Richard Goyder – Managing Director Terry Bowen – Finance Director

Craig Woolford – Citigroup, Inc. Shaun Cousins – JPMorgan Chase & Co. Andrew Peros – Credit Suisse Group AG James O’Brien – Credit Suisse Group AG Sam Teeger – Commonwealth Bank of Australia

Ladies and gentlemen, thank you for holding and welcome to Wesfarmers quarterly retail sales briefing. Your lines will be muted during the briefing. You will have an opportunity to ask questions immediately afterwards and instructions will be provided on how to do this at that time. This call is also being webcast live on the Wesfarmers website and can be accessed from the homepage of wesfarmers.com.au. I would now like to hand the call over to the Managing Director of Wesfarmers Limited, Mr. Richard Goyder.

Good morning and thanks for joining us, for the retail sales briefing relating to the first quarter of the 2015 financial year. And I’m joined by Terry Bowen, our Group Finance Director. I’ll do the normal, I know everyone’s reasonably busy, so we’ll try and get through this efficiently. I’ll provide an overview of sales results and then leave plenty of time for questions that any of you may have. Before kicking off on the retail sales performance though, I do want to touch on coal. In relation to export coal pricing, export metallurgical coal pricing continues to be weak, with the December 2014 quarter’s export. Metallurgical coal pricing settlement outcomes being largely consistent with outcomes achieved in the June and March 2014 quarters. For the October to December 2014 quarter, the weighted average US dollar free on board price for new contract prices of pyro metallurgical coal, that’s hard coking, semi-coking and PCI – will decrease by approximately 1%, as compared to the July to September 2014 quarter prices. Approximately 70% of deliveries in the October to December 2014 quarter are forecast to be at the new contract prices with the balance at carry over prices, subject to a – obviously, to actual contract deliveries for the October to December 2014 quarter. Current hard coking coal benchmark prices remained largely flat over the three quarter to December 2014. But, for some context current hard coking coal benchmark price for this quarter does reflect a $37 per ton or approximately 25% decrease from pricing in the October to December 2013 quarter. We are, of course, continuing to focus heavily on cost control at both Curragh and Bengalla. Now turning to retail sales results for the first quarter of the 2015 financial year, sales results were generally pleasing, supported by strong growth at Coles, Bunnings and Officeworks. During the quarter, our retail portfolio continued to invest productivity improvements into lower pricing, enhanced merchandise offers and customer service, as well as improving its store networks. Coles’ headline food and liquor sales growth increased to 5.8% during the quarter, with improvements recorded in all key metrics, including customer transactions, basket size and fresh participation. Bunnings’ total sales growth of 11% built on the strong growth achieved in periods, reflecting further value creation and enhanced customer experiences and the contribution of recent store network expansions. Officeworks’ sales growth of 8% reflected the sound execution of its every channel strategy, with sales growth recorded in stores and online. Kmart recorded total sales growth of 2.9% for the quarter, supported by good performances of Kids and Home categories. Target’s total sales declined 4.6% during the quarter, reflecting the transition to a first price, right price strategy. I’ll talk through some of the divisional detail. For Coles Food and Liquor, headline food and liquor sales for the first quarter were $7.3 billion up 5.8% on the previous corresponding period. Coles recorded comparable food and liquor store sales growth of 4.3% in the quarter. Excluding liquor, comparable food store sales increased 5%. Food and liquor price deflation eased to 0.5% for the quarter supported by ongoing investment in value, which was partially offset by tobacco excise increases and fresh produce inflation as a result of cooler weather and tougher growing conditions. The comparable sales growth achieved during the quarter was pleasing, driven by further value investments, resulting in continued improvements in sales entity, transactions, basket size and fresh participation. Coles continued to invest in better value, including launching Down Down Frozen across more than 100 product lines. And provide increasingly targeted offers to customer through flybuys. Coles is focused on being a little better every day, and we believe that Australians deserve world-class quality, service and product choice, with strong supplier relationships a key enabler of this focus. During the quarter, both Murray Goulburn and Norco commenced supplying Coles branded milk under long-term arrangements. Coles continued to improve its store network during the quarter through the opening of high quality space and the continued renewal of the fleet. Coles opened four larger supermarkets and closed one smaller supermarket during the quarter, taking the total number of supermarkets to 765. A further 22 stores were refurbished during the quarter, taking the total number of supermarkets in the renewal format to 444, which represents 58% of the network. While Liquor continued to underperform food in the quarter, transformation activities commenced during that time. These activities included key leadership changes, a store support centre restructure and the development of detailed plans to accelerate store closures and reset the range. Coles opened 16 new liquor stores, the majority of which were stores co-located with Coles supermarkets, and closed nine stores during the period, resulting in a total of 838 liquor stores. One hotel was opened during the quarter, taking the total number of hotels to 91. On Convenience, total Coles Express sales, including fuel, for the quarter were $1.9 billion, a decrease of 2.3% on the previous corresponding period. Headline fuel volumes declined 3% during the quarter and comparable fuel volumes declined 4.6%, with lower fuel prices during the quarter more than offset by reduced fuel discounts following the December 2013 undertaking to the Australian Competition and Consumer Commission. Convenience store sales, excluding fuel sales, grew by 11.1% for the quarter. Comparable store sales grew 8.3% as a result of improved ranges, more effective promotions and the effect of tobacco excise increases. Excluding tobacco, comparable store sales grew 5.7%. Coles Express opened four new sites and closed one during the quarter, bringing the total store network to 645 sites. Now turning to Home Improvement and Office Supplies, total sales for home improvement for the quarter of $2.2 billion were 11% above the previous corresponding period. Total store sales for the quarter grew 10.9%, while store-on-store growth was 8.2%. Sales growth was achieved in all key trading regions, across all product categories and in both consumer and commercial areas. Bunnings’ solid trading momentum stemmed from good contributions from all growth drivers in Bunnings’ strategic agenda. In particular, Bunnings focused on creating more value and investing to further enhance experiences for both consumer and commercial customers, with pleasing outcomes evident, as this focus continues. During the quarter, four Bunnings Warehouses, one smaller format store and one trade centre were opened. At the end of the quarter, a further 20 stores were under construction. The timing of new store openings during the financial year is expected to be evenly weighted across the period. Now to Office Supplies, total sales for the quarter were $420 million, up 8% on the previous corresponding period. Customers continued to respond favorably to Officeworks every channel strategy, with strong sales growth achieved in both stores and online. The result was very pleasing and continued to build on the positive results achieved during the past 24 months. The business is continuing to drive its every channel strategy, providing customers with a unique and brand consistent experience in every channel to market, anywhere, anyhow, anytime. Officeworks also continues to expand its presence in the business-to-business market. During the first quarter, two Officeworks stores were opened. And now turning to Department Store Retailing, firstly to Kmart, Kmart’s total sales of $998 million for the quarter were 2.9% above the previous corresponding period, with comparable store sales increasing 0.9%. Growth during the quarter was affected by the continued decline in entertainment categories with comparable stores sales excluding entertainment categories, increasing 1.8%. The sales performance during the quarter was driven by good growth in core ranges of kids and home, together with pleasing results from seasonal and sporting apparel ranges. Kmart remains committed to delivering everyday items at the lowest prices. During the quarter, Kmart completed seven store refurbishments and opened four new stores. Kmart Tyre and Auto opened four stores and closed two during the quarter. And finally, to Target, Target’s total sales of $753 million for the quarter were 4.6% below the previous corresponding period, with comparable store sales decreasing 2.3%. Adjusting for the effect of the toy sale timing, where the first week of last year’s sale fell into the first quarter of the 2013 financial year, comparable store sales decreased 7.7%. Target’s sales performance in the quarter continued to reflect the transformation underway, with price deflation outpacing volume growth as the business transitions from high-low pricing to first price, right price. During the quarter, target delivered better value to customers through lower prices across our range. Growth in units sold was, however, offset by price deflation. Target continued to implement the significant changes required to transform the business and although there remains much to do, we have better ranges for summer through improved fashion, style and quality at lower prices. During the quarter, Target opened one new store, one replacement store and closed three stores. So, in summary, our retail divisions remain heavily focused on delivering increased value to our customers and obviously, preparations for the Christmas trading period are well progressed. Now we’ll hand over to questions that Terry and I will be very happy to answer.

We now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of Craig Woolford from Citigroup. Please ask your question. Craig Woolford – Citigroup, Inc.: Good morning, Rich, Terry and Paul.

Hi, Craig.

Hi, Craig. Craig Woolford – Citigroup, Inc.: Might be one of those, there might be a few tied up with Coke.

Yes. Craig Woolford – Citigroup, Inc.: I just wanted to ask about Bunnings. Again, a great result on the comp store sales. What’s intriguing me is trying to understand the new store sales contribution. So a figure I look at is the total sales growth of 11% and the comps of same store sales was 8.2%, which means there’s 2.8% new store sales. It seems quite low, given the pace of store rollout. I just wanted to understand how you feel about the quality of the store openings and the cannibalization and whether there are any factors we should be mindful about, around the store openings?

Yes. Craig, I’ll get Terry to comment on what stores we include and we don’t include in the comps. We have a review on in all our retail businesses; we have a review on how stores are performing after 12 months and 36 months. And we’ve just done that process in through our divisional boards and we had Bunnings last week. And certainly the Bunnings stores, we’ve opened over the last 12 months performing, generally inline or just above the focus. And those focus typically have us reaching to the full performance within three years, profitable from day one and a strong return on capital in year one. So, based on the numbers we saw last week, we’re very happy with the way the new stores are performing in the business. So I’m just – I’m worried if that that gap might be something to do with the way we calculate comps, Terry?

I think, in Bunnings case we’ve obviously got commercial, which plays out a bit differently, obviously, with the business-to-business versus some of the other businesses. But it’s largely those stores that have been open for 12 months go into comp and before 12 months are not –there’s a few other minor things, but they don’t really move the dial, too much. So, no, I think… Craig Woolford – Citigroup, Inc.: But there is the cannibalization effect?

Yes, well you’ve got certainly, you’ve got cannibalization, but that would be affecting other comp stores. Craig Woolford – Citigroup, Inc.: But don’t you take cannibalized stores out of comps, for Bunnings, so that the comp store figure, the 8.2%, excludes any stores impacted by cannibalization?

There’s certainly some of that, we go and we look at I mean, it obviously depends on the degree of cannibalization, Craig, so that’s what I mean. There’s a big – I think you’ve also got timing of store openings, as well, which impacts some of this and as Richard said, maturity profiles. But there’s generally – if you look back at the quality of the store openings and look at some of the stores that we’ve opened this year and where they’re trading and you wouldn’t have a concern that the space we’re opening is not good space. Craig Woolford – Citigroup, Inc.: Yes, I know. So your methodology of reviewing is great, but it’s really only the ramp up within the last 12 months of store openings where, you know, I fear that there are excessive store openings across the industry. I think in 12 months time it’ll be interesting to ask the same question, as to whether there’s some pressure.

Yeah, we’re not seeing it. But, obviously we brought, we’re right to it. Craig Woolford – Citigroup, Inc.: Sure.

Okay. Craig Woolford – Citigroup, Inc.: Thanks, guys.

Thanks, Craig.

Your next question today comes from the line of Shaun Cousins from JPMorgan. Please ask your question. Shaun Cousins – JPMorgan Chase & Co.: Thank you. Good morning. Just a question on Coles and your value proposition, I’m just curious about how you see your value proposition relative to ALDI and Woolworths, if you think your marketing is as effective now as it has been in the past, where Down Down had, sort of, dramatic impact to sort of highlight that value proposition. And if you think that customers are appreciating the value that you’re offering, in terms of the traffic that you’re being able to generate?

Yes, Shaun, I mean we’ve internally, we look at our value against our major competitors, that includes Woolworths and ALDI. And I’m not going to share those with you, because others will have different ways of calculating. But I’ve got no doubt that the majority of our customers, they have a project and they understand that they’re getting better value at Coles. And we’re driving very hard on our own brand product range to ensure that we’re very competitive with ALDI. And I think we’re generally, now very competitive and nothing like the price differential that you see in the U.K., between the majors there and ALDI. So we think we’ve invested more in price and that’s going to be our ongoing strategy. And I think the other numbers; the sales numbers reflect the consumer reaction to that. Shaun Cousins – JPMorgan Chase & Co.: Do you think the consumer appreciates to the extent of value that’s being provided? I mean, is there any element of disappointment that the customer remains either as promiscuous in terms of cross-shopping as they are? Or that they’re not just latching on to Coles as a place to get value, which is a proposition that the Bunnings business enjoys?

Yes. I mean, I’m very confident customers understand values. As I said, the customer walks in the store and they’ve got to tell us a budget. And they know what they’re putting in their basket each week, and they know if they’re putting more or less in their basket. And the other marketing side of things is important and we’ve done a lot on that front, as you know. But I think we’ve now got something like 26 consecutive quarters of positive comp growth in this business, and these numbers, as good as we head for some time.

We think…. Shaun Cousins – JPMorgan Chase & Co.: Oh, sorry.

To put it – Shaun, sorry, to put a bit more bones on that. We probably thought for a long period of time that the – if you like, on those indexes we measure, that we, in reality, are lower than customers would think, that customers are moving in the right direction in terms of their perception as well. So I’m not saying we’re disappointed, but we think there’s more to run on that. Shaun Cousins – JPMorgan Chase & Co: Great, thanks. Thanks for the color, Terry.

Your next question today comes from the line of Andrew Peros from Credit Suisse. Please ask your question. Andrew Peros – Credit Suisse Group AG: Thank you. And just another quick one from me on Bunnings, wondering if it’s possible for you guys to elaborate on trading across some of the key product categories within that business? Perhaps if you could give us a feel for maybe how the paint segment and hardware is performing specifically. And then, following on from that, and in light of the question that we had earlier, any comments you could make on the competitive landscape. Obviously, Masters have turned up the heat with a pretty aggressive paint promotion, so I was just wondering if you had any thoughts in that regard.

I don’t think we’ll give category information, Andrew. But I mean, as I said earlier, Bunnings has had growth across all key categories. And as we’ve said for a long time it’s a competitive sector. It is. We’ve responded. We’ve invested fairly heavily in price in the quarter, so we’ve continued to do that. And yes, there’s been a fair bit of competitive intensity in paint, but we think we’ve got real range authority in paint, and that’s borne out in the way the business is performing. Andrew Peros – Credit Suisse Group AG: Okay then. Thanks.

Your next question today comes from the line of James O’Brien from Credit Suisse. Please ask your question. James O’Brien – Credit Suisse Group AG: Good morning, guys, and thanks for the Q&A. I was wondering if you could give us a little bit more insight into the improved like-for-like performance at Coles. Maybe if you could speak to any promotions that were particularly successful or, if you can call out, to what extent the return to produce inflation contributed to that positive movement in your comp.

Yeah, I mean, that was – that helped, but there was deflation in grocery for, I mean I’ll tell few things, I’d say fresh participation has increased, even with that inflation fresh participation has increased. So the work we’ve done through the store, renewals, and new store format, and the work we’ve got, we’ve done through our supplier base to improve the offer in fresh continues to work for us. And I did talk about the promotional work we’ve done through flybuys, and that’s certainly, we’ve think been a positive for us. We’ve got something like 6.9 million active flybuys customers at the moment, and we see good results on that. Terry, do you want to add anything?

Yes. I mean I echo the fresh produce. That was a very strong period of volume growth, despite the volume, despite the inflation. We saw a very good growth in all of our other categories meat, bakery and deli, which was slightly stronger on the previous periods, which is always good. And then reinvestment in value was stronger, probably, in grocery than it’s been, certainly in the last 12 months. And we saw strong volume growth off the back of that as well. So really, across the board in Coles, it was quite good. James O’Brien – Credit Suisse Group AG: Okay, thanks. That’s good to hear.

Thanks.

Your next question today comes from line of Sam Teeger from Commonwealth Bank. Please ask your question. Sam Teeger – Commonwealth Bank of Australia: Good morning, Richard and good morning, Terry.

Good morning. Sam Teeger – Commonwealth Bank of Australia: Just in terms of the new format Target stores, just wondering if you can provide some commentary about how the trial has performed relative to your expectations, and also any thoughts around the timing of rolling out this new format across the network?

Actually, we’re heading down to a new stores that’s being opened South of Perth after this, this morning. The new stores so Frankston, Mount Gravatt, they’re performing well. They’re performing well because the stores look and feel bright and good to shop. The product range, as I said earlier, is better, and they’re cleaner and less cluttered because they’re not carrying clearance inventory that some of the other stores are. So a combination of those things means we’re getting good performance out of the stores. We are still trialling a bit, so we don’t have a plan. And those of you who know Wesfarmers know that we’re always reluctant to spend significant capital on businesses that aren’t making an adequate return. The Target team is very conscious of the need to turn around the underlying business before we start throwing significant amounts of capital at that business. Sam Teeger – Commonwealth Bank of Australia: Sure. And just following on, in terms of Target are you able quantify the price deflation for the quarter?

We could give you in terms of the – if you like, the first price, right price deflation meant that the average opening price points in stores was down about 11% on the previous. So that has been the biggest driver of reduction in sales, if you like is just that deflation that’s come through. Sam Teeger – Commonwealth Bank of Australia: That 11%, is that on the PCP or the prior quarter?

PCP. Sam Teeger – Commonwealth Bank of Australia: Great. And Terry, any comments on the Target inventory position relative to this time last year?

Unfortunately, it’s up. So we’re up about 10% in terms of carrying value. There’s a bit more on the water as well. But it’s up for various reasons. So at the end of 30th, September we were carrying Missoni range ready for that launch, so that represented about a third of the difference. We were carrying some new ranges in some new categories that we’ve gone into in particular as well around some office stuff and stationery. And we were also carrying versus this time last year, we were effectively not able to get a lot of our summer seasonal in which we spoke about, so we had more of that on the floor as well as. So if you – they represent about a third each but, in total, we were carrying quite a bit more inventory at the end of 30, September. So we’re looking forward now over the next three months for that coming down. Sam Teeger – Commonwealth Bank of Australia: Great. Thank you very much.

Your next question today comes from the line of Craig Woolford from Citigroup. Please ask your question. Craig Woolford – Citigroup, Inc.: Hi, guys. Can I just clarify with the comment you made about accelerated store closures in liquor? Can you give us some more context to what the plan is there?

Yeah, Craig, I mean Terry can add some colour, but it goes to the announcement we made at the end of last year. And so we said – we’ve said for a while we need to get the liquor network right. We brought in that provision last year, and it’s enabled us to now move forward and close stores that we want to get out of.

We had, we didn’t close any stores in the period, Craig, around enacting – in particular first choice, getting me out of some of those poor locations, if you like the plans were developed to deal with the people, and to also deal with the stock in those locations and other complexities. So I’d expect, as we said, during the rest of this financial year we’ll move forward on that front. Craig Woolford – Citigroup, Inc.: Is – will there be just liquor store closures, like?

No, I don’t think so. Basically, we’re still in line with where were when we made the provision. What it means is at the end of the first quarter, out of all of that provision we took up, at the moment we’ve only released about $2 million of it for minor stock issues, so, if you like, from a restructuring point of view we haven’t spent any of that provision at the moment, and that’s to come. Craig Woolford – Citigroup Inc: And if I squeeze it in, it’s only a minor issue, but it’s an interesting one: a slight revision of the previous corresponding period’s sales for liquor, for food and liquor, was like $9 million or $13 million actually, $13 million less for first quarter 2014. Not a material amount, but just intrigued as to the reasoning.

Yes, mainly around concession sales. We’ll come back to you on that Craig. Craig Woolford – Citigroup, Inc.: Okay, thanks.

Your next question today comes from the line of Shaun Cousins from J.P. Morgan. Please ask your question. Shaun Cousins – JPMorgan Chase & Co.: Thanks. Just a question on the discount department store space. In the Kmart had some challenges with entertainment, and Target’s obviously quite weak, down 7.7%. Do you think it’s the channel, in terms of discount department stores are just a challenged sort of retail format? Or do you think it’s the less affluent consumer, or more value focused consumer, that’s sort of resulting in some of these weaker trade – sorry trading performance? John L. Thornton: Yes, Shaun. I mean Kmart’s performance, I think, is not bad, pretty good. And we’ve got will be opening more space in that business. And it’s trading pretty well, particularly if you take out the home entertainment category. We are, where we can, in both businesses, reducing the size of resource space we’ve got in stores; again, because of entertainment category. There’s no doubt in my mind though that customers are very purposeful. And that’s why I’m pleased we’ve got these two businesses, because they’re value businesses. I’ve also got no doubt that as we get Target right, that business will turn around because the new offers we’ve got are resonating – and the new stores we’ve got are resonating with customers. And we’re doing a heck of a lot of work behind the scenes to get sourcing right, to get the cost base right for the business. So we’re keeping a very close eye on total space in those markets, and we’re very, very watchful of how any new space we’re opening is going, and we’re not going to live with underperforming stores either.

The one thing to follow-up on that is the lease terms are pretty important. So our lease terms for these stores are typically 10 years, so for anything new and so, if you like, the longevity of the lease space we’ve taken, hopefully, will give us flexibility to your concern overtime, if that was to play out. Shaun Cousins – JPMorgan Chase & Co.: Yes, I mean, maybe, but you made the point at the full year result that you thought the consumer was in an okay position. I mean your comp growth in Target’s deteriorated. Part of that might be sort of clearing inventory there, but do you still think the consumer’s in a reasonable shape?

Yes, I do. I mean I think if you look across all – across Coles, Kmart, Officeworks and Bunnings, and you’d say the consumer’s in. Shaun Cousins – JPMorgan Chase & Co.: Pretty good.

Yes. I don’t think there’s much difference frankly, Shaun. And Target, we’re going through some of the pain in Target as we did in Kmart some years ago when we moved to more of an everyday low price. It’s a challenge, but we’ve got to get off this high/low, drug that Target’s been on. To do that you’ve got to lower prices, and it just takes a while to get the customers into – understand that and realize, actually, that the price sticker to buy it today is going to be the price they’re going to have in three or four weeks time rather than they came back in its 40% off. So we’re going through very similar times, as we did in Kmart, in Target now. That’s I think more internal than external, I think the customer’s okay as long as you’ve got the right product offering; service range, price. That matters a lot. Shaun Cousins – JPMorgan Chase & Co.: Great. Thank you.

There are no further questions, at this time.

I know everyone’s got a busy day. Thank you for your time. And if there’s any further questions we’ll be happy to take them offline. Have a good day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.