Walmart Inc.

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

Thank you and welcome everyone. We're excited to discuss with you the results of a strong second quarter and our upwardly revised outlook for the year. Joining me are Walmart 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 Cath McClay from Sam's Club. In order to address as many 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, and once 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-gap reconciliations on our website at stock.walmart.com. Thank you for your interest in Walmart. Doug, we are now ready to begin.

Good morning, everyone, and thanks for joining us. We had another strong quarter. We're gaining share across markets and formats, growing units sold, transaction counts are positive across markets, and growth in operating income is outpacing sales. We're really pleased with our first half performance. For the quarter, comp sales for Walmart U.S. were ahead of where we thought they'd be at 6.4%. Sam's Club U.S. was 5.5%, and sales for International were up 11%, led by double-digit growth at Walmex and China. Flipkart's GMV was also strong. The team is driving results in the short term and building for the future. We're a people-led, tech-powered, omnichannel retailer dedicated to helping people save money and live better. We like who we are, and we like who we're becoming. We're positioned for growth. We can serve people how they want to be served, whether that's in a store or club, picking up an order curbside, or having it delivered. We continue to grow some of our newer businesses, which shape the overall model in a positive way, helping to enable us to grow profit faster than sales. We're setting the right capital priorities, and you can expect us to continue investing in the areas we've talked about, like technology, including automation, store and club remodels, and with new stores and clubs in select markets. As it relates to technology, our approach to new tools like generative AI is to focus on making shopping easier and more convenient for our customers and members, and helping our associates enjoy more satisfying and productive work. Ultimately, the power of generative AI or any technology is only as good as the data that powers it. Our data assets are unique, and we're excited about the potential to leverage them in new and impactful ways. We're taking large language models developed by our partners and by the broader tech community and adding retail context to create models that are uniquely suited to the needs of our customers, our associates, and our supply chain. We'll unlock value for shareholders through the combination of our physical automation work with our data and increasingly intelligent software. We have a sharp focus on ROI as we drive results and set our capital priorities. The financial framework we laid out at our investment community meeting in April is evident in our results from the last two quarters. The remodel program I mentioned includes items to support our goal of becoming a regenerative company as we put things like new refrigeration equipment and EV charging stations in place. I was in Chile last week where I got to participate in the grand opening of a new hydrogen plant in Santiago that supports our strong business in that country. While I'm on the subject of regeneration, we recently announced a new collaboration focused on supporting US and Canadian farmers to help improve soil health and water quality. Our collective goal is to enable and accelerate the adoption of regenerative agricultural practices on more than 2 million acres of farmland and deliver 4 million metric tons of greenhouse gas emission reductions and removals by 2030. Some days I still get amazed by all the good work happening across our company. As a global retailer, we see how our customers and members are affected by what's happening at a macro level and how that influences their behaviors. Jobs, wages, and pockets of disinflation are helping our customers, but rising energy prices, resuming student loan payments, higher borrowing costs, and tightening lending standards, and a drawdown in excess savings mean that household budgets are still under pressure. I was in Calgary visiting stores a couple weeks ago, and our Canadian customers are feeling the pinch of higher interest rates faster than in the U.S., given their shorter-term mortgages. When you put all this together, we see families that are discerning about what they're spending on. They're setting priorities and spending on the things they care most about. We saw that during the first half of the year with Chinese New Year and Easter, and more recently with July 4th and the start of back to school, where sales are ahead of plan so far. We see them buying more private brand items and they're buying more grocery staples and in-home meal options consistent with eating at home. Our customers and members are resilient. They're looking for value and they trust us to be there for them. we see people across income cohorts come to us more frequently looking to save money on everyday needs. That gives us an opportunity to drive conversion in more discretionary categories. We're encouraged by how general merchandise performed during the second quarter versus our expectations. We still expect food, consumables, and health and wellness, primarily due to the popularity of some GLP-1 drugs, to grow as a percent to total in the back half. But the trends we see in general merchandise sales make us feel more optimistic about those categories in the back half of the year. Our stores and clubs give us a competitive advantage and power our omnichannel model. Our curbside pickup business continues to grow as people look for ways to save time, and store-fulfilled delivery is now growing faster than pickup across all three segments. Delivery speed and accuracy are obviously important, and we lack how we're leveraging our physical assets. In the U.S., we have more than 4,000 stores and nearly 600 Sam's Clubs making same-day deliveries, and in nearly 2,000 stores and clubs internationally. We're increasingly measuring those deliveries in hours rather than days. In China, where we deliver from all our stores, nearly 80% of digital orders are delivered in under one hour. I like how we're constantly improving delivery speed. It's important to our customers and to our strategy. And I like how we're building mutually reinforcing businesses. Running great stores and scaling commerce are and will be our top priorities. The way we design them, along with our marketplace, fulfillment services, and advertising business is key. We'll keep prioritizing Omni Retail, but we have good opportunities in healthcare and financial services in multiple markets. The growth of phone pay has been fantastic, and we're building other financial products like Cash in Mexico and through one here in the US. We continue to build our healthcare services capabilities with clinic expansion. As I look at the remainder of the year, our immediate focus is on getting product costs and retails down to fight inflation, which will help with mix. Improving execution of pickup and delivery orders, expense management, and inventory management by item and category. I'll wrap up by saying a big thank you to our associates. As always, they're making a difference every day for our customers and members. As we close out back to school and get ready for the holidays, their execution day to day and commitment to our customers and members is as critical as ever. Thank you for your interest in our company. Over to you, John David.