Woolworths reported FY22 EBIT down 1%. However, 2H22 was encouraging with EBIT up 8%. Australian Food had higher gross margins and improved cost management. Food inflation remains a tailwind for sales and earnings. We expect a tough 1Q23 in sales for Australian Food but then a recovery, and profit margins should rise substantially this year given lower COVID-19 costs and gross margin gains. There are partial offsets from weaker EBIT in NZ which is largely COVID-19 related and much higher overheads.