Walmart Inc.

Greetings. Welcome to Walmart's fiscal 2022 first quarter earnings call. At this time, all participants are in almost an only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dan Binder with Investor Relations.

Thank you, Rob. Good morning and welcome to Walmart's first quarter fiscal 2022 earnings call. I'm joined by a few members of our executive team, including Doug McMillan, Walmart's president and CEO, Brett Biggs, executive vice president and chief financial officer, and John Ferner, president and CEO of Walmart U.S. In a few moments, Doug and Brett will provide you with an update on the business and discuss first quarter results. That will be followed by our question and answer session. Before I turn the call over to Doug, let me remind you that today's call is being recorded and will include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include but are not limited to the factors identified in our filings with the SEC. Please review our press release and accompanying slide presentation for a cautionary statement regarding forward-looking statements as well as our entire safe harbor statement and non-gap reconciliations on our website at stock.walmart.com. It is now my pleasure to turn the call over to Doug McMillan.

Good morning and thanks for joining today's call. Our results for the first quarter were strong. We're pleased with our sales momentum and adjusted EPS growth of 43% versus last year. We had strong performance in all three segments. As the pandemic continues, it's impacting the countries where we operate in different ways. So our teams are adapting to overcome the challenges and deliver the strong results we're sharing today. We continue to be grateful to all of our associates for their dedication to serving others. 2021 brings its own unique challenges and uncertainty. But overall, my optimism is higher than it was at the beginning of the year for several reasons. In the U.S., economic stimulus is clearly having an impact, but we also see encouraging signs that our customers want to get out and shop. Our execution is improving despite the hurdles presented by the pandemic. The second half will likely have more uncertainty than a normal year, but we like our position. Our stores are getting stronger, and our e-commerce capabilities are expanding as we continue to grow. Customers will decide how and when they want to shop, and they'll find us ready, whether they want to shop in-store, pick up an order, or have it delivered. Key elements of our strategy are coming together nicely. We saw an acceleration of traffic in our stores, gained market share in grocery, improved in-stock levels, and grew e-commerce sales globally by 43% in constant currency, excluding recent divestitures. Globally, commerce penetration now represents over 12% of total company sales, an increase of 340 basis points over last year. Looking ahead, we'll navigate the supply chain challenges and inflationary pressures, whether that's in cost of goods or wages. We'll monitor our price gaps and adjust as appropriate with both customers and shareholders in mind. As it relates to COVID-19, the past several weeks have been more challenging in some countries. India, Canada, Chile, and South Africa are priorities at the moment. Supporting our associates is our primary focus, but we're also investing our resources to support the countries as we find opportunities to do so. In India, we're donating oxygen concentrators, PPE, and financial support. When it comes to helping people get vaccinated, we're engaged in multiple countries. In the U.S., we've administered millions of doses. We're taking steps to encourage our associates and everyone to become vaccinated. Given CDC guidance, our U.S. associates that have been vaccinated can now work without a mask if they choose to, and we've added a cash incentive as one more step to encourage vaccinations. All of our Walmart and Sam's Club pharmacies in the U.S. are administering vaccines, and we can provide them without an appointment. We've also collaborated with national and local organizations to support more than 200 community events across the country so far. In India, we're facilitating vaccinations for our associates and their households and our flip card and phone pay contractors, more than 200,000 people. Across the countries where we operate, we'll keep looking for more places to make a difference. This pandemic won't be over until it's over for everyone. In addition to combating the pandemic, we also announced a new commitment to U.S. manufacturing during the quarter. Over the next 10 years, we've set a goal to purchase an additional $350 billion on items made, grown, or assembled in the U.S. We estimate this commitment will create more than 750,000 new American jobs and avoid 100 million metric tons of CO2 emissions. We also want to make it easier for manufacturing in the U.S. to flourish. That's why we're launching an initiative called American Lighthouses. We'll bring together partners from the supplier community, academia and government, among other groups, to identify and overcome top-down barriers to U.S. production. We also have other exciting news to share as we continue to invest in the technologies of tomorrow. In collaboration with Engie North America, a power generator and services company, we're adding more than 500 megawatts to the U.S. renewable grid through three separate wind projects. Together, these projects are expected to supply renewable energy to hundreds of stores, clubs, and distribution facilities annually. That's enough renewable energy to power over 240,000 average American homes for a year. That's on top of the four gigawatts of renewable energy currently supplied by our projects globally. This is one more example of the important work we're doing to become a regenerative company. Now let's talk more about our results for the quarter. Walmart U.S. had another strong quarter. The team delivered for our customers as they shopped in our stores and online, and additional government stimulus payments created a tailwind. Our comp sales of 6%, including 37% growth in e-commerce, were strong. Strength was broad-based across categories, including apparel, home, hard lines, and seasonal. I've recently visited stores, clubs, and supply chain facilities in New Jersey, Delaware, D.C., Ohio, New Mexico, Texas, Illinois, California, and Florida. I continue to be grateful for the job our associates are doing, and I'm impressed by their spirit. They're operating safely in a pandemic, improving our in-stock and standards, working hard to fulfill pickup and delivery orders, and vaccinating millions. Doing all those things at once isn't easy, and we've had our challenges. But our associates continue to step up, and they're strengthening our position as they do it. In the U.S., our first-party retail business is strong, but we're also making good progress in other important parts of our business. Marketplace GMV, fulfillment services, and advertising income with Walmart Connect are all strong. The flywheel we showed you in February is being built. Each component is positioning us to serve the customer better while diversifying the model. As we previously shared, the top of the flywheel starts with being the best first place people shop. Store remodels, investments in pickup and delivery capacity, and sales of Walmart Plus fall into this category of activities. We need more capacity to get ahead of demand, and we remain convinced these investments are smart ones. This is one of the keys to selling more Walmart Plus memberships, which is an important piece of our strategy over time. In addition to work at the top of the flywheel, we'll continuously add brands, assortment, and capabilities to our e-commerce general merchandise business with first-party inventory and marketplace expansion. We'll invest in our general merchandise business and grow in higher margin categories. The announced acquisition of Zkit is a great example. This startup combines fashion and technology through a dynamic virtual fitting room and underscores the desire to grow our apparel business aggressively. We continue our work to build a larger health and wellness business and help customers and associates have a better experience when it comes to their healthcare. Our acquisition of MeMD is a big step in that direction. Adding a telehealth capability was important. Just as we're doing with Core Retail, we're building an omni-channel health and wellness business. At Sam's Club, the momentum continues. Our items are improving, membership and sales comps are strong, and the team keeps adding and scaling capabilities like curbside. We're seeing strength in categories associated with social gatherings, as well as an increase in business member activity. Categories like restaurant supplies are coming back. We saw tremendous growth in membership income for the quarter, and overall membership counts are at an all-time high. Like our source business, government stimulus helped our results, but I'm confident the underlying business is strong and moving in the right direction for our members. Our international team has been busy transitioning the portfolio to higher growth markets, and it's working. As you'll recall, we recently divested our businesses in the UK, Japan, and Argentina. And as a result, net sales for the quarter declined about 11% year on year. On a like-for-like basis, when we removed the recently divested markets, net sales increased 5.1%. These are good results and demonstrate the segment's ability to deliver growth for the enterprise. In India, for the first quarter, Flipkart and PhonePay continued to experience strong growth as annualized total payment value run rate at PhonePay grew by more than 150% versus last year. At Flipkart, monthly active customers and users are key metrics. and we're performing well. Our recent announcement of our intent to acquire ClearTrip, a leading online travel company, underscores our commitment to transform the customer experience through digital commerce. Our growing base of customers means we need to continue to add new capabilities, including areas such as logistics and data storage. The recently announced partnership with Adani Group will help us do just that. Walmex continues to be strong, and the flywheel is coming to life. Our assets in this market uniquely position us to serve customers in new ways, and they're responding. In Mexico, sales in e-commerce increased 166%, and our same-day delivery service is now available from 680 locations. Similar to the U.S., we're expanding our business to include more than just traditional retail. A few areas of note include the advertising business, which saw an increase of more than 100% in new advertisers, and our new mobile phone services network that provides voice, data, and home broadband, bringing access and value to our customers. We doubled the number of users of these services during the quarter as customers enjoy the convenience of adding data to their plan right at the checkout. In China, our e-commerce business and Sam's Club continue to resonate with customers and members. Helped by a strong Chinese New Year, the club business delivered strong sales across all categories, leading to double-digit comp sales growth. We grew overall e-commerce sales 60% on top of impressive growth last year. Results from our business in Canada were good, even as lockdown measures intensified as the quarter progressed. We started with strong sales in stores and e-commerce, but COVID-19-related restrictions on sales of certain merchandise categories towards the end of the quarter pressured our performance. The underlying business is strong, and we're confident in our omnichannel model for this market. I'll close today by thanking everyone for a strong quarter. It all starts with our associates and their focus on serving our customers and members. We're being aggressive and dialing up innovation and speed. We're moving fast to learn new skills and to sharpen our edge on existing ones. And we'll move even faster as we invest in key areas to accelerate growth into the future. Thank you for your interest in our company. Now I'll turn it over to Brett.