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spk02: Greetings. Welcome to Walmart's fiscal year 2023 fourth 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 should require operator assistance during the conference, please press star to zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Steph Wissing, Senior Vice President of Investor Relations. Steph, you may now begin.
spk00: Thank you and welcome to our Q4 fiscal 23 earnings conference call. Joining me today from Walmart's home office in Bentonville are CEO Doug McMillan and CFO John David Rainey. We'll follow a similar format to prior calls, where Doug and John David will share their thoughts on the quarter, year, and year ahead. Following, we'll open a call to your questions. For the Q&A portion, we've asked our segment CEOs to join, including John Ferner from Walmart U.S., Judith McKenna from Walmart International and Cass McClay from Sam's Club. 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. We are now ready to begin. Doug, over to you.
spk18: Good morning, everyone, and thanks for joining us. We're excited about our momentum. The team delivered a strong finish to the year, and as our results in the last two quarters show, we acted quickly and aggressively to address the inventory and cost challenges we faced last year. We built momentum in the third quarter, and that continues. We're well positioned to start this fiscal year. For fiscal 23, we added $38 billion in sales globally, and we crossed $600 billion in revenue for the first time in our company's history. Globally, e-commerce now represents more than $80 billion in sales and over 13% of our total sales. Walmart U.S. grew sales by more than $27 billion. International had another strong year with sales and profit growth of about 9%, excluding divestitures, restructuring, and currency. And Sam's Club U.S. grew sales by more than $10 billion as we delivered double-digit comp growth for the third consecutive year, with membership count at a record high and strong growth in membership income. All three segments have momentum. We're grateful to John, Judith, Kath, and their teams for how they're leading these businesses and showing results. The holidays were strong for us. From Thanksgiving to Christmas to Diwali to Singles Day, our teams were ready. We had aggressive plans, and we delivered. Around the world, the teams leaned into our food and consumable strength, taking share in places like the U.S. and Canada, and delivered a good experience for customers and members in general merchandise. They drove sales and landed the seasons in a very good inventory position when it was all said and done. We ended the quarter with inventory about flat to last year, which is better than we anticipated, and even better when you consider how inflation lifts that number. And they did it while improving in stock levels. I'm impressed with how they brought it all together and want to highlight our store, club, and supply chain associates who handled a lot of volume to make this happen. As we navigated the short term, we also advanced our strategic priorities. Big picture, our strategy is simple. It's to bring our purpose to life for those we have the privilege to serve. We're a people-led, tech-powered, omnichannel retailer that's dedicated to helping people save money and live a better life. That's who we are. Why do we exist? It's to help people save money and live better. How do we do it? By being people-led with clear values, a unique culture, and tech-powered. We're a people business focused on customers, members, and associates. We're constantly adjusting to put the right combination of wages, benefits, and education in place so that our people can build lifelong careers and achieve their full potential. You can start your career assembling bicycles and end up leading all of our U.S. stores. You can start as a cashier and become a truck driver. You can start unloading trucks in a DC and grow to oversee an automated system moving freight through that DC. We provide opportunity, even as we continue to innovate through technology and prepare our business and workforce for the future. One of the things I have always appreciated about this company is that it's naturally hedged. If customers want more of something and less of something else, we shift our inventory. If the economy is strong, our customers have more money, and that's great. If things are tougher, they come to us for value. With today's inflation, we're continuing to see that happen. We're gaining share across income cohorts, including at the higher end, which made up nearly half of the gains we saw in the U.S. again this quarter. And we're also capturing a greater share of wallet at Sam's Club in the U.S. with both mid- and higher-income shoppers. Our goal is for the experience they're having in our stores and clubs combined with our current capabilities for pickup, delivery, and membership to result in them choosing us even as inflation eventually subsides. As we plan this new fiscal year, we've anticipated stubborn inflation in dry grocery and consumables in particular, which will have some mixed impact. We'll stay focused on general merchandise and earn sales in those categories to offset that impact as much as possible. When we think about our business today compared to what it was during prior economic downturns, we now have a more compelling offer, a true omnichannel experience that makes us optimistic that more higher-income families will continue shopping with us across categories because we have pickup, delivery, and membership. And we're improving in categories like apparel and home. Our recently remodeled U.S. stores have a focus in those areas, and the early response from customers is promising. We're also improving our e-commerce assortment and presentation in those categories. We've always been known for great prices, and because of the work we've done around pickup and delivery from stores, clubs, and expanded assortment through FCs, we're increasingly known for the convenience we offer. In fact, our U.S. customer feedback showed strength in price and convenience. Our reputation for price remains strong, and our score for convenience has risen to nearly the same level. Our Walmart Plus members recognize our strength for convenience even more than the average customer. As it relates to our customer or member value proposition, we continue to have a strength with respect to value while we're expanding choice by growing our assortment on Walmart.com and we're improving as it relates to experience. Being an at-scale omni-channel retailer creates unique opportunities to innovate in the area of experience. That includes products like Scan and Go at Sam's Club and a newer in-house conversational AI platform enabling a voice and chat capability being used by more than 50 million customers and an average of 1 million associates across the U.S., Mexico, Canada, and Chile. We're driving a lot of change inside our company. We know where to tap the brakes on costs and inventory. But our focus is more on the gas pedal with respect to our strategic improvements related to assortment growth and our customer member experience. We'll keep shaping the business model by scaling our newer, mutually reinforcing businesses in areas like marketplace, fulfillment services, and advertising. It's exciting to see our global advertising business grow to $2.7 billion for the year we just completed. That's nearly 30% growth. Over the last three years, while our frontline focus was on navigating the pandemic and inflation, we still launched and started scaling new complementary businesses using the technology and expertise we've developed over time. You can see this in some of our recent announcements. The partnership we announced with Salesforce to help scale local fulfillment and delivery solutions for customers on their e-commerce platform is a good example. or our new Walmart business e-commerce sites another, where we're helping small and medium-sized businesses and nonprofits save money and spend less on purchasing the items they need every day. Our fast-growing businesses in India, Flipkart and PhonePay, announced a full separation, which will allow both companies to focus on their own growth paths independently and help unlock value for shareholders. Flipkart has continued to strengthen its market leadership position in e-commerce and is entering this year with good momentum. PhonePay also announced the closing in January of the initial tranche of a fundraise that values the business at $12 billion pre-money. This is more than double the previous valuation just two years ago. And our Sam's Club U.S. team announced expansion plans that will have us opening more than 30 new clubs across the country over the next several years, in addition to a multi-year plan to invest in and modernize our supply chain, especially in the U.S. I'll wrap up my comments today by saying thank you to our associates. I'm grateful for how they continue to step up for our customers and members, and I'm impressed by their creativity and resilience. We've worked through a lot of the operational stress in our business from last year, and we made progress on strategic initiatives as we did it. And we're doing it in a way that's uniquely Walmart. John David, over to you.
spk07: Thanks, Doug. I'd like to start by thanking our customers, associates, and partners for helping us deliver a strong quarter to wrap up the year. We're pleased with how we finished the year. Our team demonstrated our agility and responsiveness to overcome the operational challenges from supply chain disruptions, excess inventory, and the shift in our merchandise mix. For the full year, enterprise sales on a constant currency basis grew more than 7%, and we surpassed $600 billion in annual sales for the first time. Adjusted EPS declined 2.6% for the year. Our performance in Q4 was better than our expectations due to sales upside and good expense leverage. Constant currency sales grew 8% with strength across all segments including strong performance throughout the holiday season. Walmart U.S. comps increased 8.3% including 17% growth in e-commerce with a combination of pricing due in part to inflation and share gains. Sam's Club U.S. delivered its 12th consecutive quarter of double-digit comps, with growth of 12.6%, excluding fuel and tobacco. And constant currency sales in Walmart International increased 5.5%, led by Walmex. As I discuss our profitability, it's important to note the reorganization and restructuring charges within the international segment affect year-over-year comparisons, so my comments regarding Q4 results will focus on the business excluding adjusted items. Gross margins were down 83 basis points, largely resulting from additional markdowns taken to address carryover inventory balances, mixed headwinds, and underlying inflation in our cost structure. With strong sales growth in the quarter, we levered SG&A expenses by 89 basis points. Taking all this together, adjusted operating income grew nearly 7%. Adjusted EPS of $1.71 was better than we expected going into the quarter. Gap EPS was $2.32. The difference between adjusted and gap EPS reflects a $1.16 benefit from unrealized gains on equity investments, partially offset by a $0.55 charge related to business reorganization and restructuring in international. Inventory at quarter end was relatively flat to last year. This includes a nearly 3% decrease from Walmart U.S. I'm pleased with how our teams responded to the challenge early in the year to aggressively rebalance inventory for the current environment and it sets us up in a really good position going into the year. Let me briefly reference key highlights for Q4 by segment. For Walmart U.S., comp sales were strong throughout the quarter and December was the largest sales month in Walmart U.S. history. This was led by strength in food sales, which increased high teens, partially offset by a mid-single-digit decline in general merchandise sales with softness in toys, electronics, home, and apparel. The effects of product mix shifts have negatively impacted our margins. Over the last year, grocery and health and wellness sales, which have a lower margin than general merchandise, have increased by 330 basis points as a portion of our mix. We continue to see strong share gains in grocery, with nearly half coming from higher-income households, and private brand penetration increased over 160 basis points as customers prioritized value. Inflation remained high, up mid-teens in food categories, which was similar to Q3 levels. E-commerce sales were led by continued strong growth in store-fulfilled pickup and delivery in Q4. Over the last two years, store-fulfilled delivery sales have nearly tripled, and we're now doing over a billion dollars a month, which gives you an indication of why we're so excited about the progress here. Advertising sales were also strong this quarter, up 41%. Higher sales and lower COVID costs contributed to SG&A's expense leverage, which offset gross profit pressure, resulting in operating income growth of 3.8%. In international, strong sales trends continued with growth of 5.5% on a constant currency basis, led by double-digit growth in Womax and China. Currency negatively affected reported sales results by about $900 million, or an approximate 340 basis point headwind to growth. Q4 sales benefited from successful festive events across our markets. Year-over-year comparisons were negatively impacted by the timing shift of Flipkart's big billion days event to Q3 this year versus Q4 last year. Looking at the second half of the year in total, international sales grew more than 9% in constant currency. E-commerce sales were strong with penetration at 21% with China leading the way at 48% penetration for the quarter. Wamex had another great quarter, with sales strength in bodega stores, Sam's Clubs, and 14% growth in e-commerce. Segment-adjusted operating income grew faster than sales, up nearly 17% in constant currency, helped by effective cost management across markets. In India, Flipkart continued its strong momentum through Diwali and other seasonal events. We are particularly pleased to see Flipkart's positive contribution margin expanding. PhonePay's recent valuation that Doug talked about was supported by annualized TPV reaching more than $950 billion, about 50% higher than just one year ago, while also exceeding more than $4 billion monthly transactions. Turning to Sam's Club, our strong momentum continued with comps up 12.6% in Q4 and up 23.4% on a two-year stack. The segment delivered another quarter of record member counts, and membership income growth was above 7%. In addition to solid increases in both transaction and ticket, Sam's e-commerce sales were up 21% year-over-year, with contributions from both curbside and ship-to-home. Operating income was pressured in the quarter by elevated markdowns, lapping higher co-branded credit card income last year, and an inflation-related LIFO charge of $14 million. With the strong trends at SAMS over the past several years, we're excited to expand our physical footprint through a multi-year investment in new clubs and supply chain optimization. Turning to guidance. As we sit here today, we find ourselves in a similar position to each of the last three years, where there is a great deal of uncertainty looking out over the balance of the year. While the supply chain issues have largely abated, prices are still high and there is considerable pressure on the consumer. Attempting to predict with precision these swings in macroeconomic conditions and their effect on consumer behavior is challenging. As such, our guidance reflects a cautious outlook on the macro environment, but at the same time, our excitement about our recent results, momentum in all segments, and progress on our strategy, both for this year and the years that follow. We are positioned well and convicted about our plan. In FY24, we expect operating income growth to outpace sales growth. Given the persistence of high prices and the potential for further macro pressures, we are taking a cautious outlook for the year. We are guiding enterprise sales growth of 2.5% to 3% in constant currency and operating income growth of approximately 3%. This guidance assumes product mix pressures persist, but that our business mix continues to improve. Even with an estimated 100 basis point impact from LIFO charges, we still expect to grow operating income more than sales. We also expect Walmart U.S. comp sales growth of 2% to 2.5%, international sales growth in constant currency of approximately 6%, and Sam's Club comp sales growth of approximately 5%, excluding fuel. Based on FX rates at the end of our fiscal year, we estimate a potential year-over-year enterprise sales tailwind of about $1.2 billion from currency. Our purpose starts by helping people save money and live better, and it's more important than ever in this environment as consumers manage household budgets more tightly, making frequent tradeoffs and biasing spending toward everyday essentials. We're reinforcing our value proposition across our merchandise offering, including featuring high-quality owned brands and leaning into opening price points. We're accelerating share gains in our food categories and seeing signs of improved attach rates in consumables and high-frequency purchase areas of general merchandise. Our multi-year sales and operating income targets are just that, multi-year. In some years, our performance will be higher, and in some years, lower. We are confident, however, that we're building a business that allows us to grow our top and bottom line throughout an economic cycle. Over the past five years, sales have grown approximately 6% on average, excluding divestitures. This year will likely be lower, but we look forward to getting back to a sales growth trend more in line with what we've delivered over the last few years. Over that same period, operating income has grown at about half the rate of sales growth on an adjusted basis, excluding divestitures. This is the result of important investments we've made in associate wages, pricing, technology, and supply chain, which together strengthened our core business and positioned us well for the future. Importantly, while we navigate some of the short-term challenges, we're continuing to invest for the future. Invest in ways that strengthen our retail advantages by expanding our capabilities in marketplace, ad platform, data ventures, and fulfillment as a service. We're providing more convenience for customers, including pickup and delivery, scan and go, and Walmart Plus. We're working in partnership with our suppliers and sellers to use data, scaled fulfillment capabilities, and our rapidly growing ad platform to elevate inventory accuracy and in-stocks, lower the cost to serve, and drive improved conversion. All of this improves the trajectory of our ROI and our margin profile. We will continue to invest in our associates through increased pay and benefits to reinforce the ladder of opportunities at Walmart. but we're managing our costs in a way that allows us to achieve our operating income goals with these investments. In other words, we're staying true to our commitment of everyday low cost, enabling everyday low prices. We expect FY24 CapEx to be flat to up slightly in total dollars compared to last year as we continue the multi-year investment in technology and innovation to optimize our supply chain and stores. Many of these tech enhancements are reaching a stage where we can rapidly deploy them across our network, and we have clear line of sight toward better efficiencies and ROI on these investments in the medium term. I want to call out a few other assumptions for our guidance for the year. Gross margin rate is expected to increase this year, though not back to FY22 levels yet. We expect gross margin to benefit from the lapping of higher supply chain costs and markdowns from this past year, as well as growth from our newer initiatives, many of which have a higher profit margin. Partially offsetting this, we expect product mix and inflation-related LIFO charges to be gross margin headwinds. Based on current assumptions for inflation, LIFO charges for both Walmart U.S. and Sam's Club could approximate roughly $500 million this year, with the headwind equally proportioned across quarters. This is an improvement from the $1 billion LIFO estimate we provided on the Q3 call due to moderating inflation in key merchandise categories and reduced inventory levels. It's important to note that inflation, inventory levels, and additional factors will influence the aggregate amount. We'll commit to providing updates as we go through the year. With sales growth expected at a lower rate versus the prior year and our commitment to continuing to invest in our people and technology, we expect SG&A to deleverage slightly in FY24. There are also several below-the-line items that will pressure EPS for FY24. First, interest expense is estimated to be about $750 million higher than last year. This translates to an approximate 20-cent year-over-year EPS headwind with Q1's impact less than the remaining quarters. Second, we do not expect a repeat of the benefit we realized from certain discrete tax items last year and as such expect our tax rate to be more normalized than FY24 at 25.5% to 26.5% resulting in an approximate 10-cent EPS headwind. And lastly, In our non-controlling interest line, we expect an approximate 12-cent EPS headwind related to acquiring full ownership of MassSmart and Alert Innovation, as well as the impacts to minority interests of strong expected performance at Walmex. In total, these below-the-line factors account for approximately 42 cents of year-over-year EPS headwind. The impact from these below-the-line items offsets the gains we're making in our core business, resulting in EPS being slightly down for the year. We expect full-year EPS of between $5.90 and $6.05, including a 14-cent headwind from LIFO. For the first quarter, we expect to see a higher rate of sales growth of 4.5% to 5%, largely due to inflation. we expect operating income to increase 3.5% to 4%, including the negative impact of a LIFO charge of approximately 235 basis points. EPS is expected to be in a range of $1.25 to $1.30, including an approximate $0.03 headwind from LIFO. While we're not providing quarterly guidance beyond Q1, I want to offer the following perspective. We currently expect sales growth to be strongest in the first half, then moderating in the second half, reflecting our macro assumptions in a more difficult year-over-year comparisons. Because we will lap the benefit we received last year from insurance proceeds in 2Q, we expect operating income to be flat in 2Q relative to last year. We expect operating income growth to begin to outpace sales growth to a greater degree in the second half of the year versus the first half. In closing, I want to echo Doug's sentiment on our business. Over the last year, our team responded to some of the external challenges with the speed and nimbleness rarely seen in a company of our size, and we exited the year in a much, much better place. As I reflect on where we are today, I'm more excited about our future than at any point in my time here. The opportunity in front of us is incredible. Our customer member value proposition has never been stronger. Perhaps that's more obvious during times like this when the consumer is pressured. We have become an omnichannel retailer. Who else has the stores and clubs so close to so many customers and members, combined with first- and third-party e-commerce, and the combination of grocery and general merchandise, and in multiple attractive countries? We're in the right markets with a breadth of assortment and ways of shopping like no one else with impactful and emerging digital and technological capabilities. Our plan leverages our strengths to serve our customers and members in more ways. We meet them where they are to continue to help them save money and time to help them live better. But what you're going to see in the years to come is that we will keep changing and the changes will improve the composition of our P&L. We will have related, diversified, higher margin earning streams that are scaling rapidly. You will begin to see the significant benefits from the investments that we're making in things like our supply chain automation and our expanded e-commerce capabilities. We're at an inflection point to begin to accelerate margin expansion, reinforcing that the algorithm is in place. The macro pressures this year may obscure some of that progress, but won't take away from the long-term promise of many of these initiatives. We look forward to sharing more at our Investor Day in April. Thank you.
spk01: Let me turn it over to the operator for questions. Thank you. At this time, we'll now be conducting the question and answer session.
spk02: If you'd like to ask a question today, please press star 1 first. information don't indicate your line is in the question queue. You may press star two if you would like to move your question from the queue. If this one's using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible, we ask you to please lean yourself to one question. Thank you, and our first question comes from the line of Oliver Chen with Cowan & Company. Please proceed with your question.
spk19: Hi, thank you. Great quarter. Would love your thoughts on consumer health and what you're seeing with respect to unit growth in terms of your guidance and your thoughts about how that may manifest. And then, John David, on the technology call-outs, advertising, Walmart Plus, artificial intelligence, what are your thoughts on things we should focus on in terms of those scaling? And finally, Judith, you had impressive momentum, double-digit growth at Walmex. in China on the China reopening would love any comments and on the price investments at Womack. That would be helpful as well. Thank you.
spk18: Oliver, you did a great job working on like six questions, five questions in that one. This is Doug. We'll try to make sure we cover all of those. You may have to remind us of one or two. Let's start with consumer health. And I'll just ask Kathy, John, and Judith to quickly comment. And Judith, you can work in the answers to the questions you asked in if you want to. We were talking just before the call, Oliver, about which adjective to use, and we were coming up with words like choiceful, discerning, thoughtful. I think you can see it in the mixed impact. Customers are still spending money. When you think about our guidance and the place we positioned it, it's obviously not as clear to us what the back half of the year looks like as what we're experiencing right now and the momentum that we had coming out of the fourth quarter. But that's why we would characterize them. They're making choices. We expect that to continue through the year. Do you want to add something for Sam?
spk11: Yeah, I'll just say as we went kind of through Q4, we were watching with interest to see how they behaved in home and apparel, GM, discretionary areas. We're happy to see high single-digit comp growth there. And we're watching as we went through Super Bowl and Ballantyne, and we're still seeing kind of that hold. So, yeah, positive with where we're at at the moment.
spk16: Hey, Oliver, thanks for the question. building momentum as the year went on. On the consumer, I think choice was a great word to describe it. There certainly was momentum coming out of the fourth quarter, but Walmart's built a lot of options for customers and will be more flexible than we have been in the past, whether it's in the store or pickup or delivery. John David mentioned the momentum that we have with delivery from stores. So we'll be there for customers as things continue to shift.
spk09: Yeah, maybe, hi, Oliver. For international, it actually was a strong quarter, which ended a strong year for us with that top line and bottom line growth of around about 9%. That strength came out of a number of our markets, and you touched on Mexico and China, but India as well had a good year. Maybe just talking about the consumer, what never ceases to amaze me as you think about being a global business is how similar the consumer is around the world, which we can take a lot of learning from. And certainly events, moments that matter were important to consumers. We also saw continuing rise in their digital capabilities and what they're looking from for the businesses. And then the third area that I would talk about is the rise of private brands in terms of the way consumers were shopping as well. And that's pretty much held true in every market in which we operate. Maybe turning to Mexico, so I'll pick up a third part of your question within this first piece. Another strong quarter for Mexico. This actually tops off the ninth year in a row that Mexico has gained market share. And I think one of those things is testament to the strength of the formats in Mexico and the way that they appeal across all sectors of the Mexican and Central American population as well. The consumer health there, again, choiceful, thoughtful are really good words to describe it, but that breadth of format allows us to play right across that spectrum. In the quarter, Mexico continues to invest in price. They saw their largest ever price gap in bodegas, which is the key format. But their strength really comes from a three-year point advantage that they have. The first is they continue to open new stores, which customers still want to be able to shop in physical stores. We opened 126 stores last year. We continue to expand our e-commerce footprint in omnichannel, on demand, so grocery, online and pickup is going from strength to strength. And they, interestingly, and I think this speaks to the consumer as well, are building out their ecosystem, where you can get trust, value, and convenience in offers such as our BITE, which is our MVNO in Mexico, or our CASHI payment capabilities. We're seeing strengths there. So China, turning to China, clearly the big news in China was the opening of China. As I look, though, into last year, we saw continued strength in hypermarkets, which is the higher-end offering that we have within China, slightly different positioning to Sam's Clubs in the US and in Mexico. They continued very strongly. But also people shopped back into hypermarkets again, and we saw some of our best performance in hypermarkets. than we have for some time. But the real consumer trend, and it's probably one that is worth taking note of globally, is what's happening in e-commerce in China. So you'll have seen in the results that we talked about 70% growth in Q4, which is 163% two-year stock. for China on e-commerce growth in a penetration now reaching 48%. That is undoubtedly helped by the buildup into Chinese New Year, that buildup fell into Q4, but we continue to see that as a key part of economic behavior. With the opening, we have seen people returning more to stores, which is what you would expect, and also wanting to celebrate events. And I think that Chinese New Year position speaks to that so overall strong for international consumer behavior similar around the world it holds up as well in india which which also had some strength in that and nowhere more so for the digital economy than our flip cart and phone pay businesses
spk08: Oliver, this is John David. I'll take the question on the initiatives. And one of the exciting things about this is actually how they all work together. And importantly, not just working together, but how the investments that we're making in our supply chain help to make this a profitable operation for us. It's tough to single out one particular area, but if I had to, I'd say marketplaces, perhaps the linchpin of all this, because that gives us the ability to sell third party merchandise as well as first party. And just this last quarter, we now have over 400 million SKUs on our marketplace. And a significant portion of those are actually avail themselves of our fulfillment services as well, which is a great benefit for us. But as we get more assortment on the marketplace, we get more eyeballs coming to our website that allows more advertisers or makes advertisers want to spend money there with the larger audience. And this all sort of works together. And if you look at our e-commerce business today, it's an $80 billion business and still growing. And we have a lot of opportunity there going forward. And so we're, you know, we've always been known for price, but as Doug noted in his remarks, we're also now being known for convenience. And a lot of the things that we're doing are helping our customers live better with the convenience that we're offering.
spk19: Thanks, Doug, John, John, and Judith. Appreciate it. Best regards.
spk02: The next question is from the line of Simeon Gutman with Morgan Stanley.
spk17: Pleased to see your question. Good morning, everyone. One theme of a question is the flywheel and the balance between investments and bottom line growth. The near-term question of this theme is the 24 outlook looks like it's burdened by some maybe fleeting items, LIFO in particular, some of the bottom line. So what's the right way to think about it? Are these good guys into 25 and or their house money that you invest? And then the conceptual question on this flywheel is what do you do with the high margin earning streams John David mentioned? Have you set out whether or not that goes back in the business and you grow your EBIT dollars faster or you do let your margins expand at a faster rate? Thank you.
spk18: I'll kick it off and then John David can add. I think generally it's the latter. We feel like that our price gaps are in a good spot, that we've made the thoughtful wage investments that we need to make. That doesn't mean that wages may not continue to go up over time, but generally the shape of the income statement is in pretty good shape. And then we've got these other items that are sterling. they've changed the business model. And so you end up mixing yourself. I think John David did a great job in his remarks describing, we're gonna face some merchandise mix pressure this year across markets, but the business model itself, the business mix is changing. That's been our strategy. And now we're starting to see some of those numbers grow as in with advertising income. I think in the investment category, the thing that we're most excited about is the automation opportunity we have, and that's reflected in our capital guidance. We've shared with some of you how excited we are about some of the things that are in front of us in distribution centers that will impact stores in a positive way. But that's more of a CapEx and balance sheet investment view than shaping the income statement differently as we've done in recent years.
spk08: Sure, and I'll add, Simeon, that we do expect to see our return on investment improve marginally this year. That's what's in our plan, but that's really before we expect a sharper acceleration in the years to follow. And we'll give you more insight into that at our investor day, but we're very mindful that we need to show a return for these investments. But the good news is the early reads on some of the things that we're doing are really exciting and support that continued level of investment. I'll give you an example like our perishable DCs where we put some automation in place. We had a plan around what that would result in increased throughput in terms of cases per hour. The actual results are almost 50% better than that. And so that like gives us conviction to want to accelerate some of this. Same story with some of our e-commerce DCs where we see a 12-step process going down to five steps, making us a lot more efficient. And so these are high ROI investments where we've got clear line of sight into the return. So to your point, this allows us to not only invest appropriately with our associates and continue technology, but also to see margin expansion over time.
spk05: Thank you.
spk18: Just quickly add, our sales have been stronger these last few years. I mean, the 6% CAGR over the last five is a much higher number than you would have experienced with the company previously. But then we had these unusual things happen with COVID costs and last year inflation and supply chain costs. And, you know, we're hoping for something that looks a little more normal going forward that would enable us to push through this strategy in a way that you see it in operating income growth.
spk01: Our next question is from the line of Chris Horvitz with J.P.
spk02: Morgan. Please receive your questions.
spk06: Thanks, everybody, and good morning. So can you talk about how you're thinking about the Walmart U.S. comp guide of two to two and a half? Inflation has barely ticked down in recent periods. It's still up double digits. Are you expecting grocery unit trends to deteriorate? Is Gen March still down this year? And ultimately, do you expect the U.S. business to go negative in the back half from a potential recession? and sneaking in a second, you know, on the SAM side, the business has a lot of momentum with comp and shrunk KPIs. Can you talk about how you're thinking about the opportunity to grow clubs over the next three to five years you see as an opportunity to fill in existing markets or expand in sort of less dense markets and new geographies on the coast? Thank you.
spk08: Good morning, Chris. This is John David. I'll start and then turn it over to Kath and John a little more color on their segments. But with respect to our guidance, so guidance is, you know, it's tricky insofar as you want to provide transparency, but also you need to balance that with reliability. As we sit here today, we look at the progress that we're making in our business, and we've got a lot of conviction and excitement around that, but there's a lot of uncertainty with the macro backdrop. We've not been in a position where we've seen the Fed tighten this sharply. We see issues where delinquencies are up and things like auto loans. You've got savings rates that are coming down, and there's a lot of unknowns on the back half of the year. And so what we've attempted to balance with our guidance is a cautious outlook on the macro environment, but coupled with a lot of excitement about the progress that we're making. And so I think the read-through on our guidance is just that there remains to be a lot of unknowns as we're sitting here just a few weeks into the year.
spk16: Yeah, and Chris, this is John. I'll just build on that. in the operating environment. But I would just highlight the team here in Walmart U.S. have done a great job expanding our ability to deliver from stores, deliver from fulfillment centers. You heard a bit about automation. So there's a lot of investment that we feel great about, the return possibilities, given the experience we've had with some of these technologies. And as you bundle all this together, we're positioning ourselves well, I think, to be able to grow and continue We merged our e-commerce and store business together just about three years ago in Walmart U.S. We see growth of almost $79 billion, almost $80 billion for the three years. So quite a bit of growth there, and the team is really focused on top line, as you'd expect of a big merchandising organization like this one.
spk11: And if I just pick up on the SAMS growth, I think, you know, we've talked quite a bit about the 12 quarters of double-digit comp growth. But if you look underneath that, it's, you know, strength and growth across traffic, every single one of those quarters, across ticket. Our membership income has grown solidly across those 12 quarters. We've grown in e-comm, we're growing with Scan and Go. If I look at the actual membership composition, we're growing with mid to high household income groups with share of wallet. We're growing with millennials and Gen Zs as the largest growth area in our membership base. And then if I look at market share, we're growing market share in our club channel despite not opening clubs while our competitors were opening clubs. So if you look at that suite of kind of metrics, you look at it and you realise that the value proposition we have at SAMS is winning and it's resonating with our member base and it's resonating with new members. And so we are looking at growing both in fill-in opportunities as well as into new geographies where we don't have as large a presence. So we're excited about opening clubs. It'll take us a minute to build up that pipeline, but we've already got some exciting areas we're looking at.
spk02: Thanks so much. Have a great year. The next question is from the line of Michael Lasser with UBS. Please receive your question.
spk14: Good morning. Thanks a lot for taking my question. On this call, there's been a few different references to an algorithm, to 6% top line growth compounded over the last few years, to growing operating income faster. than sales. Previously, we were under the expectation that Walmart was managing its business over the long term to a 4% top line growth and greater than 4% operating income growth. It's going to fall short of that this year. Is it still a realistic expectation that Walmart is managing the enterprise to that 4% top line, 4.5% than 4.5% operating income growth number. And is it reasonable for that to kick in as early as next year?
spk08: Michael, good morning. This is John David. Good to speak with you. Yes, is the short answer. It's absolutely realistic to assume that. But when we put out multi-year targets, they're not designed or not intended to suggest that we can hit that in any scenario. macroeconomic environment in any year. And so we're certainly, our guidance this year reflects some of the pressures that we see broadly in economies around the world. But we'll be able to give more insight into both our top line and bottom line. in terms of what we anticipate over the next several years at our investor day in April. But we absolutely 100% believe that we've got a business that can drive that kind of outcome where we've got sales growing at 4% or higher, frankly, as well as operating income outpacing that. Again, it goes back to my earlier comments around some of the investments that we've made not only in our supply chain, but in investing in our associates and some of our technology that really give us a footing to realize some of these results of margin expansion and outsized growth in our bottom line over the next several years.
spk18: Oliver, this is Doug. I'll just second what John David said and then call out this last five-year is obviously not four and four, but we don't feel too bad about the six. And we just wish that that three was a 6.1 and we'd be in really good shape. So, you know, we don't know exactly what the external environment's gonna enable us to do, but because this business is based on value and has a breadth of categories, we are positioned to do well relative to the market, regardless of what happens in the environment. And as we're doing it, As you've heard us say for a long time now, we're changing the business model so that operating income can grow while still having low prices. Do both at the same time. That's what we've set ourselves up to do, and we're making progress at that, and you can see it in the results in the pieces that we've shared with you already.
spk08: If I can just say one more thing. Michael, what we're fundamentally focused on is growing the absolute dollars of free cash flow each year. It's when we look at the composition of our business and how it's changing and the returns related to some of these initiative areas, it's just such that the financial architecture suggests that the operating income should outperform sales growth over the next several years. But fundamentally, we understand what creates value for shareholders, and we're focused on growing the absolute dollars of free cash flow.
spk14: And just to clarify that, John David, to the extent that you do better, especially in the U.S. business this year, should your incremental margin on that upside be consistent or better than it's been historically given? You'll be lapping COVID costs, a lot of inventory disposition and other factors that shouldn't repeat this year.
spk08: Yeah, it's a good call out. I appreciate the opportunity to address that. You're right. If you look, particularly for the U.S. business, the incremental margins will be higher this year than what you typically see, and in large part for the reason that you mentioned. We're lapping, like even in the last quarter, we lapped $500 million of COVID costs alone in that quarter. But when you look at it on a full-year basis, that creates a tailwind in terms of incremental margins.
spk02: Thank you very much. The next question is from the line of Kate McShane with Goldman Sachs. Pleased to see with your question.
spk12: Hi, thanks. Good morning. We were just wondering with regards to the promotional environment, within grocery, are you still finding the promotional environment rational? Are there any areas that maybe aren't as solid as others? And I think you've alluded to this on the call today, but your view on the need for price investments in food going forward and the possibility of that being incorporated in your guidance for this year.
spk16: what we're doing and the purpose of the company is to help people save money and live better. So we're constantly thinking about making sure that our values are appropriate given what's going on in the relative marketplace. And as Doug alluded to earlier, we're encouraged by the price positioning relative to the market, and we'll continue to work on that. Externally, I wouldn't call it any major shifts in what we're seeing in terms of promotion. There has definitely been a shift. to more private brand versus branded product. That shift really began last March and continued all year, and the fourth quarter got a bit stronger. We don't set targets for branded versus private branded. We want to be there for any customer and make sure that quality and value are right across all product lines, but there's definitely some acceleration to private brands in the last 90 days.
spk01: Thank you.
spk02: The next question is from the line of Paul Leggway with Citigroup. Please proceed with your question.
spk05: I'm curious if you could talk about what the net impact of SIPCART and FEMPA was on totalities results this past year and what your expectations have been to guidance for this upcoming year. And also just what the plans are for that business and the ownership of those businesses. And then just click on the share repo or share account functions that have been given guidance for this upcoming year. Thanks.
spk18: We had a difficult time hearing you. The question was about Flipkart and phone pay, and is it reflected in our guidance for the year forward? That's all we got. Can you clarify a little bit more for us?
spk05: Flipkart and phone pay contributed to the results of this . the share remote assumption or your share account assumption that's been in the guidance for F24, F23.
spk08: Paul, this is John David. There was a little bit of a bad connection, so I'm gonna attempt to answer this. And if we don't completely address your question, then we can follow up after the call. But the one-time costs related to the separation were called out separately from our results related to restructuring. But in terms of the core business and the way that that affects our results, A lot of our GMV growth, a lot of our revenue growth is coming from, in particular, Flipkart. We see great progress over there where they continue to be a strong player in the market that they operate in. And as I noted in my comments on the call, We're in a much better position right now with respect to some of the investment that we've made historically. Any e-commerce or any digital platform, you need an infrastructure that you can scale at a low marginal cost. And that's what Flipkart has done. They've invested in that infrastructure over the last three years to where now we're able to see that contribution profit continue to expand. And so we're excited about that. I think there is part of your question that was related to the separation of phone pay and Flipkart and what that allows them to do. And Judith, feel free to jump in here, but to me this is in some ways very analogous to eBay and PayPal, where each of them operating independently can pursue their own initiatives and they don't necessarily need to be tied together. And so this is an opportunity for them to unlock and realize more value independently than they can by themselves. Judith, anything you'd add before I go on?
spk09: Maybe just a comment on the separation of the key businesses. You have to remember, when we first invested into Flipkart, phone pay had only just launched. It was four months old and it had an annualised TPV of in the tens of millions of dollars. As that business has grown and as the Flipkart business has grown, whilst there are partnerships between the two commercially, actually we recognise that each has been successful and we're setting them up on a path for long-term success. As I look at Flipkart now, and John David referenced it, and so did Doug, I'm really impressed at the contribution margins, which are positive and been consistently positive for some time. And that sets them up structurally well, not only from a cost perspective in terms of the infrastructure investment that we've made for their e-commerce business, for their delivery and distribution business, but also the way they're working on their margin mix. In phone pay, I think the highlights there are clearly, I talked about the size of their annualized TPV when we acquired them. That has reached $950 billion in last year. At the end of last year, that was their run rate. And they're now doing 4 billion transactions a month. So that separation allowed us to put both of them on the path to being the very best businesses they can be in the long term. And the fundamentals of India remain strong and attractive, strengthening all the time. So it was a challenge from some of the adjustments that we needed to make in order to do that, but really testament to the strength of both businesses and the economy in which we operate.
spk08: And I believe the last part of your question related to shared account assumptions for this year. Let me take the opportunity to just talk about capital allocation broadly and answering that question. We've been historically very balanced with respect to our capital allocation goals. investing organically what we've done in mergers and acquisitions as well as dividend and share buyback and we will remain balanced going forward but as we sit here today i think the skills tilt a little bit more towards organic investment when we look at the returns related to that every dollar of capital has to compete for the highest returns and As noted in my comments earlier, when we see the returns around some of these technology and supply chain investments, these are ones that we think translate into increased shareholder value. And so relative to last year, you'll probably see us do less on share buyback and therefore it will have less accretion in terms of the earnings impact. But last year we saw dislocation in our stock And we were opportunistic and more aggressive at that period of time. And we'll always be responsive to factors like that in the market. But our planning assumption is to buy back less stock than we did last year.
spk02: The next question is in the line of Karen Short with Credit Suisse. Please just do your take question.
spk13: Hi, thanks for taking my question. Just two. First of all, I wanted to talk about the Walmart US EBIT margin structure specifically within your guidance. You know, obviously 22 or your fiscal 23 had its own separate challenges, and we know there's the LIFO headwind in fiscal 24. But I guess I want to talk a little bit about what the U.S. EBIT margin structure could be like going forward in fiscal 24 relative to pre-pandemic. And then the second question I would just ask is that, you are obviously cautious for the reasons that you called out, but prior evidence is that you actually tend to do very well in weak macro environments slash recession. So I'm just curious on why that there's such a much more cautious tone. Thanks very much.
spk08: I'll start Karen, it's good to speak with you. John may wanna jump in, but I'll start with the first part of your question. So the EBIT structure related to the U.S. business, there's a couple factors there. One is if you look over the last 12 months, we had a mixed shift in our business from GM to food and consumables of over 300 basis points. And we actually don't expect that to improve this year. In fact, we expect it to get a little bit worse. Not by the same magnitude, but slightly worse. So that affects the margin structure. But as noted, our business composition, the things like our initiatives, advertising, Walmart fulfillment services, those are contributing to a larger share of our overall business, which has less of an impact as we look at this fiscal year. It'll be more pronounced as we get into the next year and the year thereafter that, where you see the margin structure change a little bit more. And certainly LIFO is something that we expect to have some impact this year, but not a prolonged effect in the years that follow. So hopefully that gives you a little bit of color on the EBIT profile. With respect to our cautious tone and the fact that we tend to do well when the consumer is pressured, look, we recognize that. We also think that we've got a great value proposition for consumers and in good economic times too. and we're eager to demonstrate that. But again, I would just point you to the fact that there's just a lot that we don't know. We could tilt into a recession. We don't know what happens to consumer spending. We don't know what happens to layoffs, household income. And so given that we're so early into the year and there's a lot of unknowns right now, we're simply taking a cautious outlook.
spk13: Great, thanks very much.
spk02: The next question is from the line of Robbie Ohms with Bank of America.
spk15: Hey, good morning. Thanks for taking my question. My question was just if we could get maybe a little more color, maybe from Doug on Walmart+. and sort of how it's doing versus your, more on how it's doing versus expectations and what the customers are responding to for the new signups in Walmart Plus and how do you see profitability of first-party e-commerce business evolving? Is that key to getting back to that long-term algorithm of growing operating income faster than sales?
spk18: Robbie, I'll go first. This is Doug. John's going to jump in here, too. I'll just say that the way that the business model is evolving that includes 1P plus 3P plus the services that go along with that, including advertising income, to us make a ton of sense. They're mutually reinforcing. We're excited about the progress that we're making there. And Walmart Plus is one ingredient of that. And we'll continue to describe Walmart Plus to you, but not do that in such a way that the market gets overly focused on that metric. Because we want to be evaluated on several metrics, not just one metric. And we've seen other companies end up in the future of the company and it is just not that simple in Walmart obviously people want to pay for delivery in bulk with an annual membership not per delivery that's what led us to this point and now it opens all kinds of opportunities up to us and we like what's happening behaviorally with Walmart Plus but it is just one component of a plan yeah I think that's a great point
spk16: And it's a way that customers can access an interesting combination of all of our assets from our digital front end, which has become one experience over the last couple years. The fact that we have inventory within 10 miles of 90% of the population is another way that this all comes together. And the business model itself, and e-commerce and stores because stores are acting as fulfillment centers at times. They're stores primarily, and then there are fulfillment centers. So there are a lot of blurred lines between all these channels. having an offer that is great for consumers in terms of the behavior they're seeking, which is convenience, and not worrying about incremental delivery fees is working fantastically. Now, it's also important to note that this tends to be a younger, more tech-savvy consumer, which is great. In some cases, a higher-income customer. As we've said in the most recent quarters, we've gained share with higher income customers, Walmart Plus, with delivery, and then these other businesses like advertising, fulfillment services, marketplace, all add up to a better proposition for both the customer and the company.
spk15: Great. Thank you.
spk02: Our next question is from Rupesh Parikh with Oppenheimer.
spk04: Please proceed with your question. Good morning and thanks for taking my question. I was hoping to ask more on food inflation. As your team looks forward, what's your expectation for food inflation? And then I'm also curious on what you're seeing right now on the inflation front for non-foods.
spk16: And generally speaking, Food inflation has been the most stubborn of all the categories. We were in mid-double digits in Q3 and Q4. Hasn't come down all that much. A little bit, I guess we could say, has come down the last couple months, but it still would be a high level of disinflation at this point. So this looks to be a little bit higher than what we were expecting going into the year, but this all leads back to the comments earlier on uncertainty. We would have hoped and expected this year there are other parts of the business where prices have come down more like in general merchandise but overall I think we're taking a very cautious outlook and going to continue working on doing everything we can to try to keep prices as low as possible for our customers
spk18: I think the way to think about it is dry grocery and consumables are stubborn, mid-double digit, and those are going to just be with us for a while. And it'll get a little confusing because you'll probably hear inflation numbers that start to sound lower, but you'll have to remember that's on a two-year stack. So if inflation in dry grocery and consumables is only three or five, that's on top of 15, and that's still a problem for the customer and still will pressure their wallet. In the fresh categories, things are a little bit different. Like eggs were at 200% inflated in January. They're down now to being just 50% inflated. That's still a problem. Milk is actually less than a year ago. Beef is lower in terms of pricing. So think of the fresh categories as kind of bouncing around, going up and down and being more volatile. It's dry grocery and consumables that we think are going to create the pressure that customers are going to feel and have the impact as a result. that relates to us on mix over the course of the year. And that's one of the variables that's a little hard to call. What will GM look like in the back half of the year?
spk02: Great, thank you for all the color. Our next question is from the line of Kelly Bean with BMO Capital Markets. This is your question.
spk10: Hi, good morning. Thanks for taking our question. Just wanted to understand a little bit more some of the factors that were pressure or that were cycling from fiscal 23, including the pressures from markdowns, mix and supply chains. Wondering if you can just help us understand the magnitude of those pressures this year and what is baked into your guidance for fiscal 24, particularly, I think I heard you say, maybe correct me if I'm wrong, 300 basis point gap again between grocery and general merchandise again this year. So just trying to understand that the magnitude of that mix I'd assume markdowns are planned to be much lower, but maybe you can help us there. And then are you baking in some cushion for a more promotional environment or just help us understand really what is baked into some of those major margin buckets as we look to next year?
spk18: Before these guys comment, I just want to quickly call out that we're profitable in food, and I don't want this to grow to the point where people think they make money in general merchandise, they don't in food. There's a delta between all things food, consumables, but there are some really profitable businesses in fresh and other areas. So we want to manage that mix, but I just don't want this to get too far out of balance.
spk16: And on the, great point Doug, and on the 300 basis point, that comment was related to last year, the shift, the difference in mix between food and GM in the year that we just experienced. So we do think we'll have some mixed impact going and and GM sales can can change that number and that's why we've as we said taken a cost cautious outlook because food inflation amongst other things has remained more unstable than what would be expected so it's higher than what we thought it would be but that point on food being a profitable business at Walmart is is important so we if the customer wants to spend more in the food Of course, we'd like to sell both because we have a really strong seasonal business, and like we stated earlier, we had a strong Valentine's, a strong New Year, pleased with the holidays that we just went through in the fourth quarter. But we want to remain open and flexible for the customer given any environment that we find ourselves in.
spk08: Yeah, Kelly, I'll just try to do it all in just a little bit more color and maybe look at the fourth quarter as a good way to frame this. Our gross profit declined a little over 100 basis points. I think it was 112 basis points in the fourth quarter. That was predominantly, if you had to bucket that, the largest contributor to that was markdowns, followed by mix. And so as we look at where we are today with a much better position around inventory, and John, jump in if you disagree here, but I feel like this year will be more of a normal environment for markdowns or certainly more normal than what it was last year. And to John's point, the mix impact is appreciably less than what the 300 basis points, a little more than 300 basis points last year.
spk16: Yeah, this is the time last year have been onshore as much as six months prior to it being unloaded. And the cost, the markdowns, the impact and everything from store labor to creating overtime, we expect some of those to be better. However, down 3% in inventory, we're proud of that position, but there's still pockets of inventory in stores and some fulfillment centers and some categories like apparel where there's still more work to be done. So we want to make sure that we have room to address those things as we get into this first half of the year.
spk01: Thank you. Our final question is from the line of Greg Malek with Evercore ISI.
spk02: Please receive your question.
spk03: Thanks. I really had a follow-up on the U.S. traffic trends and then on Sam's Club. It sounds like in that guide, the deceleration to second half comp is all from less inflation and you still expect traffic to be up through the year. Second, on Sam's Club, any more insight in terms of the members you've won? And I know you had a fee hike last year. Has that had any influence in terms of the rate of growth of at least member counts or any sort of inflection there or anything on renewal rates given the first in a decade fee hike? Thanks.
spk16: Hey, Greg. Morning. It's Sean. Yeah, certainly would expect that there'd be growth in traffic. That's what we've been seeing over the last several quarters, led by food and consumables. The growth of pickup and delivery and then e-commerce to home are also helping, so stronger results in e-commerce at its core. and also stronger from the delivery business John David mentioned in his remarks that we had a billion dollar month in December which is really exciting to see what the team is scaled from into over the last five or six years certainly some acceleration since the two channels e-commerce and stores were merged together last about three years ago but continues to be a lot of great work done increased capacity and fulfillment all across the network
spk11: Yeah, I'll just pick up from Sam's perspective. I think last year we had a couple of big acquisitions around Super Bowl and then around July 4th and I think the marketing of those as well as the offering with curbside and scan and go and convenience meant that we're attracting a lot younger member base than what we've previously had. So I think we're really happy with the way the membership kind of composition is trending. And then if I just look at like the renewal rate, we're not seeing an impact from the fee increase. Remember that this year we did do an offset with Sam's Cash and that's pretty much what we're seeing is it's kind of neutralised any impact we could have expected to see to our renewal rate. But it's also meant that those members, because they get Sam's Cash available to them on the app, are becoming more digitally engaged with it. So this whole kind of approach around driving convenience and digital engagement is working and we're seeing growth through the absolute membership numbers, as well as staying strong in renewals.
spk03: If I could, I'd love to follow up on the e-commerce part of the US. You talked about margin drivers with advertising. You gave us some numbers there. Can you tell us what 3P is now as a percentage of that e-commerce business or shipments or any insight there?
spk16: That's something we haven't disclosed. What we did say earlier, which is important, is the absolute number of items is now over 400 million. We have a really strong leader in the business who's building capabilities, and we know that there's seller demand. sellers all across the market are looking for more ways to diversify their own business. So this is a great time for us to make the improvements we're making with things like sign up and the ability to list catalogs more easily. And that's led to the item and SKU count growth.
spk03: That's great. Good luck and thanks.
spk02: Thank you. At this time, we've reached the end of the question and answer session. I'll turn the call to Douglas Miller for closing remarks.
spk18: Thank you all for your interest in the company. I think the three headlines are strong results, great team, bright future. On the results side, we have momentum. The fourth quarter was really good. We got the inventory into a good place. We're on our front foot as we start the year. As it relates to having a great team, just look at what they did last year. When the world changed, they moved quickly at scale to deal with issues. They got them resolved. Q3 was better, Q4 even stronger. And as it relates to our future, we're now positioned to serve the customer how they'd like to be served. Stronger on convenience as well as being known for value. If they wanna pick up, we can do that. If they want delivery, we can do that in various forms. And obviously we've got great stores and clubs. And then secondarily, the business model is changing. Some of the things we've been working on for these last few years are starting to scale and we're excited about that. So as we begin the year, we're gonna stay focused on those things and drive them and have the best possible year. And we'll talk about our guidance at the end of the year to see how we did. We'll go drive the results and that'll be our focus. Thank you all.
spk02: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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