Walmart Inc.

Greetings and welcome to the Walmart third quarter fiscal year 2025 earnings call. At this time, all participants are in a listen-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 call over to your host, Steph Wissink, Senior Vice President of Investor Relations. Thank you. 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. our associates delivered another strong quarter, continuing our momentum. They're working hard to save our customers and members time and money while simultaneously transforming our business for the future. For the quarter, sales grew 6.1% in constant currency and profit was up 9.8%. Globally, we drove strong growth in e-commerce, up 27%. Advertising grew 28%, and membership income was up 22%. This helped us grow profits faster than sales, even as we worked to help lower prices and invest in our associates. The rapid growth from these newer businesses is helping us strengthen our business model. All three segments of our business performed well. Sales for Walmart International grew 12.4% in constant currency. Comp sales for Sam's Club US were 7%. And Walmart US delivered comp sales of 5.3%. Transaction counts and unit volumes were positive across each segment. And we continued to gain market share in the US, both in grocery and general merchandise. Households earning more than $100,000 made up 75% of our share gains. In the U.S., in-store volumes grew, curbside pickup grew faster, and delivery sales grew even faster than that. Becoming more convenient for our customers and members is helping drive our growth. We had almost no like-for-like inflation in the U.S. this quarter. It was nice to see general merchandise grow low single digits in the U.S., even as prices are deflated by over 4%. We currently have about 6,000 rollbacks in Walmart US across all categories. We're feeling some margin pressure from growth in GLP-1 drugs, so we're pleased to see general merchandise sales be positive. Across the company, inventory is in very good shape. The unique characteristics of this quarter included a US port strike, two large hurricanes, and the flooding they caused. Our team did a really nice job preparing before those events, and they worked hard to aid recovery after the storms. The team that comes together from across the company to form our emergency operations center is impressive. They coordinate closely with federal, state, and local leaders. They make sure our associates are accounted for and safe. And we set up distribution points at stores in the affected areas where we serve hot meals, give away supplies, offer showers, laundry services, and phone charging. Through Walmart and the Walmart Foundation, we made a $16 million commitment, which we've delivered on. This includes 178 truckloads of needed supplies and cash grants, totaling nearly $10 million to support local needs. Our truck drivers and other associates helped facilitate or serve 544,000 meals in the affected areas, supported by our nonprofit partners. Our customers and members contributed an additional $14.5 million from in-store and online campaigns. I got a chance to see our associates in action in Georgia and here in Bentonville, and I couldn't be prouder of them all. In total, the storms and the port strike lifted our sales growth by a small amount and negatively affected operating income growth by a larger amount. The takeaway should be that we delivered on our financial framework despite the noise from these events. This was clearly a strong quarter, and the changes we've been working on for years are continuing to bear fruit. We're well positioned to serve people how they want to be served, whether that's coming into a store, picking up an order, or having it delivered. Our team has changed, developed new capabilities, and learned how to work in new ways. We build new tech more effectively than we used to, and we're doing it with more speed. This is a more customer and member-centric organization. I got to attend our Sam's Club grand opening in Grapevine, Texas a few weeks ago, and it was exciting to be there. We made quite a few changes to the design of this club. We have an expanded area for curbside pickup and delivery orders, new category adjacencies with consumables near the pickup and delivery staging area, and a stronger general merchandise presentation that has improved the sales mix of those categories. Boldly, our Sam's team also eliminated traditional checkouts. So our members can use Scan and Go and the new computer vision exit technology to exit the club faster. Just imagine 150,000 square foot Sam's Club with no traditional checkouts. The week after that grand opening in Texas, I made a trip to China. The week before I arrived, we opened our 50th Sam's Club there with 60,000 members. All 50 clubs are performing well, and we have more to come. About half our sales in China are digital, thanks in part to our network of over 350 club distribution points, which provide one-hour delivery service to members, extending the reach of our traditional clubs. We've learned a lot from operating around the world, and we continue to learn from places like China where social commerce, including live streaming, are growing quickly, and places like India where financial services have digitized at scale. Last week, I got to spend a couple of days with our team in Mexico. where our team is driving innovation in lots of areas, including with our cellular service, Byte, our financial services business, Cashy, and with healthcare services, where we've helped over 400,000 customers visit a doctor in our in-store healthcare clinics. As in other markets, our Walmex team is growing e-commerce, adding newer businesses, including marketplace and advertising, and becoming an omni-channel retailer. As I mentioned last quarter, we're seeing early tangible results from the deployment of generative AI. I'm a little hesitant to talk about AI because I know someone will hear this in the months and years to come and chuckle about how old school it sounds given how fast things are changing. But it's important to convey that we're learning and applying generative AI, AI and machine learning to solve the practical opportunities right in front of us. Our data sets are valuable and we're learning to put them to work to improve the customer and member experience and assist our associates as they do their daily work. I'll build on the example I shared last quarter about how GenAI has helped us improve our product catalog by mentioning the personal shopping assistant we're building. We've had it in beta form for five months, and it continues to improve. I'm excited about how it will improve the customer experience in the months and years to come, enabling us to provide a better experience than the one that starts by typing into a search bar and getting a list of results to choose from. We're racing to improve all the things that people love about shopping and remove or diminish all the things they don't. In addition to the customer-facing work, 15 months ago, we deployed a GenAI tool to all of our U.S. home office associates. It's called My Assistant. We've expanded access to home office associates in 13 additional countries, and we continue to see engagement grow. It provides our associates a place to access knowledge and time-saving actions in a secure environment. Since launch, 50,000 associates have used My Assistant to ask 1.5 million questions. Our leaders can get insights into people-related metrics, such as hiring and retention. And associates can get answers to common policy questions like, how do I order my discount card through a conversational experience? We'll continue to build on these use cases to enable more productivity and help identify the next best task for our associates in stores and clubs. Just as we're enhancing the customer experience with GenAI, we're working to remove friction for our associates so they can do high-value work that they enjoy, like serving our customers and being merchants. I continue to be excited about how our associates are learning and changing the way they think and work. With that, I'll wrap up and turn it over to our CFO, whose Baylor Bears beat my Arkansas Razorbacks in basketball recently. We'll see you in March, John David.