Walmart Inc.

Greetings. Welcome to Walmart's fiscal year 2025 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 on your telephone keypad. Please note, this conference is being recorded. At this time, we'll now turn the conference over to Steph Wissing, Senior Vice President, Investor Relations. Steph, you may begin.

Thank you. Welcome, everyone. We appreciate you joining us and your interest in Walmart. Joining me today from our home office in Bentonville are Walmart CEO Doug McMillan and CFO John David Rainey. Doug and John David will first share their views on the quarter, and then we'll open up the line for your questions. During the question and answer portion, we will be joined by our segment CEOs, John Ferner from Walmart U.S., Kath McClay from Walmart International, and Chris Nicholas from Sam's Club. For additional detail on our results, including highlights by segment, please see our earnings release and accompanying presentation on our website. We will make every effort to answer as many of your questions as we can in the hour we have scheduled for this call. As a courtesy to others, 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 and non-gap reconciliations on our website at stock.walmart.com. Doug, that concludes my intro. We're ready to begin.

Good morning and thanks for joining us. We had another good quarter with strong sales growth and even stronger profit growth exceeding our expectations. The team not only drove our short-term results, but they also continued to drive change, setting the stage for our future. Their good work is resulting in our customers and members not only being able to save money on an increasingly broad assortment, but also to save time. Convenience matters, and we're uniquely positioned to provide it. When I'm out in stores and clubs around the world or shopping on our app, I'm seeing the benefits of doing the basics well. Inventories are in good shape, merchandising is improving, and our associates are making good things happen. The strength we saw for the quarter was broad-based. Our business outside the U.S. continues to lift the total company in terms of sales and profit growth. Womax had another strong quarter, and India Flipkart again delivered positive contribution margin, and PhoneBay continues to deliver amazing growth in total payment volume. In China, strong membership trends and Sam's Club continue to drive double-digit sales growth, and about half of our sales there are digital. We continue to gain market share, including in general merchandise, and transaction counts and unit volume are up across markets. In the US, for both Walmart and Sam's Club, comp sales were fairly consistent throughout the quarter. Food continues to be strong, and it's encouraging to see improvements in general merchandise. And our U.S. health and wellness business and Walmart and Sam's Club, primarily due to sales of GLP-1 drugs, is contributing to our strong comp sales. So far, we aren't experiencing a weaker consumer overall. Around the world, our customers and members continue to want four things. They want value. They want a broad assortment of items and services. They want a convenient and enjoyable experience buying them. And they want to do business with a company they trust. These four things are constant. But the way we provide them is changing and changing fast. The results we're delivering are due to real progress across these dimensions. As it relates to value, we're lowering prices. For the quarter, both Walmart US and Sam's Club US were slightly deflationary overall. Walmart US food prices were slightly inflated as we exit Q2, but down 30 basis points versus Q1. In Walmart US, we have more than 7,200 rollbacks across categories. Customers from all income levels are looking for value, and we have it. As it relates to assortment, our item and seller count continues to grow. Walmart U.S. marketplace sales grew 32% for the quarter. If you're a Walmart customer, you have so much to choose from. And if you're a seller, you're going to want to be on Walmart.com. As it relates to the customer or member experience, e-commerce sales grew about 20% for each segment and 21% overall. Sometimes it's most convenient or enjoyable to visit one of our stores or Sam's Clubs. Sometimes it's more convenient to pick up an order, and sometimes it's more convenient to get it delivered. Our store and club businesses are growing. Pickup is growing faster than our in-store or club sales, and delivery is growing even faster than pickup. Delivery accuracy and speed continue to improve. Our e-commerce progress creates more optionality for our customers and fuels the growth of our newer businesses. Globally, membership income grew 23%. Walmart Plus memberships were up double digits. And Sam's Club US achieved a record high member count. Globally, advertising grew 26%, including 30% growth for Walmart Connect in the US. Advertising sales driven by marketplace sellers were up nearly 50%. As it relates to strengthening our business for the future, we continue to be pleased with the automation work happening in our supply chain and our progress with technology overall. We're finding tangible ways to leverage generative AI to improve the customer, member, and associate experience. We're leveraging data and large language models from others and building our own. One example is that we've used generative AI to improve our product catalog. The quality of the data in our catalog affects nearly everything we do, from helping customers find and buy what they're looking for, to how we store inventory in the network, to delivering orders. we've used multiple large language models to accurately create or improve over 850 million pieces of data in the catalog. Without the use of generative AI, this work would have required nearly 100 times the current headcount to complete in the same amount of time. And for associates picking online orders, showing them high-quality images of product packaging helps them quickly find what they're looking for. Customers and members are already enjoying AI-powered search on our app and site. And now they'll have even more help with a new shopping assistant that provides advice and ideas, answering questions like, which TV is best for watching sports? Looking ahead, the assistant will be able to respond with more specific follow-up questions like, how's the lighting in the room where you'll place the TV? Helping our sellers on our marketplace is also an area where we see opportunities to be better using generative AI. As we work to do all we can to help our sellers grow their businesses, we're testing a new experience to select US-based sellers that allows them to ask us anything. We want our sellers focused on selling, so the more we can make it a seamless experience, the better. The new assistant will quickly summarize and provide the seller with succinct answers without them having to sort through long articles or other materials. The use cases for this technology are wide-ranging and affect nearly all parts of our business. And we'll continue to experiment and deploy AI and generative AI applications globally. We're anchored in the responsible use of AI while also moving with speed and in an EDLC way to meet our future needs and scale these experiences. Today's Walmart is different. We are people-led and tech-powered. We've put ourselves in a position where we can continue to grow because we're serving people however they want to be served. We can grow profit faster than sales while investing in our associates and lowering prices for customers and members. And we can grow ROI as we make the right capital investments and grow profitability. Before I close today, I'd like to welcome Bob Moritz as the newest member of Walmart's board of directors. Bob brings more than 38 years of global business experience, including as the global chair of PricewaterhouseCoopers until his retirement in June of this year. Bob's experiences and skills are highly relevant to the oversight of Walmart's governance and strategy, and we're excited to have him. As always, I'd like to thank our associates. They've delivered a great first half of the year, and we're looking forward to a strong second half. With that, I'll turn it over to John David.