to it. We're exploring what a services marketplace would look like. So for sort of installation and other things like that, and we'll talk more about that in May. But that's really exciting. And we haven't sort of set a limit. On things like appliances, we're very clear, we would love to have appliances in our business, and we'll keep working away opportunities to do that. And we do have some appliances, but we recognize that like in every other category, Australian consumers do love the, sort of, strong brands. So we think that's an opportunity for those brands to partner with us for new growth opportunities. So we'll chip away at that, but we wouldn't carry a lot of inventory in store for the reasons that you outlined. And then on digital penetration, I love the fact that customers coming to our stores. And we work really hard to create an environment where you can come in, there's an activity for your kids. There's some learning that you can do. You can have a coffee, you can get something to eat. So we really do value that. And I think even little things like adding the EV, the fast EV chargers, another reason to sort of stopping at Bunnings, but we want to be where the customer wants to be. So in-store, on-site, online, in home. And we're seeing very rapid increases in online. I think the bit that Rachael touched on the popularity of the 2-hour Click & Collect, we sort of see that. So I don't think we've got a problem getting double digit. But we're not pushing customers to the channels, we are letting them choose where they want to be. So we want to make sure that the app, the website, they're easy to use, they're fully functional. And if a customer is using that for convenience, great. If they want to go down and get a snag on a Saturday, they can do that as well. So we're pretty relaxed. From a CapEx point of view, fulfillment centers costs, I think it's about 20% of what our -- 20%, 25% of what a warehouse cost to build. So CapEx, relatively light. You can imagine a world in which we've got a couple of fulfillment centers in Sydney, Melbourne, Brisbane, maybe some other parts of the network as well. But we've got over 400 locations. We can use that nodal network to make sure we're nice and close to the customer for sort of pretty quick delivery, particularly in regional locations. So we don't see it as being a big draw on CapEx. And I think we've got the supply chain planning to sort of think from really ports in overseas countries right through to the doorstep of your home.

Caleb Wheatley from Macquarie. Just another one on the Retail Media front. Those that have done it really well offshore really talk to frequency or eyeballs being key, whether that's physical or digital. Relative to some of your peers domestically in Australia, where maybe frequency say, supermarket or someone like an Amazon, is much more common than maybe for Bunnings. I know some numbers were spoken to earlier that in the context of maybe not being able to win on the frequency front, how do you think about the opportunity for Hammer Media from a Bunnings point of view?

Yes. It's a really great question. The frequency of shop, like, I get told all the time, I was in Bunnings on a weekend, but our data tells us that customers are shopping less frequently than I'm getting told by my friends when they're in a store. But we're not after just eyeballs, right? So there's eyeballs in store, there's other opportunities for out-of-home. We're -- we've been well established Retail Media for a long time through magazines and things like that. And then we're looking at radio as well. So we've got some different ways. And if you think about tradies, they're listening to radio all day long. So there's some really uniquely different ways that we think we can engage with our audiences using some different platforms to -- than simply relying on screens in stores. And one of the things that I was really clear on the team was, if this is just a screen in-store play then we're wasting our time to be a far more sophisticated model as we go forward.

[ Matt Crowe, ] JPMorgan. Just on the supply chain piece, something you've spoken about a few times before, but I just wanted to flesh out a little bit further. What's the issue you're trying to solve here with the current direct-store model, it seems like it works relatively effectively. Suppliers are doing a lot of the hard yards for you in terms of getting product to your stores. But is this about a trading terms discussion with the supplier to get more out of them? Is this about limiting out of stocks? Where do you see the opportunity from either sales or earnings perspective that you're trying to fix it? It's quite a big endeavor to real.

Yes, it is. And it's not a one size fits all. So what's currently working really well, our DC deliveries and our import DCs do an amazing job and it's such an important part of our network and really well covered across the Eastern Seaboard, Perth and Auckland with DC. So that's in good shape. We've got some fantastic supplier partners that are really large organizations who've made really substantial CapEx investments of their own. We're not looking to disrupt the supply chains of those sorts of organizations. So I give you two simple examples, PPG and the Dulux group with paint, we don't want paint touched more than once because it's effectively big cans of water getting moved around the country. I don't want to keep touching that, because you're just going to take any sort of margin out of that product pretty quickly. But what we do know is that there's a lot of small to medium suppliers who -- it's actually quite a challenge. And it's a challenge not necessarily through transport rates and things like that, our team do a great job of negotiating really good transport rates. But a big warehouse, so Preston where we were today, that could get 60 to 80 deliveries in a day. That's everything from the post delivering a couple of satchels through to some pay doubles. But we want to sort of simplify that for our store team because that will improve in-stock availability in store. It takes cost off the back dock and we think it improves efficiency all the way through. So we're always going to have a hybrid model, which is why we don't sort of have that big bang CapEx somewhere hiding in the distance that we're looking to invest in. So we're going to really look at some cross stocks where for small to medium suppliers where it makes sense for them to sort of consolidate through that. We think that brings efficiency. We'll have conversations with those suppliers about sort of costing models of that. But we actually think it's cost advantageous for both parties and you'd want both to participate. But we're really coming at it from what's the best for the store team and therefore, best for the customer by having a simplified supply chain.

Just a follow-up. Is the -- so your current direct store rate at the moment versus where you think it might be in 5 years or 10 years once this program is done? Up in my head, 70% to 80% direct to store, is that right? And then where do we get to?

It's hard to say. And I think some of it will depend on individual suppliers and what they want to do. One of the things that we're always working on is making sure that our supplier partnerships are through supplier partnerships. I don't -- I'd be really disappointed if our buying team are going to a supply and say, you must do this. But where it makes sense, we're hoping that they'll actually opt in because they'll see the benefit of it, and we'll see where that flows out.

It's Lisa from Goldman. First question is on the sales productivity. So by my numbers, we're just under $5,000 per square, and I think we're half the key USP that you guys put up. Where do you think we can get to over the next couple of years with all the evolution of categories?

Look, I'd be really disappointed if we weren't seeing substantial improvement, but it's not a unit of measure that we fixate on at Bunnings. We're actually more interested in sort of gross margin return on space. We think that delivers a better outcome. And equally, it will vary based on how that network evolution sort of rolls out over the next little while. But it should be double-digit improvement over time.

Double-digit improvement over time. And then as you say, you're focused a little bit a lot more on the gross profit density, right? So all the new categories that you guys put up on Slide 11 of the deck. Can you confirm that there are also gross profit-wise more dense than the existing average of the stock?

Yes, largely. So but as you know, we don't speak very much about gross margin.

Got it. Second question is on the space going forward. So historically, in the last 5 years, we did two. We're now talking about 1:2. It seems a little softer than sort of the 10 over 5 that we've previously talked about?

Yes, it's still broadly about that space. One of the things that we're always sort of looking at is when we open a new store, what does that mean for surrounding sites or if we open a fulfillment center, what's that going to mean for our trades. And as a simple example is, we're going to open a fantastic and much needed warehouse on the northern beaches of Sydney at Frenchs Forest. The net number of new store -- net number of sites drops, because we closed our Trade Center in Cromer and our small format store in Ringmore, but the net space increases. So there's some slight modulation just based on as we iterate the network evolution. But the plan is broadly as we've talked.

So the 10 over 5, it's not a softer than that?

No.

Mike, just interested in commercial. You've obviously earlier, if we went back 4 or 5 years, there was a strong ambition to grow the proportion of sales from commercial. It's still a growth angle, but not necessarily a proportional, sort of, goal in the way I see it. Is there any information you can give on how your traction is in some of those commercial categories? You introduced them, but any other measures of market share or market penetration? And do you still have a goal of commercial taking a bigger share of the sales?

Yes. Look, I'm very clear, internally and externally, we'd love to see commercial 50-50. It's got to be led by the customer. It's got to be led by the market. Clearly, we would love to be seeing more out of residential construction. And we think that's a big driver of future opportunity. And we're certainly primed to go with the investments not only in locations for Frame & Truss, but the capability and the robotization that we've invested in for those. We sort of finished that just as the sort of housing market sort of softened off. So we're well primed as I said in my remarks earlier to sort of make the most of that. And I think the other big one for us where we're getting significant momentum is in organizations where we're starting to sort of have the credentials to be able to demonstrate to larger organizations and government that we can fulfill that. And then there's some verticals like tourism and the sort of tourism economy where we're very low and there's lots of upside to go forward. So plenty -- still plenty to come. We really just focus on our sort of growth drivers relative to our prior corresponding periods and then listening and watching what's going on in the market more broadly.

So maybe Frame & Truss is a bigger gap than what you're talking about?

Well, yes. There's no secret that there's not a lot of new housing starts, right? We've got seven factories ready to go to help builders as soon as that turns. So that's what the sorts of things where I think we will see those really kick as that market goes through. We're still seeing good volumes go through because, obviously, we service small to medium builders, but those facilities have the capacity to do a lot more as the market heats up as well.

Mike, Ben from Jarden. Just last question around margins, probably sort of two parts. Firstly, just on the media side of wins. How much sort of easy wins, if you like, are there from just formalizing media with this? I don't think you charged for catalog at the moment, for instance, theory, that could be a couple of million bucks a week. Like I'm just trying to think about, is it as you formalize it bang is $50 million of pops up? That's the first question.

No, not really because we've obviously got trading terms where our supply has got different sort of terms with us around advertising that exists from our traditional channels. But we also know that for our supplier partners, they're out advertising themselves. So if we can actually use the data we've got to help them inform them more deeply on the customer segments that they're going after based on the data we've got. We think there's a good value exchange there for them to invest in the Retail Media program. And then secondly, we've got some really interesting customer bases and known customer bases that a lot of others don't have. And I think here about our trade business, right? Like every tradie drives if you're a vehicle retailer in Australia, want a market to want to engage in and participate in. So there's -- that's where that sort of non-endemic will really sort of kick in as an opportunity for us as we go forward. But I think the thing that we were very clear with our partners on it at the Hammer Media launch a couple of weeks ago is we've got to earn the right to win that business, and we won't earn it unless we can clearly show actionable data and insights. And one of the things that I observed when I watch Retail Media in Australia is some of that is just white noise. And we don't want to be there. We want to be really meaningful and purposeful in the way that we're connecting and engaging with people who choose to partner us in that channel.

And just second one, I appreciate you give us gross margin. It would be nice if you did, but I don't think we're going to get it. But in terms of the GP mix, as you look at your business moving forward, like you bring in some of these FMCG categories, how should we think about the GP percentage mix in terms what you're doing from a category standpoint? And then the second part is you've done obviously a phenomenal job holding margins when you said there hasn't been any starts in the last couple of years. How much operating leverage will come through the business when that commercial starts to kick in because in theory, it could be enormous as we look into '26, '27?

Yes. And I think, we're really focused on productivity right across the organization, right? Like there's so much that Rachael and Rod, of course, who leads our store team are doing to sort of drive improved rostering coverage, those sorts of things, but also take task out of stores. So even something like electronic shelf labels, that's replacing the need for team members to run around doing labels, doing temporary price labels, those sorts of things. So we can see opportunity everywhere we go. And I think as we sort of lean more into some of the other tech investments we've made, that's going to bear out in productivity improvements in our support functions, our DCs, trade centers and the like. On your question on margin, yes, we're not going to obviously go into margin, but we're focused on the dollars rather than the percentages. So we want to make sure that in absolute terms, we're growing earnings. That's our focus over the long term. And our buyers are incredibly good at looking at product and where they're sort of setting the price, knowing that there's going to be some movement because of competitive tension to make sure that the margin is an acceptable margin for us. And similarly, our pricing policy is the same. We want to be the lowest in the market, and we're not going to allow others to come in and sort of try and take that space, but we're also very rational players. So we're not picking on -- kicking off a price war over something, but we will definitely be there on price where we need to be. But when we look at a new category, one of the considerations is, what's the return going to look like from a space point of view, a gross margin point of view, team member productivity point of view, all those things are going into those considerations. And when we do that and we go, yes, this looks right, then we go in and we test. So we did that with Pet. We did that with automotive. And then we go is a hypothesis bearing out, yes or no. And then that informs our thinking on going after it from there.

Sorry, a couple of questions, but you say to the team, look, we don't want to print a 200 basis point margin, we want to put back into price. So you're already running an EDLP, so in theory, just start falling out...

Well, yes, and it drives the productivity -- like the better we're running the business, the more opportunity we've got to deliver a better value outcome for customers. If we're doing that, then they're in our stores or on our website more, that's driving up the sales and that's driving the earnings through. And yes, you should be getting leverage out of that as you go forward as well. I think, it's been modest leverage we've shown over the period, but equally, on the sort of returns profile we've got, we're really happy with where that's at and really confident that, that's sustainable, not only in the next couple of years, but in the years ahead as well.

Mike, Adrian from Citi. I just wanted to get a handle for how bullish you might be about the auto opportunity relative to pets and cleaning, where you've been very successful. And if I think of the success factors of pets and cleaning, I think the large pack sizes you've been able to offer has been a key differentiator and able to get that low unit pricing. Also, like pets is at the front of the store, cleaning is at the back, but it's very visible on those front ends, lots of bulk stacks and even outside the store. So if I compare that to auto, do you think there is the opportunity for those large pack sizes I'm struggling to see it? And then also, is there the same opportunity to really promote it at the front of the store, like say on those front ends to get the customer awareness that you're selling it because obviously, it is at the back next to clean. Just be interested in your thoughts.

Yes. Look, and not all departments are equal in Bunnings, which our buyers don't like, right, because our buyers like their department to be the most important. We've got some really what we would call leadership categories, tools and paint are good examples of those. I think given the success of pets, it's sort of moving into that sort of leadership space as well. But we've got other categories that are complementary and we'll assist with completing a project. Window furnishings is a good example of that. We've tried lots of different ways over the year to make more out of the window furnishings category, but we've now settled on a range that really makes sense for renters and homeowners to be able to repair or replace something, but we're probably not going to be there to sort of design a whole home, automotive sitting somewhere in that. So there is going to be an opportunity, I think, for category expansion. One of the things that is always interesting in talking to suppliers is that there's sometimes a reticence for a brand to enter the Bunnings ecosystem. They've got established relationships. Unfortunately, they'll tell us have had pressure from a retailer that if they sell to Bunnings, it's going to be a problem for them somewhere else. And where we're very respectful of that. But equally often, what happens, you'll see a category start, it will be successful. And then those brands actually want to participate. In most cases, we're able to accommodate that. But actually sometimes the success is there with what we've got. We want to reward the suppliers that have been with us from the start. And then we choose not to participate with the brand because, actually, we've got to a point where we've moved beyond that. And I think we've demonstrated that very clearly in the barbecue category, in particular.

Mike. Phil from E&P Capital. Just wanted to go back to that sales per square meter slide, which is really interesting where you're comparing yourself to offshore peers. Can you give any examples of categories when you talk to them where you're significantly below? I'm just wondering whether that high-level comparison might be influenced by online sales percentage as well as product mix which differs between you and them?

Yes. Online definitely plays a role. Some of it is also about the nature of the network. Like if I look at -- and we've had, I think, about this time last year, we had about 35 home improvement retail businesses come out and visit with us. If I compare us, say, to Hornbark in Germany, and that's not one of the ones that was on the slide. They run a really homogenous network. It's very much in their thinking that the boxes are 6,000 to 8,000 square meters. there's a lot more variety in the Bunnings network. In our smaller stores, I think, 1,900 square meters and our largest at Alexandria is 20,000 square meters. That requires a lot of different thinking for how you planogram and get your assortment. So I think they're more mature at using space, using inventory planning software to really analyze productivity almost down to a facing level. What's really good is that the type of tech we're using is very consistent with those leading global peers. So we're actually able to sort of take their learnings on how they're driving that space productivity, inventory availability. So back to one of the earlier questions on supply chain, that's why that backlog to shelf is so important, because any out-of-stock is working against sales per square meter. So there's lots of differences. So it's not so much about categories in which we participate. But certainly, if I think about a category like cleaning, that's been a global trend for home improvement retailers. Pets less so, it's sort of hit and miss across the globe. But cleaning is definitely one where a lot of home improvement retailers have expanded, and we were informed by that thinking. There's also just products and services that they're selling that we don't know. If I look at the U.S. retailers, there's been a real shift to food-based products, not in a supermarket sense, but just a convenience store sense and they drive incredibly high sales per square meter, it's probably not going to shift the dial to the extent that they sort of call it out, but there are just those structural differences as well. Just the last one probably is most don't have the drive-through space that we do. So that's a real feature of the Australian market. So Preston, you probably got a few hundred or a few thousand square meters that is the vehicle traffic, which is actually not retail space, so to speak. Any other questions in the room? Well, thank you again so much for today. I really appreciate it. My team and I are going to be available for any other questions over lunch. So please feel free to join us. And if you've got a head off again, thank you so much for your time today. Cheers.