Walmart Inc.

Greetings. Welcome to Walmart's second quarter fiscal year 2026 earnings call. At this time, all participants will be in listen-only mode. 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'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. Our team delivered strong top-line results again this quarter with sales up 5.6% in constant currency. Growth in transactions and units is helping drive our performance. We grew e-commerce sales by 25% globally with all segments exceeding 20% growth, led by Walmart US and Sam's Club US at 26%. Customers are liking our faster delivery speed. From a segment point of view, we grew international sales by 10.5% in constant currency, led by China, Walmex, and Flipkart. International continues to help lift our top-line growth rate. Sam's Club US delivered a strong comp of 5.9%, driven primarily by unit growth. Walmart US sales were stronger than we expected when we started the quarter. We grew comp sales by 4.6% with consistent strength throughout the quarter. Sales and general merchandise were positive in every segment and across categories in the US, led by apparel, media and gaming, and automotive. Again this quarter, we gained market share in the US and across markets internationally. Globally, we grew our marketplace by 17% and membership income by 15%. We grew global advertising by 46%, including Vizio. Walmart Connect in the US was up 31%, and that excludes Vizio. These strong growth rates in our newer businesses continue to change the shape of our income statement. Looking at profit for the quarter, adjusted operating income grew 0.4% in constant currency. This is below what we expected going into the quarter as we absorbed a headwind of 560 basis points for the expenses related to general liability claims in the U.S. Our businesses were able to overcome the additional expenses and still deliver profit growth. The model we're building gives us more price and wage flexibility, and it also means we're better positioned when unusual items come our way. John David will talk to you about our annual guidance in a minute. We're still driving towards growing profit faster than sales this year, and that's reflected in our guidance. Importantly, the composition of our inventory is in good shape as we start the back half of the year. We're up 3.8% globally and up 2.2% in Walmart U.S. With regard to our U.S. pricing decisions given tariff-related cost pressures, we're doing what we said we would do. We're keeping our prices as low as we can for as long as we can. Our merchants have been creative and acted with urgency to avoid what would have been additional pressure for our customers and members. They've done a terrific job managing pricing and mix across merchandise categories. They managed to generate rollbacks. They've made good quantity and flow decisions, and they've set us up well as we start the back half of the year. As it relates to what we're experiencing with customers and members here in the US, their behavior's been generally consistent. We aren't seeing dramatic shifts. The way things have played out so far, the impact of tariffs has been gradual enough that any behavioral adjustments by the customer have been somewhat muted. But as we replenish inventory at post-tariff price levels, we've continued to see our costs increase each week, which we expect will continue into the third and fourth quarters. Not surprisingly, we see more adjustments in middle and lower income households than we do with higher income households. In discretionary categories where item prices have gone up, we see a corresponding moderation in units at the item level as customers switch to other items or, in some cases, categories. As always, our customers are aware, smart, and value conscious. We have approximately 7,400 price rollbacks across our assortment, which is about 2,000 more than last quarter. Our rollback count in grocery was up 30% in the quarter compared to last year. Back to school is usually something of an indicator of how the holidays will go, and we feel good about how it went for us in terms of units and dollars sold and inventory sell-through at both Walmart and Sam's Club. Our top back-to-school items had a lower price than last year, and we offered a basket of everything students need for their first day of school for under $65. We had our Walmart U.S. store managers together last week for our holiday planning meeting where they got to see many of our new items and pricing for the upcoming season. We liked what we saw and heard, and we like our position for the back half of the year. We're expecting to have a good holiday season at Walmart. For a few quarters now, I've been commenting on our use of artificial intelligence. Our enthusiasm for how AI can help us serve customers and members better, improve the experience for our associates, and increase productivity continues to grow. It's been years since we made a structural change for a role reporting to the CEO, and we've done it in this case because we're clear on a path to accelerate. Daniel Denkers joined us to lead AI acceleration, product management, design, tech prioritization, and AI-related change management. Daniel brings tremendous expertise and experience from places like Instacart and Uber. We also announced a new role reporting to Suresh Kumar, our chief technology officer, that will focus on AI platforms. This role will help us increase innovation, speed, and productivity, own the AI platforms, and architect our intelligent system stack. We're building agents into the core of how we operate, including four super agents. There will be many agents that roll up to these super agents that our customers, associates, and other stakeholders experience. First is Sparky. Sparky is the customer-facing assistant you see smiling at the bottom of our app. Today, Sparky takes us from traditional search to intelligent AI-powered assistance. Sparky will develop agentic capabilities over time. Customers are giving us positive feedback, and we're excited about the roadmap ahead. As we improve and scale Sparky, we'll make it even smarter and more personalized. It'll be the primary digital vehicle for discovery, shopping, and for managing everything from reorders to returns. We see Sparky becoming an indispensable part of how people shop with us. The other super agents we're building include one for associates that'll bring everything into one place, from scheduling to sales data. One for our suppliers, sellers, and advertisers that they will use to manage things like onboarding, orders, and campaigns. And lastly, a developer agent built to scale innovation across the business by speeding up how we test, build, and launch new products. This is just the beginning of how we'll deploy AI over time. We see lots of opportunities, whether that's with digital twins of our facilities, which can help predict or prevent issues before they happen, or the accuracy of dynamic delivery windows, which we'll provide to 95% of US households by the end of this year. Our opportunities are numerous. We're seizing the moment with AI. I'll close today by thanking our associates for their hard work and ability to change. Since we shared our first quarter results, I've had the chance to visit with our associates in stores and clubs here in the U.S., India, and Mexico. Those conversations have left me feeling so encouraged. Our associates are leaning forward and they're excited about our future. They're doing a great job, and I'm confident they'll continue to learn, change, and strengthen our business. John David, over to you.