Walmart Inc.

Greetings. Welcome to Walmart's fiscal year 2024 first quarter earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Steph Wissing, Senior Vice President, Investor Relations. Steph, you may begin.

Thank you and welcome everyone. We're excited to discuss the results of a strong first quarter and our upwardly revised outlook for the year. Joining me on the call are Walmart's CEO, Doug McMillan, and CFO, John David Rainey. Following prepared remarks from Doug and John David, we'll take your questions. At that time, we will be joined by our segment CEOs, John Ferner from Walmart U.S., Judith McKenna from Walmart International, and Kath McClay from Sam's Club. In order to address as many of your questions as we can in the time allotted for this call, please limit yourself to one question. The operator will mute your line after your question has been posed. After management has responded, we will move to the next person in line. Today's call is being recorded, and management may make 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-GAAP reconciliations on our website at stock.walmart.com. Thank you for your interest in Walmart. Doug, we are now ready to begin.

Good morning, and thanks for joining us to discuss our Q1 results. We had a strong first quarter. Sales growth was strong globally, including growth of 26% in e-commerce. Profit grew much faster than sales, and we made further progress on inventory levels. The omnichannel model we're building continues to resonate with customers and members. As expected, a higher mix of sales in the food and consumables categories negatively affected gross profit, but strong expense management and progress with our newer, mutually reinforcing businesses helped us grow profit ahead of sales at 17.3%. The business model we outlined at our recent investor conference is taking shape. International had a great quarter, continuing our momentum from last year. Sales grew 12.9% in constant currency, and profit grew even faster at 41%. China, Walmex, and Flipkart all saw double-digit top-line growth. In China, the reopening of the economy coincided with the Chinese New Year season, and that drove traffic to our clubs and stores. Sam's Club China continues its strong performance. For India, a group of us were there last week, and we left even more excited about our opportunities. Flipkart and PhonePay are doing well. Our Walmart tech team there is strong, and we have a big opportunity to increase our exports from India across quite a few merchandise categories. In the U.S., both Walmart and Sam's Club performed well with good transaction growth, positive units in food, and strong e-commerce growth. We continue to gain market share in the grocery category, including with higher income and younger shoppers, and we saw good growth in membership income in both businesses. At Sam's Club US, member count and plus member penetration hit all-time highs in the quarter. Our growth is now being driven by convenience in addition to price. We see it across formats and income and age cohorts. In terms of inventory, we're in good shape. In-stock is improving and excess inventory keeps coming down. We see it in the numbers and I'm seeing it on store and club visits. Globally, customers continue to seek value given the impact of inflation. We see it in the U.S. and in other markets like Mexico, Canada, and Chile. Private brand penetration is up about 110 basis points versus last year for Walmart U.S. and 50 basis points for Walmex. We continue to manage our price gaps and deliver value for our customers. In Walmart US, general merchandise costs are now lower than a year ago, which is great, but they're still higher than two years ago on like items. In the dry grocery and consumables categories like paper goods, we continue to see high single digit to low double digit cost inflation. we all need those prices to come down. The persistently high rates of inflation in these categories, lasting for such a long period of time, are weighing on some of the families we serve. This stubborn inflation in dry grocery and consumables is one of the key factors creating uncertainty for us in the back half of the year because of the cumulative impact on discretionary spending in other categories, specifically general merchandise. We think we've got guidance where it should be, reflecting the appropriate amount of conservatism given the external environment. We feel very good about our performance, our multi-year momentum, and our ability to serve people however they wanna shop and do it at a value. We're executing well and performing well in all three segments. John David will say more about how we're thinking about guidance in a minute. As we look ahead to Q2 and the rest of the year, we're focused on getting our merchandise costs and retails down to fight inflation for our customers and members, which will help us with mix, pickup and delivery execution, whether that comes from a store or an FC, expense management, and inventory management by item and category. There are places to play offense and there are places to be more conservative. We shouldn't be treating every category the same way and we aren't. We're playing offense where we should and controlling what we can control. Last month, we hosted our investor meeting in Florida where we visited a DC, a store, and a Sam's Club. For those of you that made that trip, thank you. We really enjoyed it and hope you did too. We had three takeaways. First, we're positioned to grow because we can serve customers and members however they want to be served. Second, over time, we expect to grow profit faster than sales and improve operating margin due to productivity improvements and the mix of businesses. And third, we'll be disciplined with capital to improve ROI as we grow operating income. I hope you can see how the investments we've made in recent years are driving results. We added nearly $11 billion in sales in Q1, delivered 58 basis points of expense leverage, and expanded operating margin by 34 basis points. As for returns, we want operating profit growing faster than sales, and we expect to see an inflection in ROI in the coming quarters as we begin to lap large one-time items from past quarters. The investor meeting also gave us an opportunity to show off a piece of the automation we're working on in an ambient DC. And while it's an important piece of what we're building, our overall set of capabilities go far beyond that. We're building a more connected, intelligent, and automated network. We're adding market fulfillment centers, or MFCs, which utilize automated storage and retrieval systems. And we expect to add thousands of electric vehicles to support our last-mile delivery capabilities. It's about creating a supply chain that's better, not just bigger. We're excited about how our new capabilities will help our associates by making some of our more physically demanding jobs into more rewarding, higher-skilled career paths. We're hosting our annual Shareholders Week events in a couple of weeks here in Northwest Arkansas. Part of the experience will include a tour of an MFC we've just opened. It'll be a good chance to see another piece of what we're building. I'll close by saying thank you. Thank you to our associates for helping us deliver another strong quarter. We're proud of them and pleased that both Walmart and Sam's Club in the U.S. were recently certified as a great place to work by the industry leader in workplace excellence. Thank you for your interest in our company. Now over to John David.