Walmart Inc.

Greetings. Welcome to Walmart's fiscal year 2024 third 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. At this time, I'll turn the conference over to Steph Wissink, Senior Vice President of Investor Relations. Steph, you may begin.

Thank you and happy holidays, everyone. Joining me today at our home office in Bentonville are Walmart CEO Doug McMillan and CFO John David Rainey. Doug will begin with his reflections on the quarter and year. John David will follow with his view of enterprise results and segment highlights using our financial framework of growth, margins, and returns before speaking to our updated guidance for the year. For specific segment level results, please see our earnings release and accompanying presentation on our website. Following prepared remarks, we'll take your questions. At that time, we will be joined by our segment CEOs, John Ferner from Walmart US, Kath McClay from Walmart International, and Chris Nicholas from Sam's Club. In order to address as many questions as we can, please limit yourself to one question. 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, over to you.

Good morning, everyone, and thanks for joining us to talk about our third quarter results and how we're seeing the rest of the year. Our value proposition continues to resonate with customers, helping us gain share and drive e-commerce growth. We're on track to grow adjusted operating income at a faster rate than sales for the year, consistent with what we discussed at our investor meeting earlier this year. We had strong revenue growth for the quarter across each of our segments. Comp sales for Walmart U.S. were 4.9% and 3.8% for Sam's Club U.S., Sales for Walmart International were up 5.4% in constant currency, led by Walmex and China. Sam's Club continues to perform well, both in Mexico and China, and while strength was broad-based for Walmex, our Bodega Arara business is worth calling out as it continues to deliver outstanding growth. E-commerce sales were up 24% in Walmart U.S., 16% in Sam's Club U.S., and 15% globally. Timing of our Flipkart Big Billion Days event, which moved from Q3 last year to Q4 this year, affected comparisons in our international segment, leading to a decline of 3%. So we'll see the benefit from the timing shift as we report next quarter. Across markets, the team did a nice job driving our seasonal events. Our in-stock and inventory levels are in good shape. We finished down 1.2% in inventory for the total company, including down 5% for Walmart U.S., Both our top line and adjusted EPS came in better than what we projected at the beginning of the quarter, but we could have done a better job on expenses, which is reflected in adjusted operating income growing less than we expected. We had a couple of unexpected expense increases in SG&A, and you'll hear more about those when John David walks through the numbers. In the U.S., pricing levels in many food categories continue to be a concern. Overall, our product costs are up versus last year, and they remain up even more on a two-year stack, which is putting pressure on our customers. Beef prices are high, but we're happy to see lower pricing in dairy, on eggs, and with chicken and seafood. The pockets of disinflation we are seeing are helping, but we'd like to see more, faster, especially in the dry grocery and consumables categories. The other good news is that general merchandise prices continue to come down. GM is down low to mid-single digits versus last year. That enables us to roll back pricing, which will help our customers during this holiday season when general merchandise is so important for gift-giving. We still see pressure from mix, including outside the U.S., which we expected, but I like the market share gains we're seeing in this category. In the U.S., we may be managing through a period of deflation in the months to come. And while that would put more unit pressure on us, we welcome it because it's better for our customers. When I look at our P&L, it's continuing to change shape. Mentally, I break it down as a combination of a traditional retail P&L and a newer version that starts with our digital businesses. It flows from first- and third-party e-commerce pickup and delivery to businesses like membership, advertising, and fulfillment as a service. It includes some faster growing, higher margin components that combined with the more traditional P&L gives us a business model that's more profitable in percentage terms as it grows. We saw strong growth in all these areas for the quarter. And when you put it together with the supply chain automation work we're doing, you get a more sustainable business that can grow more effectively over time and create a better mix along the way. Marketplace is one of our engines for these mutually reinforcing businesses. meaning that marketplace growth pulls other businesses like fulfillment through. Back in September, we held our first-ever Marketplace Seller Summit. We hosted thousands of current and potential sellers to let them see firsthand our commitment to this business and how we'll grow it together. Since the beginning of last year, we've more than doubled the number of items available to customers on our U.S. marketplace. It's an important piece of what we're building, and it's growing fast, and not just in the U.S., We have a unique opportunity to grow in India, Mexico, Canada, and Chile. We love the opportunity to grow our assortment this way so customers can get what they want, when and how they want it. We're making shopping easier and more convenient. Our net promoter scores for pickup and delivery in Walmart US are improving, and we've started using generative AI to improve our search and chat experience. We've released an improved beta version of search to some of our customers who are using our app on iOS. And the coming weeks and months will enhance this experience and roll it out to more customers. When I step back and look at the company overall, I love what we're building and how we're building it. We've got a good hand to play and a strong team making things happen. It's our recipe for growth and improved margin and returns we've been discussing with you. Everyday prices are a foundational component of us fulfilling our purpose. We bring EDLP to life on a year-round basis by doing things like offering a Thanksgiving meal in the U.S. and Canada that costs less than last year. We're offering tremendous value for things like fashion, electronics, and seasonal decorations, and helping remind people that when they're looking to buy toys, we're the place to come because we have the right product at the right price. This same focus on purpose and execution came through when I was visiting Chile, Canada, and China earlier this quarter. It was my first time back in China since before the pandemic. Our team there runs some of the most incredible Sam's Clubs in the world, and they continue to be a leader for us in terms of digital penetration and innovation. As I wrap up, I know we're all concerned about events across the world. war, acts of terror, political unrest, impacts from storms like those in Mexico from Hurricane Otis, the pressure we're feeling from stubborn inflation in some categories, and other challenges beyond our control. As for our company, we care about everyone. We want to be a place where literally everyone feels comfortable and welcomed to shop or work. We want to live our values and create a warm, safe, and fun place for the hundreds of millions of people that will shop with us in the days and weeks ahead. I'm grateful to be part of this big team, grateful to work alongside our associates. Now I'll turn it over to John David.