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8,100
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WMT
| 3
| 2,025
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2024-11-19 08:00:00
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Walmart Inc.
| 313,055
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Chris Nicholas: Yeah. I think in Sam's Club, we had a 15.1% growth in membership income, but none of this is a gift. It's all an achievement. It's just hard work. John talked about execution. We are executing on our member value proposition, which is value, its assortment, it's great experiences and it's building that trust with the member, so that you build a lifelong relationship with them. We had some great results as you've heard in eCommerce and in club, which we're really proud of. And we've seen the outcome of that. So great inputs give you great outcomes and we've seen digital penetration increase 400 basis points, Scan & Go up 250 basis points, and that's resulted in all-time high memberships, increasing plus penetration is up 300 basis points and our renewal is up 230. So just really nailing those basics, listening to your members and giving them what they want gives you great outcomes.
Steph Wissink: All right. I want to thank everybody for joining us today. We look forward to engaging with many of you in the coming weeks and months at investor conferences. I want to ask you to mark your calendars for our next investment community meeting, which is on April 8 and 9, 2025. Doug?
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8,101
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WMT
| 3
| 2,025
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2024-11-19 08:00:00
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Walmart Inc.
| 313,055
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Doug McMillon: Really proud and grateful to the team and of the team. The folks who are in this room are leaders more broadly and our associates around the world, they're doing a nice job of delivering short-term results, managing today and building for tomorrow at the same time, so that we can continue this momentum. I think we are being appropriately aggressive as it relates to our level of investments, whether that's related to price or associate investments or automation, for example. And I'm really encouraged by the way folks are working together with our tech teams to build things in a way that's faster and more effective. We've got room to improve there. We probably always will, but when I look at what we're putting together, the combination of businesses, I think the outcome is one that can continue to grow the top line while growing the bottom line faster in a sustainable way, but while making the necessary investments, as we work towards trying to serve people better. For decades, it's been my experience that our customers and members want four things from us. They want low prices. They want a really broad assortment of products and services. They want to have a great experience and that includes convenience and saving them time and they want to do business with somebody they trust. And in this business, you get what you earn. So we are working hard today to make sure that tomorrow we're continuing to have quarters like the one that we had this quarter. Thank you all.
Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
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8,102
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WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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Operator: Greetings. Welcome to Walmart's Fiscal Year 2025 Second Quarter Earnings Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. At this time, I'll now turn the conference over to Steph Wissink, Senior Vice President of Investor Relations. Steph, you may now begin.
Steph Wissink: 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's CEO, Doug McMillon, 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 Furner from Walmart U.S.; Kath McLay 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-GAAP reconciliations on our website at stock.walmart.com. Doug, that concludes my intro. We're ready to begin.
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8,103
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WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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Doug McMillon: 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. Walmex’s had another strong quarter. And India Flipkart again delivered positive contribution margin and PhonePe 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 U.S., 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. Our U.S. health and wellness business in 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
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8,104
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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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 U.S. and Sam's Club U.S. were slightly deflationary overall. Walmart U.S. food prices were slightly inflated as we exit Q2, but down 30 basis points versus Q1. In Walmart U.S., 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 U.S. achieved a record high member count. Globally, advertising grew 26%, including 30% growth for Walmart Connect in the U.S. 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
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8,105
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WMT
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2024-08-15 08:00:00
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Walmart Inc.
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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 a 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 U.S.-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
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8,106
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| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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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 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.
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8,107
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WMT
| 2
| 2,025
|
2024-08-15 08:00:00
|
Walmart Inc.
| 313,055
|
John David Rainey: Thanks Doug. I want to start with thanking our team for delivering on a good quarter. We're pleased with our results and the continued progress we're making executing our strategy. Since we shared our financial outlook at our investor day in April of last year, on average we've increased our quarterly sales by more than 5% and our quarterly operating income by 9%. These financial results reflect that our value proposition extends beyond great prices into convenience. Our combination of price, trust, assortment, and experience has made us more relevant with our customers and members than ever before. Q2 sales, operating income, and EPS all exceeded the top end of our guided ranges. Second quarter total net sales growth was 4.9% on a constant currency basis, with all three operating segments outperforming our expectations, aided by strong global e-commerce growth of 21%. In Walmart U.S., comp sales growth of 4.2% was driven primarily by strong traffic and unit growth across both stores and digital channels. Customers continue to be discerning and choiceful, looking for value to maximize their budgets, while leaning into seasonal celebrations. The pace of sales was largely consistent by month during the quarter. Across categories, we're providing low prices and winning customer consideration, including in general merchandise, with Walmart U.S. comp sales growth in hard lines, home, and fashion. We're also seeing higher engagement across income cohorts, with upper income households continuing to account for the majority of gains, even while we grow sales and share among middle and lower income households. We're seeing private brand penetration continue to increase, and we're highly encouraged by customer uptake of our new food brand, Better Goods, and the early excitement surrounding the relaunch of our young adult fashion brand, No Boundaries. E-commerce sales in Walmart U.S. were up 22%, and weekly active customers increased 20%. In addition to the great progress we're making in our fulfillment
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| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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U.S. were up 22%, and weekly active customers increased 20%. In addition to the great progress we're making in our fulfillment centers, the close proximity of our stores to customers has also unlocked new capabilities and enabled faster delivery times. Store fulfilled delivery was up about 50% in Q2, with customers increasingly choosing and paying for delivery of their e-commerce orders in under one hour or under three hours. Our international business delivered constant currency sales growth of 8.3%, reflecting strength in Walmex, China, and Flipkart. Across markets, sales were strongest in food and consumables categories, and we’re encouraged that general merchandise growth has improved year-over-year. Our private brand penetration increased in multiple markets as customers continue to focus on value. In our Bodega and Walmart formats in Mexico, nearly half of customer orders included a private brand item in Q2. E-commerce sales in our international markets were up 18%. Customers are responding favorably to the increased convenience as we scale pick-up and delivery capabilities. In China, we increased e-commerce orders delivered within one hour by 28% to 59 million orders. In India, Flipkart grocery grew over 50%, while providing next day delivery in over 200 cities. And in Canada, our delivery pass members drove more than 40% of grocery delivery sales with order frequency significantly higher than that of non-members. Sam's Club U.S. comp sales ex-fuel increased 5.2%, including e-commerce growth of 22%. Digital engagement remains strong with Scan and Go penetration surpassing 30%. And with our increased convenience of our Just Go technology now operational in 325 clubs, over 50% of our members can exit without a check, improving member NPS by more than 800 basis points, compared to the clubs without this technology. The members-marked private brand continues to drive excitement as sales and digital penetration increase during the quarter. Sam’s is also growing membership across all income levels and with
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8,109
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WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
|
sales and digital penetration increase during the quarter. Sam’s is also growing membership across all income levels and with younger demographics, with Gen Z and Millennials constituting about half of new members in Q2, a positive signal about the future growth of the business. From a margin standpoint, consolidated gross margins expanded 43 basis points led by Walmart U.S. and international segments. We're focused on providing everyday low prices for our customers and members, and we're managing U.S. pricing aligned to competitive price gaps. Customers and members are responding to our value proposition. We're seeing continued sales growth, share gains, and higher gross margins. We're demonstrating that we're able to grow our business on a sustained basis in the absence of price inflation. Global e-commerce losses continue to narrow, most notably in our Walmart U.S. and Flipkart businesses. While improved business mix is helping, we're also encouraged by the progress in core e-commerce margins, due largely to another quarter of nearly 40% reduction in U.S. Net delivery cost per order. Flipkart's contribution margin also expanded significantly in the quarter. Scale and delivery density are key. As more customers are shopping with us more often across more categories, we're improving delivery density and transaction level margins. With improving business mix, we're continuing to reshape our profit composition as we scale growth drivers, such as advertising, membership, marketplace and fulfillment, and data analytics and insights. Our advertising businesses around the world continue to scale with global advertising up 26%. This was driven by another strong quarter from Walmart Connect in the U.S., which grew 30%. We're also pleased with the trends in our membership programs. In the U.S., Walmart Plus membership income grew double-digits again this quarter. In Sam's Club U.S., reached another record high level for member counts and plus member penetration, resulting in 14.4% membership income growth. Within
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8,110
|
WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
|
another record high level for member counts and plus member penetration, resulting in 14.4% membership income growth. Within international, membership income in China from our Sam's Club business grew 26% as member count continues to increase. And in May, we opened our 48th club in China, and we welcomed around 50,000 people on opening day. For marketplace and Walmart fulfillment services, in the U.S., we've now seen more than 30% growth in each of the past four quarters, as we continued to increase seller counts on the platform by double-digits. Growth from sellers using our Marketplace Fulfillment Services increased 800 basis points in Q2, surpassing 40% penetration. Sales in fashion, toys, hard lines, and home all grew more than 20%. Outside the U.S., we're seeing similar trends as we enhance our capabilities in product assortment. For example, Flipkart delivered double-digit top line growth and more than doubled the number of units that delivered same day. In Mexico, we grew marketplace items and sellers by around 60%. And in Chile, we launched cross-border trade, adding sellers from China and the U.S. to our local marketplace offering. Within data analytics and insights, Walmart Data Ventures continues to see strong results as clients value the insights we provide, bringing together consumer behavior with omnichannel sales and inventory trends across our platform. Our client base has increased nearly 200% versus last year as we launch new tools and enter new markets, including the expansion of our Walmart Luminate product in Mexico in May. We're also optimizing our business model to deliver greater efficiency. I've been encouraged by how our teams have renewed our longstanding everyday low cost operating mindset. Ideas are being implemented across the organization and they're beginning to yield tangible results. By leveraging our scale as a global enterprise, we're finding savings in supplies, transportation, storage, third-party service contracts, and various other expense categories. In other areas, we're
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8,111
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WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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supplies, transportation, storage, third-party service contracts, and various other expense categories. In other areas, we're maximizing the utilization of our assets and using tech to streamline our operational processes. Together, these efforts translate into meaningful savings. We're also making good progress on our supply chain transformation, and we're seeing the direct benefits to customer experience. In Walmart U.S., more than 45% of our e-commerce fulfillment center volume is now automated and we have about 1,800 stores receiving some level of freight from 15 of our regional distribution centers that are in varying stages of automation implementation. And as a result, our supply chain teams are processing more units through our DCs and FCs. And while we're spending more on CapEx than we have historically, we're pleased with the returns from these investments, particularly the automation of our supply chain. We expect these investments to yield returns that will allow us to increase our return on invested capital each year. Importantly, our evolving business model with more diversified and durable sources of profit has provided the ability to fund investments in prices for our customers, wages and benefits for our associates, and leading-edge technologies to power our growth, all while delivering on our financial framework of operating income growing faster than sales. Wrapping up Q2 results, consolidated adjusted operating income grew 7.4% in constant currency, reflecting strong growth in sales, gross margins, and membership income, partially offset by expense deleverage across segments, largely related to increased marketing and higher variable pay expenses tied to our above-planned performance. Operating income also benefited from reduced e-commerce losses during the quarter. Adjusted EPS of $0.67 per share was above the upper end of our guidance of $0.62 to $0.65. Turning to guidance. For the first-half of the year, we reported net sales growth of more than 5% and adjusted operating income growth of
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8,112
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WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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guidance. For the first-half of the year, we reported net sales growth of more than 5% and adjusted operating income growth of almost 10%. We are raising our full-year guidance to reflect strong first-half results. Looking at the second-half of the year, we expect the business to achieve sales growth in line with our financial framework and for sustained structural improvements and incremental margins. This should result in operating income growing slightly faster than sales when looking at the second-half in total. We now expect full-year FY ‘25 sales growth of 3.75% to 4.75% and operating income growth of 6.5 to 8% versus our prior guidance of growth of 3% to 4% and 4% to 6% respectively. Adjusted EPS is expected to be $2.35 to $2.43 versus prior guidance of $2.23 to $2.37. We're focused on executing on the things that we can control, focused on our business and serving our customers and members. But the economic and geopolitical backdrop that we operate in is perhaps more uncertain than normal, and we're not completely immune from the volatility that can result from this. And while we have not seen any additional fraying of consumer health in our business, other economic data out there, as well as the state of affairs globally, would suggest that it's prudent to remain appropriately cautious with our outlook. Reflecting these considerations, our guidance is for growth in Q3 sales of 3.25% to 4.25% and operating income of 3% to 4.5% with EPS expected to be $0.51 to $0.52. There are two primary factors influencing Q3 operating income growth. First, as is the case in most years, the timing of festive events in our international segment has a bearing on sales and profits by quarter and can affect year-over-year comparability and growth rates. And second, the timing of planned expenses is more concentrated in Q3 versus Q4. In closing, with the results we've delivered through the first-half, we're in a good position to achieve our financial goals for the year. Our business model is delivering strong momentum.
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WMT
| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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we're in a good position to achieve our financial goals for the year. Our business model is delivering strong momentum. E-commerce is sustaining its strong growth and pulling new value streams and profit pulls along with it. Simply put, our value proposition is broader and more relevant to our customers and members than ever before. We appreciate your interest in Walmart and are now ready to take your questions.
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| 2
| 2,025
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2024-08-15 08:00:00
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Walmart Inc.
| 313,055
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Operator: Thank you. We’ll now be conduct the question-and-answer session. [Operator Instructions] Our first question is from the line of Michael Lasser with UBS. Please proceed with your question.
Michael Lasser: Good morning. Thank you so much for taking my question. Can you frame or quantify how you have factored in things like the election and other distracting events into your guidance for 3Q and 4Q? And if you haven't seen an impact from these distractions as of yet, whereas many others who are serving the consumer have, why would you experience an impact from that as you move through the rest of the year? Thank you very much.
John David Rainey: Michael, this is John David. Good morning. Thanks for your question. Good thing about elections is they come along every four years and we get to have a lot of history with seeing the impact of that. As I noted in my prepared remarks, given the state of the economy, the election, state of affairs globally, there's reason to be appropriately measured in our outlook for the back half of the year, but effectively nothing has changed for that period of time relative to what we thought at the beginning of the year. Our business is executing very well, we're gaining share. We're seeing that our value proposition is resonating with customers. And so we feel good about what we can control and the performance of the business. We'll continue to monitor what happens over the course of the coming months. And we think that we are positioned very well, irrespective of whether we're in a more recessionary or more expansionary type period and some of the volatility that may result from that.
Operator: Our next question is from the line of Oliver Chen with TD Cowen. Please proceed with your question.
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2024-08-15 08:00:00
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Walmart Inc.
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Operator: Our next question is from the line of Oliver Chen with TD Cowen. Please proceed with your question.
Oliver Chen: Hi, thank you. In your remarks, you mentioned that you aren't experiencing a weaker consumer. What does your guidance assume in terms of your outlook on the consumer? And related to that is general merchandise. The flat performance was impressive, given the trends in what we're seeing? What do you see happening within that category and will that momentum continue? Does your guidance assume that stays flattish? Lastly, just on e-commerce, you continue to make really nice drives on the density and scale. What's ahead in terms of profitability, drivers, and how much more room there is for delivery density? I imagine that can just get better and better. Thank you.
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2024-08-15 08:00:00
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Walmart Inc.
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John David Rainey: Oliver, I'll try to address each of those questions real quickly. In terms of the outlook for the consumer, let me characterize this or give some context in the second quarter. So each of the months of the second quarter were relatively consistent. If you were to look at the pure comps for each month, July was actually slightly higher, but we think that, that's largely a result of where the days of the week fell in the last month of the -- or last week of the month. So we did not see a step down and our outlook for the back half of the year is really for more of a continuation of what we've seen. Even in the first couple weeks of August here, things have been remarkably consistent. So I know everyone is looking for some piece of information that maybe indicates further weakness with our members and our customers, we're not seeing it. But we feel like we're -- as I mentioned in my prior response, measured in our outlook and positioned well. With respect to general merchandise, I'll make a couple comments and maybe John or Doug wants to jump in, but we like what we're seeing in general merchandise. First time in 11 quarters that we've seen positive inflection there. I think some of this is not so much what's happening broadly in the economy, but specific to our business. If you take our marketplace business as an example, there are many categories that grew over 20% in the quarter. As we're expanding our assortment, we're more relevant to customers. And I think that's driving some of what we're seeing in general merchandise. Lastly, on e-commerce, I would say that, that continues to have an outsized contribution to our results. If you look at the second quarter, and you were to parse out the various pieces of our business, for example, advertising, membership, fulfillment services, core e-commerce, without the benefit of any of those, was the single largest contributor to our year-over-year operating income improvement. So we really like the progress that we're making there. John may want to
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Walmart Inc.
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to our year-over-year operating income improvement. So we really like the progress that we're making there. John may want to comment on some of what's happening in the U.S., but continue to make good progress, sir.
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2024-08-15 08:00:00
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Walmart Inc.
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John Furner: Hey, good morning, Oliver. It's John. Thanks for the question. I'll just pick up a bit where John David left off. And first, really proud of the progress the teams made, Tom Ward and others who have done a great job with e-commerce. The 22% result is impressive and we're proud of it. The progress behind it, maybe we'll just start with customers. The thing that Doug mentioned in his earlier remarks about using GenAI for the catalog has been a great enabler over the last few months. It's about 100 times more productive to use GenAI versus having people work through each product display page. And that's really important in the context of the marketplace where we've had so much expansion in terms of the number of sellers and the number of assortment -- the number of items in the assortment. So for customers, more and more, we are really feeling like Walmart can sell you anything that you want to search for. And for the sellers that are coming on, it’s an exciting time because there is so much momentum in the business all around. So the GenAI product that we're using has helped us populate the attributes and the characteristics of hundreds of millions of items, and that would have taken, as I said, a 100 times longer if we had tried to do that manually. So when we're trying to really understand the intent a customer has in each session when they're on the site or in the store, then we're able to match the catalog to their intent in a much more effective way, because the detail of each item and the product display pages has gotten so much better. So that's one example of using the latest technology that we can to try to improve customer experiences. And so, you know, customers in many cases start shopping in the store. We know there's much more value when a customer shopping both in the store and in their e-commerce. Third, when they join Walmart Plus, we see even more frequency. And then the last thing I would say is something that we said earlier about convenience. The number of customers who are
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Walmart Inc.
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And then the last thing I would say is something that we said earlier about convenience. The number of customers who are enjoying the benefits of convenient on-demand deliveries. And when I said demand, I mean less than three hours. That has grown at a very high rate over the last few quarters than this last year and so the flexibility that the team has been able to offer to customers whether it's in the store, at the curb, delivery, or with Plus, or in this on-demand channel, which is really fast, in many cases, it's less than an hour for the full store assortment across the country, has been great. And so we'll continue to lean into these areas, number one. And then -- and the second, you mentioned density and frequency. We just recently expanded our delivery catchments to include about another 15 million homes across the country. And that's a result of the density and the business that the team has built. And all those things added up are helping us with this core e-commerce profitability improvement that John David mentioned, which has been really helpful for the total P&L.
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Walmart Inc.
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Chris Nicholas: Yes, and hey, Oliver, it's Chris Nicholas here from Sam's Club. Just to build on that answer from a Sam's Club point of view, you know, our incredible associates have done a great value for -- a great job for our members and our results are reflecting that. And if I think about how we've done that, digital engagement has been a really big part of it. So, we think, we take a look at the numbers, John David talked about some of them, but e-commerce is up 22%. That's delivery from club, that's delivery from fulfillment centers, and that's pick up from club, and all three of those are resonating really well. On top of the e-commerce piece, we have a digital engagement in club with our Scan and Go up 190 basis points. Our just go frictionless exit that John David talked about is really resonating. I think last, when we -- when this went to print it was 325, we're now at 380 clubs. So we're feeling really good about that. And what that does is it helps drive just a much deeper engagement with our members. They're spending more, they are more prone to renew, which we feel really good about. And, you know, it's worth mentioning, and it's something we've talked about before, that the Sam's Club e-commerce business is profitable, and it's growing rapidly. So we're feeling good about the mix, we're feeling good about the offer, and it's across the membership base too.
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Doug McMillon: Oliver, this is Doug. One of the questions we used to get was, how do you feel about e-commerce as it relates to impulse sales? People walk into stores and clubs and they buy things that they didn't necessarily have on their list when they came in, can you do that with e-commerce? And one of the interesting things that's happening with generative AI is that cross-category search is more effective, which serves up more general merchandise items and it helps drive e-commerce profitability, as you were asking about earlier. So we're in this situation where we've got the best e-commerce food offer and new tools are helping us connect impulse items that are general merchandise in some cases, which helps us improve both sales and profitability.
Operator: Our next question is from the line of Kate McShane with Goldman Sachs. Please proceed with your question.
Kate McShane: Hi, good morning. Thanks for taking our question. Membership growth was noted as one of the drivers of operating income dollar growth during the quarter. And there did seem to be an acceleration from Q1 to Q2, especially at Sam's Club. I wondered if there was something meaningful that had changed from a quarterly standpoint or sequential standpoint, and you flagged increased marketing as part of the reason that operating expenses deleveraged in the quarter? Did that have anything to do with some of the increased membership that we saw? Thank you.
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Chris Nicholas: Hey Kate, Chris Nicholas here from Sam's Club first and I'll just touch on the membership growth piece. We are seeing all-time high membership growth, we're seeing all-time high plus penetration too, so the health is really good and we're also seeing growth across all income cohorts and all generations. One of the really exciting things we're seeing is that 50% of the growth that we saw in the quarter was Gen Z and Millennials. And that really talks to a really strong health for the future. We're getting people early in their lives and we see them continuing to be sticky. The reason that it's working is we're focusing on all parts of our value proposition. So we're focusing really hard on enhancing the core value proposition. We're focusing really hard on that deepening of digital engagement and Member’s Mark is doing really well as well. And you saw that in terms of transactions, our units were ahead of comps too. And what's good about that for a membership model is the more engagement you have, the more frequently that they engage with you, the more prone they are to renew. So just good quality health of the Sam’s Club business drives more members in and drives that renewal rate up.
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John Furner: Hey, Kate, it's John. Good morning. Thanks for the question. Let me address the marketing question in addition to the comments Chris made about membership. And if you step back, what we opened the call with is we know what customers are interested in around the world, and that -- those are the four things we talked about, value, assortment, experience and trust. And while, of course, we have always focused on being a great value with everyday low price and we're driven to an everyday low cost culture to support everyday low price, so customers can always depend on us for the best value of our basket of goods. What's happened in the last couple of years is a really rapid expansion in assortment. We've talked about that for the last few quarters on calls like these and other places. But as the assortment has expanded, our ability to show those items in a very high quality way, using new tools like generative AI and improving our search, has enabled us to understand better what customers are looking for by season, by session, by time of week. And it felt like it was the right time given this increase in convenience in addition to pick up and delivery. So you can shop in the store, you can pick up on a schedule, you can deliver on a schedule, deliver on a schedule. And then this acceleration of this convenience experience felt like the right time that we need to be more bold about telling our story to our customers. And so starting late in the first quarter, we decided intentionally to increase our marketing investment to tell the story to our customers about all the things that we can do for them, which has led to what we feel good about are some really important early positive signs in general merchandise, including unit growth, which led to the results we talked about at the end of the quarter. But seeing things like marketplace and specifically fashion within marketplace lead the way is encouraging. So this could be something that we continue over time. We'll learn as we go. We'll be very thoughtful
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the way is encouraging. So this could be something that we continue over time. We'll learn as we go. We'll be very thoughtful about how we manage mix, how we manage expenses and how we manage our costs across channels. But seeing customers respond to these new offers that we have in marketplace and with apparel, home, other categories has been really exciting.
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John David Rainey: We still have lots of room to improve, but the progress we've made on the e-commerce experience across businesses, across markets, puts us in a position where we can play more offense and be more aggressive as it relates to marketing. So, whether it's that or the capital investments in supply chain, what you're seeing is that we are playing offense.
Operator: Our next question is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.
Rupesh Parikh: Good morning and thanks for taking my question. So I just wanted to go back to the momentum you're seeing in the health and wellness category. Just want to get a sense of how you guys are thinking about the sustainability of strength that you're seeing there? And anything outside of GLP-1 that contributes to that momentum? And then just from a gross margin perspective as you look at you know stronger growth in grocery and within health and wellness, how is the mix -- product mix impact on gross margins playing out versus how you thought about for the year?
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John David Rainey: Hey, Rupesh. It's John. I'll take that. So let me start with mix in general. In the quarters, we noted better results in general merchandise, which is of course helpful. We have strength in food and consumables, we also talked about inflation really being at exiting the quarter roughly flat slightly down in some areas. So we're growing the business with higher transaction counts and higher unit growth, which of course is encouraging. Our merchants have a lot of experience over the last few years and the last few decades, maybe is the best way to say it, at managing mix in any kind of situation. So yes, there are -- there is growth in health and wellness led by GL-1s, but there's other growth in the category like supplements that we're proud of. This is a time of year as people go back to school, back to college, you can lean into categories like over-the-counter supplements and we can do really well. But when you step back and look at the entire business, inventory is down 2% across the business. That's a decrease on top of a decrease last year and we're proud of the in-stock results that we have. And so our merchants have a number of levers they can use. First, of course, they want to be a great value to customers. We have 7,200 rollbacks. And then our merchants can mix across categories. In many cases, by taking a high margin item and taking a rollback on it, you can shift sales to items within a category to bring the category up, and you can do that , while you have pressure in other places. So at this point, we're managing the margin, we're managing mix. I don't have any concerns about our ability to do that at this point. We'll see growth. Perhaps it's uneven in certain cases. That's always been the case. But we're in a good spot in terms of inventory, in stock, value, being ready for customers so that we can manage our mix.
Operator: Thank you. Our next question is from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.
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Simeon Gutman: Good morning. Thanks, everyone. My question, it's on the spread between U.S. EBIT growth and U.S. comps or U.S. net sales. It looks like the first-half of the year you're running 4-ish and change comps and you're doing EBIT growth of about 7% to 8%. So about a 3 to 4 point spread. My question is two-parts. First, are there active decisions of reinvestment that we can do both reinvest and grow. I'm curious how much reinvestment's happening? And second, that 3 to 4 point spread, is that representative of the business's run rate or is this still scaling and then that spread should continue to widen going forward? Thank you.
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Doug McMillon: Simeon, this is Doug. We are being thoughtful and deliberate about reinvestment. And we start out thinking about the customer first. What's the level of price investment? Where are our gaps? And as we've been saying for some time now, we're feeling comfortable with where our gaps are and we'll continue to support those as needed. And it is great to see prices come down. We are wired to help bring prices down and we'll continue working on to get more rollbacks to help customers and help members save money. The second thing we think about is our associates and where's our level of compensation, what investments need to be made there. And you've seen now for years a string of different investments that we've made in our associates, whether that's hourly or management. We obviously think about shareholders all the time and it's not lost on me that our operating income percentage came down for a period of years as we made investments and it feels good to have turned the corner on that and have a healthy business mix, so that we can do both in parallel. So whether it's a one-year operating plan or it's a five-year plan, we're kind of in that season right now where we think about a five-year view. We're trying to be deliberate about reinvesting in the business, so that the momentum continues and we don't find ourselves having managed the short-term to the detriment of the long-term.
Operator: Our next question is from the line of Christopher Horvers with J.P. Morgan. Please proceed with your question.
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Operator: Our next question is from the line of Christopher Horvers with J.P. Morgan. Please proceed with your question.
Christopher Horvers: Thanks. Good morning everybody. You talked about the U.S. e-commerce business turning profitable perhaps in the next one to two years after 2Q. Is there any refinement to that time frame? And then related to that in the first quarter you talked about I think total contribution 300 million to 400 million in alternative profit pool growth that you saw in that first quarter, is that improving? And can you talk about how that arc of improvement trends as we look out into the future? Thank you.
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Doug McMillon: Christopher, this is Doug. I'll go first and others can join in if they want. As it relates to e-commerce profitability for some time now, I've been trying to stress to everybody not to get too hung up on it. We've got a business with a lot of variables here and we're going to manage them all and they're going to be new businesses that we invest in and in the short-term don't make money, but make money in the mid to long-term. And at some point, we'll tell you that we've crossed a threshold and that e-commerce is profitable. We'll then talk about whether that includes advertising or does include advertising. You heard John David say earlier, we saw a lot of progress in core e-commerce during the quarter, which is absent advertising, and we focus on that, and we're seeing really great improvement there. And so I'm encouraged by it. But with Walmart, I wouldn't get hung up on one metric too much, whether it's advertising income or membership income or e-commerce profitability, look at the omni total. We have a great and huge store and club business around the world that is profitable. We make money in food. We make money in consumables. We make money in general merchandise. And we'll eventually make money in e-commerce. And we're getting into that zone where it's going to cross a threshold. And we'll talk about that at some point, and then we'll put that to bed and we'll be talking about something else.
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John David Rainey: I'll just add on the newer businesses, we continue to see great progress there in the quarter, just to maybe cherry pick a couple of them, if you took advertising and membership, those two alone accounted for over 50% of our operating income growth. And so, as Doug and others have alluded to, all these things work together. We've got to be really good at the core basics to have those work, but continue to be pleased with these faster growing higher margin parts of our business that you all are seeing are changing the reflection in terms of how our financials look, our margins are inflecting higher.
Kath McLay: Can I just add too, like as I look across international business, there's so much balance across the markets and we do have markets where we are e-com profitable, we have channels where we're e-com profitable, but what we see holistically is that while with the value and convenience play, that is growing density, it's helping our fulfillment costs come down and it's helping the overall profile. But it's just a very balanced result across markets as we're seeing that omni continuing to increase as a component of our business and seeing the profitability mix really balance out.
Operator: Our next question is from the line of Krisztina Katai with Deutsche Bank. Please proceed with your question.
Krisztina Katai: Hi, good morning and congrats on really strong results. I wanted to ask on the momentum in membership. You have done a lot to enhance the Walmart Plus business. You added many new features. So one is what have you found to be working best, not only in attracting, but also retaining members? And in fact -- and can you update us on the uptake of the Walmart Plus assist program and how you think about the sustainability of that growth as we think about the low-income consumer taking advantage also of convenience and value. Thank you.
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John Furner: Hey, Krisztina. Good morning. It's John, I'm happy to address the question. Of course, I'd say we're proud of the progress in Walmart Plus. The team is working really hard on ensuring that, number one, the offer is built in such a way that it's very relevant to our customers all across the country. The core of the offer, of course, is delivery without cost from either the fulfillment centers or stores and our ability to attract people starts with the offer our ability to retain people ends with how well we execute that proposition, so we spend a lot of time and energy we start every week going through all the metrics on how we did on the week before, the month before, the quarter before, and then building roadmaps to ensure that any friction that we are putting in front of customers, we're doing everything we can to try to eliminate that. We know that when we deliver what we call a perfect order, which is part of our over-customer experience score, that the likelihood of repeat and renewal goes up significantly. So we focus a lot on ensuring that customers get what they ordered, when they ordered it, with only appropriate substitutions when those are absolutely necessary, and those are all helping. In terms of assist and other things we have a membership program that should and is we believe very applicable for customers at all income brackets. We have members who are delivering very frequently who are below 50,000 a year in income and we have members who are delivering frequently and growing above 100,000. And so this flexibility is super important. And as I said earlier, when a customer moves from just shopping in the store to stores in e-commerce or stores in e-commerce and they become plus and then within plus they use what described earlier is on-demand sub three-hour delivery. We really see spend rates and the amount of time and energy money people are spending with us go up significantly. So it's about the entire journey. And as Doug said earlier, I wouldn't weigh too heavy on one metric in
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us go up significantly. So it's about the entire journey. And as Doug said earlier, I wouldn't weigh too heavy on one metric in particular. Walmart Plus is an important part of our program. It's not the only thing we do. We do a lot of other things. But for the people that join, we want to make sure that we deliver the very best experience that we possibly can that's within our control.
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Operator: Thank you. Our next question is from the line of Chuck Grom with Gordon Haskett. Please proceed with your questions.
Chuck Grom: Thanks, good morning, great results. On automation, where are we on that journey today and how much of the benefits are we seeing in the P&L over the past couple of quarters versus what you expect to flow through over the next several years? And then separately on August comps sound solid. Any early thoughts on back to school, back to college? Thank you.
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John Furner: Hey, Chuck, it’s John, I'll take that first and I'll start with automation and talk about back to school for a second. As you know, we have a number of facilities and a number of types of facilities around the country that we are automating in the supply chain. We have our regional distribution network, which is primarily an ambient network. Progress there is right where we planned it to be. Continue to be pleased with the progress of our provider in the space, and by the end of the year, roughly we should see about 3,000 stores of the 4,600 having deliveries from automated facilities in some way. So the progress is good. The ability for a store to get a load in that is palletized, it's by aisle, and as we build more density in these centers, not only is it by aisle, in many cases it's by section when an associate needs to stock a pallet, is so helpful. I remember working in stores years ago and it was a bit of a treasure hunt to try to find the items you needed, the cases you needed, but not only our automation, but then the in-store technology to help us locate what we own and know where it is makes it much easier for our associates to access inventory and get those things in front of people. The second type of automation, of course, is perishables. That's a network that we're pretty new in. We have about three facilities that are underway. And then our fulfillment center network is probably the farthest along with the highest percentage of buildings that have converted. And we're really pleased with the accuracy, the number of steps it takes an associate to run inventory through, and our variable cost per unit is showing significant improvement in those centers. The last part of your question, back to school, it started off strong this last couple weeks. I've been and a number of operators have been in stores all over the country where we're looking at how ready they are for back to college and back to school. About 50% of our customers still say they have a lot of shopping left to do. We have
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for back to college and back to school. About 50% of our customers still say they have a lot of shopping left to do. We have over 2 million school lists uploaded on the site. So we still have a lot of trading ahead of us. So good start. We have to continue to execute really well, clean up, come out of the season strong so that then we can move to the next holiday, which will be Labor Day. We take all these one at a time. We focus on what we can control we execute, we clean our inventory up and then we move forward so good start, but a lot of trading left to do.
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Operator: Thank you. Our next question turn the line of Corey Tarlowe with Jefferies. Pleas eproceed with your question.
Corey Tarlowe: Great. Thank you. And good morning. So Doug a couple quarters ago you had mentioned to us that deflation could be a real possibility. And now in the prepared remarks today, I think for the quarter, both Walmart U.S. and Sam's Club, you mentioned, were slightly deflationary overall. So I'm wondering, what do you think this means for the trajectory for pricing as we look ahead? What does it mean for your price gaps? And then additionally, how do you think private label plays into this as I think we've continued to see those price gaps widen as well. And that also is continuing to increase in terms of penetration in the business. So how do you see that adoption unfolding in the midst of, in the broader context of pricing potentially being slightly deflationary?
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Doug McMillon: Yes, Corey, first I would say we want to sell brands. It's important to Walmart to sell brands and show a value and so we're hoping that our branded suppliers do the right things with both quality and price to get to the value that our customers want to see. I would guess that private brand continues to grow although it'd be okay with us if the percent of total leveled out for the reason that I just mentioned. Our teams are doing a better job with private brand as it relates to both the development of the product, the quality of it, and the value. So, you know, that's good and helpful for customers and we'll keep doing that. Looking ahead from a pricing point of view, fresh food is behaving like it does. Supply and demand moves faster and things adjust, whether it's the proteins or it's fruit and vegetable. General merchandise has come down. My guess is it doesn't come down a whole lot more, but it's great that the prices are down and that rollbacks are being reflected. In dry grocery, processed food consumables are where inflation's been more stubborn. And as we mentioned, we still have slight inflation, even in last quarter in the food categories. So I'm hoping that what we see from our branded suppliers is investment in price, and we're seeing that from some of them and not others. We have less upward pressure, but there are some that are still talking about cost increases and we're fighting back on that aggressively, because we think prices need to come down. So I don't forecast that we're going to see a lot of deflation in our number looking ahead. It probably levels out about somewhere near where we are with the mix being reflected as I just described.
Operator: Thank you. Our next question is from the line of Paul Lejuez with Citigroup. Please proceed with your question.
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Operator: Thank you. Our next question is from the line of Paul Lejuez with Citigroup. Please proceed with your question.
Paul Lejuez: Hey, thank you guys. Following the gross margin expansion in the first-half, how are you thinking about gross margin in the second-half, which drivers of the first-half margin expansion stay the same, which fall off, and are there any new drivers of gross margin that we might see pop up in the second-half? And then maybe related to that, what are your expectations for the competitive landscape relative to what you've seen the past several months? Thanks.
John David Rainey: Paul, John David I will respond to the gross margin question, but I just want to jump out in the front part of that and say we're not raising prices, we're lowering prices. But we don't want product margins to go up. When we talk about margin improvement in our company, it's business mix, a mix of geographies. It is not that we are increasing product margins.
John Furner: I just add to that, Paul, that if you look at some of the drivers of the gross margin improvement, as Doug noted, business mix drives a large part of that. We've also seen improvement, as I mentioned earlier, in just core e-commerce losses. Within the core merchandise mix, we had a little bit of benefit from improved shrink in the quarter, similar to what we saw last quarter as well, as we were at higher levels last year. But as Doug noted, we're advocating for our customers. We want to drive everyday low prices and we're not intending to achieve any of our margin performance by passing this along to our customers and members in the form of higher prices.
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Kath McLay: I probably just call that too. We had talked in -- we had a really strong op inc result in Q1 and we called out that Q2 would moderate. It did but it was still a really strong result into Q2. But one of the things that I'm finding in international is that there is a significant amount of impact from events and we will have BBD in the back half, which does change the profit profile of the back half. But we're still really optimistic and bullish about the results. We're driving in international. It's just recognizing that those big events do kind of have a disproportionate kind of impact on the ratios across between top line and bottom line.
Paul Lejuez: What does BBD stand for?
Kath McLay: Oh, BBD is Big Billion Days, which is a really big sales driving event in India that happens around Q3, Q4.
Operator: Our next question is from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.
Kelly Bania: Hi, good morning. Thanks for taking our question. I was curious, you talk a lot about the share gains by income cohorts and how that's primarily driven by upper income households. But would you be willing to kind of give color on comps by income cohorts? And I think a lot of investors are just really curious if you are growing comps with low income households or how much of comps are being driven by that upper income? And maybe if you could tie in any color between grocery spend and general merchandise by cohort, is it really that upper income cohort that's starting to turn the needle here on general merchandise? Any color there I think would be helpful.
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Doug McMillon: Kelly, this is Doug. I'll go first and if anybody wants to add, they can. I don't know that we can add a whole lot more color except to say that value matters to everyone, whether you're above or below $100,000 in income, we do see behavior differences in the lower income levels, more focus on opening price points, end of month behavior looks different, all the things that you would expect, but they still need us for general merchandise price points. And as it relates to higher income people, they can buy more discretionary goods and they can pay more for convenience and we're offering all of it. So, you know, I think our future looks like it's got a spread across income levels that's different than our past, because of convenience. I think the Walmart Plus membership, delivery, the things we're doing with remodels, John, and the U.S. stores, I think all these things are coming together to give us a shot at continuing to have growth with higher income levels, regardless of what happens in the economy.
Operator: Thank you. The next question is from the line of Robbie Ohms at Bank of America. Please proceed with your question.
Robbie Ohms: Oh, hey, thanks for squeezing me in. I just was wondering from the team with the back half guidance, I'd be curious to get your thoughts on what kind of holiday Walmart is planning for this year in the U.S. and even globally.
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Doug McMillon: It's going to be great, Robbie. We're all smiling at each other. I mean, you know, you guys know what we know about the volatility of the environment and all the things are in front of us. But the good news is we have a long history of dealing with volatility and surprises of all forms, especially in more recent years. It is nice that the early days of back to school went well. Sometimes, most times, I guess, that does give some indication as to how Halloween and Christmas will go. We bought increases and we're playing offense, so we're expecting to have a good holiday and we look forward to serving our customers and members through all the holidays around the world.
Operator: Thank you. At this time, we've reached the end of our question-and-answer session. And I'll turn the call over to Doug McMillon for closing remarks.
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Doug McMillon: Yes, as always, Thanks for your time and attention. We're feeling pretty good about where we are. We believe we're making real progress, not only as it relates to saving people money, but growing our assortment through both first party and third party, and importantly, saving people time. Regardless of your income level, you need to and you want to save time and convenience is a big deal and we're improving that part of our experience. The team's driving results right now, the unit growth, market share growth, pricing improvement, really good inventory management. It's great to see and it's also great to see ROI up 230 basis points in a quarter. At the same time that the team's doing a great job driving short-term results, we're building for tomorrow. The e-commerce growth is strong. That includes the marketplace business, which helps pull through things like membership and advertising and fulfillment services, resulting in that new business model. And I'm also really excited about international as it relates to building for tomorrow. We're in a great position in the right markets and this business is more than a domestic business. It's got global leverage, global benefits and Kath and the team are figuring out ways to help make that be true across markets where they see benefits by being part of Walmart. And 8% operating income growth for the quarter was really good. So we're trying to do a good job of both managing the short-term and building for the long-term at the same time. And I think that's what we're seeing happen. And I'm just really grateful to the team. Thank you all.
Operator: This concludes today's conference. May disconnect your lines this time. Thank you for your participation.
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Operator: Welcome to Walmart's First Quarter Fiscal Year 2025 Earnings Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I'll now turn the conference over to Steph Wissink, Senior Vice President, Investor Relations. Steph, you may now begin.
Steph Wissink: Welcome, everyone. We appreciate you joining us today and your interest in Walmart. Joining me today from our home office in Bentonville are Walmart’s CEO, Doug McMillon, and CFO, John David Rainey. Doug and John David will first share their views on the quarter and then we'll open the line to your questions. During the Q&A portion, we will be joined by our segment CEOs, John Furner from Walmart U.S.; Kath McLay 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 questions as we can in the hour we have scheduled for this call. As a courtesy, please limit yourself to one question. Today's call is being recorded, and management may make forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Please review our press release and accompanying slide presentation for a cautionary statement regarding forward-looking statements, as well as our entire Safe Harbor Statement and Non-GAAP reconciliations on our website at stock.walmart.com. Doug, that wraps my intro. We're ready to begin.
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Doug McMillon: Good morning and thanks for joining us. Our team delivered a great quarter to start the year. Our results were stronger than we anticipated with sales growth of 5.7% and adjusted operating profit, up 12.9% in constant currency. All three operating segments performed well. The momentum we see across the businesses driven by growth in units sold and transaction counts, as well as market share gains, including general merchandise. These are not inflation-driven results. In the U.S., like-for-like sales inflation was about 40 basis points for the quarter, including mid-single-digit deflation in general merchandise and low-single-digit inflation in food and consumables. Together with our suppliers, we're making progress lowering prices. Our rollback count is up and customers are responding to our price leadership. The first highlight I'd like to call out is the improvement in customer experience scores. That has a lot to do with our associates. I get to visit with a lot of them as I travel. This quarter I've been in stores and clubs in Johannesburg, Cape Town, Toronto, Nashville, Los Angeles, Austin, Oklahoma City, and Dallas. And before we get too far into the conversation about our performance, I want to thank all our associates everywhere. They deserve all the credit. They're managing the things we've always managed, while simultaneously building new capabilities and driving change. Here's what they're doing to drive our business. First, we're providing value. Low prices on quality merchandise are always important to our customers and members. Our combination of everyday low prices plus a large number of rollbacks is resonating. During the holiday, we offered a basket of Easter items with a lower price than a year ago in the U.S. and Canada. Customers responded, and we saw strong sell-throughs. Our merchants are doing a great job, including managing inventory, where we finished down 2.7% globally. Second, we have the selection people are looking for. In the U.S., the number of marketplace sellers
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down 2.7% globally. Second, we have the selection people are looking for. In the U.S., the number of marketplace sellers grew by 36% for the quarter with a skew count now sitting at more than $420 million. In Mexico, the number of marketplace sellers grew by more than 50% with skew count up nearly 80%. More often, our customers are finding what they're looking for when they shop our app or site. eCommerce penetration is up in all our markets. Third, we're improving the experience of shopping with us. Our store remodels look good and are performing well. Plus our curbside pickup and delivery capabilities are improving as indicated by our customer experience metrics. Globally, we completed nearly 70 remodels during the quarter, and we're on track to do more than 900 this year. We're making it more convenient to shop with us, and our customers and members are rewarding us with growth as we save them time. We expect to continue to earn healthy levels of sales growth and simultaneously grow profit faster than sales this year, while managing our price gaps and investing in our associates at the same time. This quarter's results were driven by a combination of strong core performance and the growth of our newer businesses. As it relates to the core, strong same-store sales growth combined with good inventory management resulted in strong profit flow through. And our newer businesses, advertising and membership were both up 24%. Today we announced that we're expanding our data analytics and insights product, Walmart Luminate, into Mexico and Canada. Our technology team continues to deliver the innovation that helps us drive our business. We're bringing new experiences to life, like generative AI driven product search that helps our customers shop more intuitively. The team continues to build and improve the platforms for marketplace and data that we're using across countries. And they're building and improving the operating system that enables us to create a more intelligent, flexible, and automated supply chain. The
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and improving the operating system that enables us to create a more intelligent, flexible, and automated supply chain. The implementation of our automated storage and retrieval systems and our DCs and FCs is on track. And we're as enthusiastic about the impact of that work as we've ever been. Turning to our segments, in Walmart U.S., we recently announced a new private brand and food called Better Goods. It's our largest food private brand release in 20-years. The brand focuses on today's trends and premium quality. But at the same time 70% of Better Goods items are priced under $5. This is the type of quality and value that will resonate with customers across income spectrums. We also introduced on-demand early morning delivery to customer doorsteps as early as 7 a.m. and as quickly as 30 minutes. Globally, same-day delivery is available from more than 6,500 locations. In Walmart U.S., over the last 12 months, 4.4 billion items were delivered same or next day, with about 20% of those delivered in under three hours. Delivery times are getting faster, and the cost of delivery is coming down at the same time. During the quarter, we made the necessary but difficult decision to close our U.S. health care clinics. There were a number of aspects that were going well, and we really want to be part of the solution to improving healthcare in this country. But the reality is that given reimbursement rates and costs to serve, we could no longer see a path to achieving an acceptable level of profitability. And we're committed to being disciplined with our investments. We're grateful to our associates that worked in this area. They did their part. We'll continue to build our pharmacy and optical businesses, and we'll find ways for our pharmacists to help as they've done with immunizations and vaccinations. Earlier this week, we also shared decisions to eliminate some home office roles and reduce the amount of remote work. The vast majority of our home office associates have been back together in offices since we came back
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amount of remote work. The vast majority of our home office associates have been back together in offices since we came back from the pandemic, and we want to see even more of that. Being in person is important. Our culture is stronger when we're together. We make decisions faster, we're more creative, and we help develop the next generation of talent. We'll continue to make changes to ensure we're best positioned to serve customers and support our store, club, and supply chain associates. Moving to Walmart International, we continue to deliver strong results with double-digit growth in sales and profit, lifting our company growth rates. Strength was broad-based, led by Walmex, China, and Flipkart. Results for the quarter included strong growth in e-commerce, led by store-fulfilled orders and marketplace. We saw improved sales growth in general merchandise categories as we focused on celebrations across the world like Chinese New Year, Easter, and Walmart Canada's 30th anniversary. Like the U.S., the international team is improving speed of delivery across markets. Same day delivery orders in India grew by over 150% in the quarter and is now available across 20 major cities. One-hour delivery in China grew to 55 million orders as customers sought convenience during Chinese New Year. And in Chile, 60% of e-commerce orders are delivered same day. With Sam's Club U.S., it's exciting to see how the team is using Computer Vision to make it faster for members using Scan and Go to leave the building once they're done shopping. I'm referring to the Computer Vision and AI powered exit technology that allows members to leave the club without having to stand in line to get the receipt check that we announced at the Consumer Electronics Show in January. Since then, we've deployed it in about 20% of our clubs and we're on track to have it in all U.S. clubs by year end. In addition to this being better for members, the technology identifies more items than we could with our previous process. This is a great example of people
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for members, the technology identifies more items than we could with our previous process. This is a great example of people led tech powered solving for technology that benefits the member experience. It was a strong start to the year. We'll remain focused on improving customer and member experiences, being great merchants, building our newer businesses, and improving returns. With that, I'll hand it to John David to share more about the quarter and our outlook for the rest of the year.
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John David Rainey: Thanks, Doug. Our strong results this quarter clearly demonstrate our ability to deliver on our financial framework of growing operating income faster than sales. This quarter's results reflect strong execution from the team across virtually every aspect of our business, share gains in improving MPS scores from our members and customers that are increasingly looking for value and convenience and the power of our Omni Retail model. I'll discuss our quarterly results using our framework of growth, margins, and returns. We experienced ongoing sales strength with all three operating segments outperforming our expectations. We're growing traffic and units, and our inventories are in excellent shape. We're on a multi-year journey to reshape our profit profile and operating income growth trajectory. And this quarter reflects the benefits of improved margins in our core retail operations, as well as contributions from business mix. We're investing in areas that have strong capital returns like automation, store remodels, and digital tools and technologies. Combined, these investments are widening our competitive advantages, providing us levers to also invest in people and price, while achieving our sales and margin objectives. Before I provide more color behind the strength of our financial results, I want to remind you that there is a supplemental presentation on our IR website with additional information beyond my remarks. First quarter total net sales grew 5.7% on a constant currency basis, ahead of our guidance of 4% to 5% growth. As a reminder, the leap year this year contributes approximately 1 point to our year-over-year sales growth. International led the enterprise with constant currency sales growth of 10.7%, reflecting strength in Walmex, China, and Flipkart. Across markets, seasonal events were strong and were encouraged by early improvements in general merchandise sales. International e-commerce sales were up 19% as we continue to expand our capabilities. In Canada, the majority of our
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sales. International e-commerce sales were up 19% as we continue to expand our capabilities. In Canada, the majority of our marketplace growth came from items serviced by Walmart fulfillment services. And in India, Flipkart same-day delivery became available to millions more customers as they expanded the offering to 20 cities. Walmart U.S. also delivered better than expected growth with comp sales up 3.8%, including strong e-commerce growth of 22%, led by store-fulfilled pickup and delivery, marketplace, and advertising. Traffic and sales growth were strong across both stores and digital channels and were pleased with the unit growth. We're seeing higher engagement across income cohorts with upper income households continuing to account for the majority of the share gates. Sam's U.S. comp sales, ex. Fuel, were also strong at 4.4%. The Sam's team continues to make progress on quality and value with Member's Mark, our private brand. The team is doing a great job of being on top of product trends with the brand. Member's Mark drove high-single-digit growth in Q1, and is a growing reason why members join and renew alongside digitally enabled solutions such as Scan and Go and Curbside Pickup. Next to sales, gross profit growth was the key driver of upside in Q1. Consolidated gross margin expanded 42 basis points, led by Walmart U.S. Across segments, we benefited from lower markdowns as a result of disciplined inventory management and favorable business mix, enabling strong margin flow through from sales. Consolidated adjusted operating income grew 12.9% in constant currency, more than 700 basis points higher than our sales growth. This reflects better-than-expected sales growth and higher gross margins and membership income. This was partially offset by expense deleverage in our U.S. segments related to higher variable pay expenses from our app performance. Walmart U.S. was the primary driver of app performance, but all segments contributed to operating income growing faster than sales. Taking a closer look at
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driver of app performance, but all segments contributed to operating income growing faster than sales. Taking a closer look at margins, as we continue to work closely with our suppliers to lower cost, we're managing our Walmart U.S. pricing aligned to competitive price gaps, and customers are responding favorably, resulting in sustained sales growth and higher gross margins. Our price gaps through the retail market remain strong. Improved inventory management and favorable business mix allowed us to optimize our pricing on everyday essentials and we're investing further in value within our private brands. Our rollback program is driving customer engagement and supporting our volume growth, with grocery rollback counts up 45% year-over-year in April. Carrying forward the success we saw last year in our seasonal programs, we're using celebrations and festive events to reinforce our value proposition and customers are responding. Chinese New Year, Valentine's Day, and Easter drove stronger sales across categories, including general merchandise. We're also working with suppliers to bring innovation to U.S. customers, while leaning into our own private brands as sources of value, quality, and newness. As a result, we've continued to see strong momentum in private brand sales with grocery penetration at 30 basis points in Q1. While private brand penetration is in the low-20s as a percent of sales, more than half of all customer grocery baskets over the last year have had a private brand in them. Our inventory levels continue to come down, with Walmart U.S. declining about 4% and Sam’s down nearly 5% at quarter end, while we sustain strong sales and healthy in stock rates. Having the right inventory in the right categories in the right places has allowed us to not only minimize markdown activity, but also support higher in stock levels with goods flowing more smoothly through distribution centers into stores. Importantly, the business is realizing efficiencies, while both customer and associate MPS scores are rising.
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into stores. Importantly, the business is realizing efficiencies, while both customer and associate MPS scores are rising. Global e-commerce growth was 21% in Q1 and e-commerce losses continue to narrow, most notably in the U.S. net delivery cost per order, improving nearly 40%. More customers are shopping with us, more often across more categories, moving us along the pathway of delivery density and transaction margins that give us clear visibility into profitability in this channel over time. Many consumer pocketbooks are still stretched, and we see the effect of that in our business mix, as they're spending more of their paychecks on non-discretionary categories and less on general merchandise. This merchandise mix remains a headwind to margins, but it's consistent with our expectations. Our Walmart U.S. team is executing strategies to improve general merchandise sales and to increase the visibility of our growing e-commerce brand assortments in fashion, home, and electronics. We have the opportunity to grow general merchandise sales in stores with our first-party e-commerce assortment and especially with our marketplace. We were encouraged to see share gains in fashion, home, and hard lines in Q1. In addition, marketplace sales in categories such as furniture, sporting goods, kids' apparel, and home grew more than 20%. In addition to sales growth and gross margin improvement, the reshaping of our profit composition is an exciting part of our strategy. We're enhancing capabilities in higher margin growth drivers, such as advertising, membership, marketplace and fulfillment, and data analytics and insights, and seeing the corresponding improvement in our business mix. Global advertising grew 24%, led by 26% growth from Walmart Connect in the U.S., and International's 27% growth. Walmart's U.S. ad sales reflected more than 50% growth from marketplace sellers, while overall active advertiser counts increased nearly 19%. Sam's ad business now has 30% more active advertisers versus last year. We're pleased with
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counts increased nearly 19%. Sam's ad business now has 30% more active advertisers versus last year. We're pleased with the trends in our membership programs around the world. Sam's Club U.S. reached another record high level for member counts and plus member penetration, resulting in membership income growth over 13%. Sam's China member count grew 25% with increasing active and renewal rates. In addition, Walmart Plus continued to grow double-digits as members engage with us more frequently and spend more than other customers. For marketplace, within international, all markets grew double-digits, led by Flipkart and Walmex, reflecting the strength we're experiencing across markets. In the U.S., Walmart's marketplace delivered strong results, aided by 36% more sellers on our platform, with 28% of sellers using our marketplace fulfillment services. To give you an example of the benefit of our Omni model, in April, we launched a new service enabling customers to order from an extended assortment of nearly 40,000 tires on our marketplace and have them installed at one of our 2,300 Auto Care centers and stores in the U.S. It's a great example of how we're leveraging our unique Omni capabilities to remove friction for customers. Within data analytics and insights, Walmart data ventures continues to see strong demand from clients for their insights on consumer behavior and trends and our Omni channel operations. In Q1, this business doubled versus last year. In April, we announced a new self-serve integration to make it easier for supplier advertisers to combine Walmart Luminate's insights with Walmart Connect's closed-loop, omni-channel retail media solutions to help drive product, brand, and category sales. This is the first time we're bringing these two solutions together, creating greater cohesion between both offerings and helping suppliers deliver more relevant shopping experiences for our customers. Beyond executing on our operating strategies, you're also seeing a discipline from us to address areas of our
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our customers. Beyond executing on our operating strategies, you're also seeing a discipline from us to address areas of our business that have not performed as well. You should expect this discipline to continue concentrating our efforts in capital on clear drivers of incremental value. This requires us to be bold enough to step back from areas that at one time were clear opportunities or were strategically or financially accretive, but now have diminishing value. It was through this lens that we made the decision to close all 51 Walmart Health Centers, as Doug mentioned. Total business reorganization cost resulted in a charge of $0.02 per share in the first quarter. Wrapping up Q1 results, below the line items reflected slightly higher interest expense on relatively flat net debt balances and a lower tax rate year-over-year based on changes in the fair value of our equity investments. Adjusted EPS of $0.60 per share, compared favorably to our guidance of $0.49 to $0.52. Turning to guidance. Our team is executing at a very high level. Q1 results exceeded our expectations for both sales and operating income growth. And while it might be a little much to expect every quarter to be this good, we feel really good about the performance and it demonstrates how this business can perform when we're firing on all cylinders. Consumer economic conditions have been relatively consistent since the start of the year. Many of the value-seeking behaviors we witnessed last year have continued, particularly around seasonal events. Our focus on providing customers with value and convenience is resonating, and we're gaining share. That said, we're one quarter into a year that still has some degree of uncertainty and we don't want to get ahead of ourselves. We currently expect Q2 sales to increase between 3.5% and 4.5% and for operating income growth in line with that at roughly 3% to 4.5%. EPS is expected to be between $0.62 and $0.65 per share. In Q2, we expect operating income growth to be impacted by timing of tech and wage
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to be between $0.62 and $0.65 per share. In Q2, we expect operating income growth to be impacted by timing of tech and wage investments. Combining Q1 results with the midpoint of our Q2 guidance would suggest first-half sales would grow nearly 5% and operating income would grow about 8%. We feel really good about our start to the year, and our outlook for the second-half is consistent with 90-days ago. Our Q1 results and the midpoint of our 2Q guidance suggest that we should be at the high-end or even slightly above our sales and operating income guidance for the year. We'll revisit our full-year guidance as we exit Q2. This is more aligned with our historic cadence of updates and consistent with the philosophy we have as a management team to recognize early momentum, but to also maintain prudence early in the year given the macro uncertainty and so much of the year is still ahead of us. In closing, I'm extremely pleased with our results this quarter. They demonstrate what our team is capable of when we're laser focused on the member and customer, disciplined on cost, and leveraging the technology investments we've made. Profits are growing, customer NPS scores are increasing, and we're running a great operation. We like our position, we like who we are, and we like where we're going. We appreciate your interest in Walmart, and are now ready to take your questions.
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Operator: Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question.
Kate McShane: Good morning everyone. Thanks so much for taking our question. We wondered if you could talk a little bit more about what you saw with the lower end consumer throughout the quarter? And how you think about their contribution to comp for the rest of the year, especially when it comes to general merchandise?
John Furner: Hey, Kate. It's John Furner. Good morning. I'll start. Well, first, just like to say thanks to the entire team for what they did in the quarter and the execution. It's great to see so many of our associates making such a difference. And it's also been encouraging to see our store managers really focus on in-store merchandising in the quarter. We saw big improvements all across the U.S. and that's -- that was really exciting. In terms of the consumer, it's been pretty consistent, I think is the best word we would use. Consistent spending across income groups. We've had more growth as we mentioned in the earlier remarks, on the high-end consumer. That remains true. We're very focused on value, flexibility, and convenience, and that's working across income segments. It's great to be in a position where we have store conditions that we're proud of with growth. It's great to be in a position where our pickup business is growing and then as we mentioned our delivery business has now exceeded our pickup business in size and the run rate remains strong. So I think what we can say at this point is things have been consistent. What is also helping us is on our food categories, well broadly across the store, we have almost 7,000 rollbacks. That's really helping that in our food categories, we see an even larger spread between eating at home, preparing meals at home and eating out, which we think can help Walmart over the remainder of the year.
Kate McShane: Thank you.
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Kate McShane: Thank you.
Operator: Thank you. Our next question is from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.
Simeon Gutman: Good morning, everyone. I have one question. I'll make it in two parts. First, to diagnose the consumer, not raising yet. It sounds like you sort of want to, but there is something holding you back besides it is early in the year, but curious if there's anything on the consumer side? And then the second part of this is how Doug has talked about doing both investing and then driving value today. And curious in this environment, if you have the flexibility and even the desire to lean in even more, it looks like it could be a choppy year. So ability to continue to drive the do both driving these impressive share gain, profit margin expansion while continuing to invest in the value proposition? Thanks.
John David Rainey: I'll start with the first part of the question, Simeon, and then hand it over to Doug for the second piece. On guidance, there's nothing to read into that. First, like we feel really good about the performance in the first quarter. These are strong results across the board. We think it's prudent to be patient on this performance and as we noted we'd update at the end of the second quarter. I think we'd all agree that we're in far from a certain environment around the consumer. It's you know the health of the consumer is something we read about every single day. And given that we're one quarter into the year, we just want to be patient on this. But that should not take away from our conviction and the results in our team's ability to continue to execute and in our strategy that's continuing to drive results here.
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Doug McMillon: So I mean, I think I'll be a bit repetitive with our previous conversations, but if you look back over the last few years, you'll remember that we've made price investments, we've made wage investments, and for a while we've been telling you that we think we're in pretty good shape as it relates to that. We use the term managing our price gaps deliberately, because that's how we think about it. And if we do need to make further price investments to drive growth or to ensure those baskets are in good shape, we can do that. Investing in our associates is always part of our plan. So I think you guys can expect that we'll continue to do it. What's happening with business mix in this quarter in particular with inventory management puts us in a position where we do have even more flexibility to make a variety of choices. And so we're doing that every week and every month as we manage our business through the quarter and through the year.
Operator: Our next question comes from the line of Robbie Ohms with Bank of America. Please proceed with your question.
Robbie Ohms: Oh, hey, good morning, and thanks for taking my one question. My question is that during the commentary, Doug and John David, you guys talked about deflation in both general merchandise and food and consumables? And then you talked about rollbacks in April being up 45%. And then you also talked about gross margin strength in the Walmart U.S. business. Can you help us think about that going forward? Should we -- are you, and how are you doing that? Is it really just the advertising, digital advertising and marketplace fulfillment and all those things are helping the gross margin so much that it's more than offsetting gross margin, you know, core gross margin weakness? You know, maybe help us think about how to think about that going forward.
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Doug McMillon: Yes, Robbie, this is Doug. I'll go first. As it relates to gross margin, we're having a conversation inside the company about the fact that the composition of it's changing and we don't want to confuse people about what's happening. We are built, our purpose is, to help people save money and live better. And we'll manage our merchandise margins like we always have and make sure that we're providing value. But as we report gross margin, it does reflect newer businesses that are helping us mix things up. And so we're using terms inside the company like our merchandise or product margins as distinguished from gross margins. So maybe, John David, as we think about our future reporting, we should help kind of clarify that a bit so that people don't have the wrong perception that gross margins are going up as a result of price. They're not. If you look at rollbacks, for example, as John mentioned in the U.S. and as we mentioned earlier this morning, we're seeing a lot of rollbacks. Suppliers participate in a majority of those, but not all of them. We're going to lead on price and we're going to manage our margins and we're going to be the Walmart that we've always been. But it's also great news that the business mix is changing, which just does change gross margin performance.
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John David Rainey: Yes. Robbie, there's maybe three points that I'd make in response to your question. The first is that overall inflation level for the business was up about 40 basis points for the quarter, that's half the rate of increase that we saw last year. So we're driving this revenue growth through more units, more foot traffic in stores and feel really good about that and that underscores that we’re just becoming more relevant with consumers. So that's the first point. Second point around gross margins is, we've mentioned several times that inventory is in a much better place. One of the consequences or results of that is we see a lot less markdowns in our business. And so that drove some of the improvement in the first quarter. The third point, and the one that I'd want to emphasize the most here, if you look at the composition of our operating income improvement year-over-year, roughly $900 million, about a third of that came from our newer businesses like advertising, membership, data ventures, and we're quite excited about that. But combined with that, we're seeing improved e-commerce losses. And one of the things that I focus a lot on in our business is what is the incremental profit from that additional revenue that we have each year? So incremental margins. And if you just focused on our e-commerce business, in this last quarter, the incremental margins around that business were 12.5%. So think about that, roughly 3 times our overall margin. There's not to me a more compelling data point that supports the strategy that we have and our execution around that and importantly how that's changing the margin profile of our business going forward.
Robbie Ohms: That sounds great. Thank you.
Operator: Our next question is from the line of Michael Lasser with UBS. Please proceed with your question.
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Operator: Our next question is from the line of Michael Lasser with UBS. Please proceed with your question.
Michael Lasser: Good morning. Thank you so much for taking my question. As hard as it is to mention, how would you break down the factors that are driving Walmart's business that are related to its actions and strategies versus those factors that are more of a function of the environment, such as high inflation and a moderating labor market? What two or three metrics is Walmart monitoring to internally gauge this? Obviously, the point of the question is trying to understand not only the sustainability of the performance, if the macro does get better, but also the prospect that the outperformance could expand if the environment weakens? Thank you so much.
Doug McMillon: Michael, I probably ignore the external environment more than you do. I mean, we are focused on what we're doing and how we earn business with customers and members. And if you look at what's happened, we've been known for price forever, but we're increasing known for convenience. So whether the environment is inflationary or deflationary, whether customers have more money or less money, if we're doing a good job on the items and prices and the service we provide, saving them money with pickup and delivery, for example, we can continue to grow share. So we're merchants at the core and we've added through the technological changes that we've made and the service changes that we've made, a dimension of the business that's driving that growth. I don't know what the future looks like in terms of what pricing is going to look like, you know, a year out, two years out. And I don't really worry about that very much. I worry about our own execution.
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John David Rainey: Not much to add there. But I think the results this quarter are really a reflection of execution across the team. We're laser focused on the things that matter most to our customers. And one data point that I'd share just in the U.S. business, and John might want to chime in on this, but you know, Michael, that we grade ourselves by a perfect order. And what a perfect order is for us is when you come to our virtual store online, do you find the things that you want? Do we have to replace those? Is it delivered when we say it will be delivered? Year-over-year in the first quarter, we saw an almost 900 basis point improvement in our perfect order scores. To me that's a great example of how the team is continuing to execute and this is resonating with customers.
John Furner: Hey Michael, good morning, it's John. I'd say what something similar to what Doug said, we're always focused on value and over the last few years we've been talking about flexibility and the ability to be convenient, whether a customer wants to shop at the counter, at the curb, or delivery. And it's been exciting to see just these last few months that delivery is now exceeding the other channels, which is great which gives the customer a lot of optionality and then the number that Doug mentioned earlier 4.4 billion units delivered same day next day is exciting and it's growing quickly and as he also mentioned about 20% of that is sub-three hours and we've expanded that service earlier in the morning, later at night so we're becoming even more convenient for individuals for shoppers and families in a -- in terms of being able to serve all of their needs.
Doug McMillon: Those underlying input metrics were focused on around the world in our Sams U.S. Business Center International and the commonality between the strategies, first party e-commerce marketplace, advertising membership causes us to increasingly be thinking about the same thing as we build these new businesses.
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Kath McLay: Yes, I mean, I would just add in like, you know, you look in Chile is probably our market that's had the least amount of growth, the economy has been tough there. As we focused on import metrics like NPS in stock, our price perception, price gap market share. If you focus on those things, when the economy starts to recover, the business lives with it. While we're doing that, you're also getting in and making sure that you're building out more sustainable businesses around e-commerce. So over 60% of our e-commerce orders are same day in Chile now. So I think we have shown that we can prosper and thrive in kind of multiple different versions of how the economy plays out across the world. And I think during this time, as we're focused on building out our e-commerce omni business, we're being more and more relevant to consumers in different markets.
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Chris Nicholas: I think for Sam's Club, it's very similar. We've got a really balanced set of results in Sam's Club. And, you know, as John mentioned, you know, it's all in the hands of the associates and the hard work that they did. But the value proposition is really resonating with the club model. It's great items at great value and we'll just never relent on that. And members are thanking us for it. So plus membership, membership is an all-time high plus membership is at 54% of our member base right now. And it's up 330 basis points in the year. Why because we're focusing on the things that really matter deepening digital engagement with our members 18% e-commerce growth and a third of our members are using Scan and Go now, which is really exciting. We're enhancing our member value proposition constantly. Price is part of it, but value is an important component too. I think you've all heard that we've got 120 of our stores, our clubs today, that have got the news exit technology that's powered by AI and computer vision. That's really exciting. And then Member’s Mark, which is our own brand, is really setting the bar for quality as well as value. It's now over a third of our sales and we are seeing really strong participation in the quarter. So people just want really great items at really great value and we just continue to give them that.
Operator: Thank you. Our next question is from the line of Krisztina Katai with Deutsche Bank. Please proceed see with your question.
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Krisztina Katai: Hi, good morning and congrats on a great quarter. So Kath, I wanted to ask you on international opportunities in particular. The performance was really strong. I think you put up your best operating margin over six years. So can you talk about sort of the main drivers behind the improvement just how you're thinking about international EBIT structure on a go forward basis as you have alternative value streams that are ramping e-commerce contribution is improving, all regions are posting very strong top line growth? And I just wanted to ask if there's anything you can share regarding Flipkart’s contribution, how has that changed relative to the acquisition as we've been reading reports that at one point you're ramping up for an IPO? Thank you.
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Kath McLay: Yes, thanks for the question. And there's quite a few components to that. I'll try and take them in chunks. First of all, I want to recognize all of our associates in international for the extraordinarily strong result that we've been able to deliver over the last period. You're right, it is a really strong result. Top line was up 10.7%, bottom line or op inc was up 27%. Now I would like to call out that, that's not -- that's kind of extraordinary. There were some one-offs that went into Q1 op inc, which aren't repeatable, but we are holding to the ratio of bottom line growing faster than top line. So we see strength in international, particularly in the way that we are turning up as kind of more of an ecosystem. So if you look in Walmex, while we have grown the traditional business, we've been looking at how we make sure we're relevant to consumers in areas like where we had consumers that couldn't engage with us online, we've been able to provide a service that enables them to get digital connectivity. And what that means is that we now have different revenue streams coming in. I think we have over 13 million customers have engaged with us on BiTE, which is our digital connectivity. We've sold a number of health memberships. So the composition of that business as well as having our Kashi Financial Services looks different, and that's helping drive the different kind of economics and more richer op inc. As we look at then at eCom across the globe, I'd probably call out China. I know I've called out the China market before, but really strong growth in Sam's Club. And that business is almost 50-50 offline and online. And while we're doing that, I think this quarter, our bottom line grew faster than our top line in Sam's Club. So really good strength, because they've worked out a model of dark stores that give them access to a larger addressable area of the market and allow them to deliver really, really efficiently. So our eCom omni business is growing in a sustainable way. And then as you talk about
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to deliver really, really efficiently. So our eCom omni business is growing in a sustainable way. And then as you talk about Flipkart, I think the things that we've seen with Flipkart that we really like is as their business has grown, we've seen -- get to EBITDA positive for the last 2 quarters. We've seen a growth in some premiumization, and all of that is lifting kind of the profile of the Flipkart business. And so we're -- they're on track to the growth trajectory that we had them on. And we are looking and exploring when will be the right time to IPO that business. But now there's strong both in Flipkart and in PhonePe, and we're excited about the India market.
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Krisztina Katai: Thank you.
Operator: Our next question is from the line of Oliver Chen with TD Cowen. Please proceed with your question.
Oliver Chen: Hi, thank you. Within general merchandise, what categories are you most excited about? What do you see happening with innovation opportunities and/or opportunities for improvement? And as we think about general merchandise as well, the intersection of artificial intelligence, large language models and also really changing the way consumers think about shopping, just what's on your mind for enhancing that and embracing the marketplace as you've been doing to continue to elevate the brand? Thank you.
John David Rainey: General merchandise is a really core part of all of our businesses, and it's something in Sam's Club that we're really excited about. We have brands that are extreme value, and we feel really good about that. And we've got Member's Mark, where we have incredible value and quality. And what we're seeing is that members are opting into us, as a brand, and renewing membership with us because we offer such high quality at such high value. So what we're seeing is that people are continuing to opt in to us. Our units are running ahead of our sales on general merchandise because of the value. So we feel really bullish. You think about apparel, jewelry, home, hardlines, auto, consumer electronics, we're seeing really strong unit growth in there. And it's just being followed -- it's because of value and it's because of innovation. So we remain really bullish in that space.
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John Furner: Oliver, it's John. I'd like to talk about a couple of things in GM. And I think I'd first start with eCommerce. The strong performance at 22% growth is very helpful. We've picked up momentum in the marketplace. Really, really pleased to see a number -- a really large number of new sellers come on board, and assortment's well north of $400 million. We spent a lot of time talking about our customer experience score, which starts with the top of the funnel, and then we work our way all the way down the conversion. And as John David mentioned earlier, one of the components is perfect order. And as you look through results, it's exciting to see more customers shopping more often, particularly in the marketplace. And then the categories that are really strong that are standing out is apparel and fashion online. I'm really excited about what's happening in men's and women's and kids apparel, we've seen growth there. And then our hardlines business has been strong over the quarter. It was helpful in the quarter to have Easter early and strong weather in March that give us a strong early start. And these businesses we call omni services like tire installation, as we mentioned earlier, having your prescription ready by ordering online or cake decorating, these are all great services that are relatively unique to Walmart to be able to enable those from a digital standpoint all the way through the store and then deliver to people's home. So I really am excited about the convenience and the expansion and assortment that we're offering.
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Doug McMillon: Oliver, we punched below our weight on general merchandise, specifically in apparel and home for a really long time, maybe forever. And I think the progress that we're seeing now is driven by the in-store remodels and in eCommerce. The marketplace is a great opportunity, but 1P will be important, too. So we've now got tools that we can use to grow the general merchandise business that we didn't have before. As it relates the other part of the question, I think the thing worth mentioning is the progress we're seeing on search. I'm really excited about a solution-oriented search and this migration that many of us are on to try and create a personal assistant so that we can be more anticipatory, save people more time and help them with solutions more than what our previous search capability could do. So I think that's going to be on a maturity curve from now until the end of time, and generative AI has helped us step change that, and I expect that, that improvement will continue.
Oliver Chen: Thank you. Best regards.
Operator: Our next question is from the line of Seth Sigman with Barclays. Please proceed with your question.
Seth Sigman: Hey, good morning, everyone. I wanted to focus on operating expenses and thinking about the investments planned for this year. If I recall, there was a first half weighting in the guidance originally. I know some of that was a year-over-year dynamic. Any update on how to think about that? And more specific to the second quarter, it looks like you set up guidance very similar to how you set up Q1. I'm just curious, is there anything different about the opportunity in Q2? In other words, could there be a bigger step-up in spending? Or anything else that may limit the flow-through that we were able to see here? Thanks.
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John David Rainey: Sure, Seth. Happy to take the question. This is John David. So when we gave guidance at the beginning of the year, in last quarter's call, we talked about the first-half of the year, we'd likely see that sales would outpace operating income. Maybe that's unlikely now with this results in the first quarter, but we did have some planned investment in the second quarter related to some technology investments. We've also got a little higher depreciation year-over-year. In terms of the opportunity in the second quarter relative to the first quarter, there are a couple of things I want to call out in the first quarter that likely would not repeat themselves, but I don't want to take away from the team's strong performance. The first of those is just strong seasonal events in the first -- in international that helped us. And we also lapped a LIFO charge last year at Sam's, which contributed to some of the operating income growth. Those are likely not to repeat themselves, but -- so the possibility for outperformance in 2Q may be less than what it was in the first quarter. That said, I don't want to take away the headline here, and we feel really good about how the team is operating. We feel really good about what the year holds for us and the opportunity to outperform the guidance that we've given.
Seth Sigman: Okay, thanks very much.
Operator: Our next question is from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.
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Operator: Our next question is from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.
Kelly Bania: Hi, good morning. Thanks for taking our questions. I wanted to just go back to business mix. I guess, with the continued strong growth in marketplace, I guess want to -- when you look at the performance of general merchandise and Walmart U.S., that market sales would obviously skew higher towards those discretionary categories -- the 420 million SKUs there? So I guess the question is, is the impact of 3P marketplace growth at all starting to cannibalize maybe in a good way, the general merchandise comps that you provide? And -- or would the performance of general merchandise be stronger if you looked at it more holistically from a total GMV standpoint?
John David Rainey: Let me start on this and others may want to jump in. So first of all, as you think about the mix of our business, we've continued to have a headwind as consumer wallets have been stretched. And for us, that's resulted in about a 100 basis point shift away from general merchandise to other categories of our business in the first quarter. We expect that to continue or some magnitude of that for the balance of the year. But to me, the real story here around general merchandise, is the progress that we're making in our marketplace. And so while general merchandise is, call it, roughly flat, there are categories like pets and beauty, where the growth in the marketplace is in excess of 30%, There are other categories like furniture, sporting goods that are in excess of 20%. And I think this shows that consumers -- customers are coming to us, thinking of us very differently than what they have in the past. And it's also an indication of how and where we're gaining share in our business. So general merchandise being able to offer third-party assortment is giving our customers a lot more options than what they've had in the past.
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Doug McMillon: I think general merchandise mix was impacted by food inflation to a degree. When food shot up to mid-double digits, there are a lot of customers that had their paycheck allocated that direction. And now that food pricing has calmed down some and we've got rollbacks happening in food and you've got a deflationary situation with GM, you've got the opportunity given the elasticity to grow more units, which we're doing. And the fact that we're growing share feels good. So I don't get too caught up, Kelly, on whether the sales come through stores, clubs, first party or marketplace. We just want to have what people are looking for. And we'll manage the mix on the other end of it in a way that generates more profitability, which is what you're seeing in this quarter.
Kelly Bania: Thank you.
Operator: Our next question is from the line of Paul Lejuez with Citi. Please proceed with your question.
Paul Lejuez: Hey, thank you, guys. You mentioned that within Walmart U.S. that the share gains were led by the higher income households, I believe. Curious how you define that. What percent of your customer base the higher income households comprised? And how are you targeting that consumer? And also curious, how is that consumer's engagement, with Walmart changed? Thanks.
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John David Rainey: Yes, this is John David. I'll start. So we define where we stratify the income groups roughly as $50,000 and below, $50,000 to $100,000 and then $100,000 and above. And as a general rule, our customer base breaks down about one-third in each group. And so in terms of what we're doing to be more attractive to that higher income household, I think this is the -- really the story or the word we've been using here is convenience. We are not just a play for value anymore. We talked about the number of units that we've shipped in the last 12-months, which is on par with any eCommerce player in the world. That shows that customers are coming to us and we're a consideration where we had been before. And convenience matters to someone irrespective of what your payback is, irrespective of what your income level is. And we expect that to be durable. We don't expect that to change.
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John Furner: Yes, John David, I'd just add to that, it's also been encouraging to see the improvements in fresh food. We've definitely experienced benefit from improvements in quality. The supply chain's gotten tighter. Many of you have seen the work we're doing in supply chain. But produce has been really exciting to see the progress over the last couple of years. The same sort of quality improvements are coming through in the meat department. And you can see that in the types of items and categories that we're selling in store and those and pickup and delivery. And in the delivery business where we are stronger with higher income consumer, that's where we've seen a lot of growth. I'm really excited, Doug, what you mentioned earlier is Better Goods as being a way to sell better quality, better taste profiles and at values that really matter. 70% of the items under $5 is exciting, and that appeals to all income groups. And so if you're trying to feed a family of four or five or six, and prices and restaurants have gone up and Walmart is beginning to come down, and we're really proud of the rollbacks, I think our value message is strong and having the ability to deliver flexibly is going to work out really well for us.
Doug McMillon: We're not trying to chase higher income cohort sales. We just offer value. If you look at what's happened historically, people with higher incomes have shopped Walmart. They've just been selective in their -- in the categories that they buy and the items that they buy. So if we offer them the right items at the right prices, whether that's in store, first party or marketplace, they'll respond to that. And so as we've been able to expand our assortment online, we can appeal to more people. And then you layer on the convenience dimension and you get a good outcome.
Paul Lejuez: Thank you, gents. Good luck.
Operator: Our next question is from the line of Chuck Grom with Gordon Haskett. Pleased proceed with your question.
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Operator: Our next question is from the line of Chuck Grom with Gordon Haskett. Pleased proceed with your question.
Chuck Grom: Yes, thanks. Good morning. Congrats on a really great quarter. Just wondering if you can discuss trends you're seeing within general merchandise between smaller ticket, shorter replacement item versus higher ticket, longer replacement items. And if any in spending within the categories reflect anything about whether the consumer is making any incremental changes in their discretionary spending? And then just as a quick follow-up, just curious if there was any deviation or big change in trend throughout the quarter by month? Thank you.
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John Furner: Yes, Chuck. It's John. I'll take it. I think the best way to describe the consumers, it's been remarkably consistent over the last couple of years. Mix has changed, but hasn't changed that much. We've seen growth in both brands and private brands. We have seen a wide range of price point selling in the quarter. March was a strong month, given Easter was in the month. We had leap here in February. That was also helped to make it stronger. So the phasing of the quarter wasn't all that surprising. It was strong in February, strong again in March, weather was favorable March, a little bit colder and then April was softer without Easter in it. But we walked out of the quarter into the month of May with similar trends that we've been seeing. So the phasing of the quarter wasn't all that different than we expected. I think as you look forward, the consumer's consistent, our inventory is in good shape. Our merchants -- we said this a few minutes ago, they have the ability to mix out. They're managing their price gaps and value. They're managing initial margins. Their markdowns have been lower due to stronger inventory management. A little bit of improvement this year in shrinkage from private -- from the previous years. We've been going up for the last three years, and it's good to see that starting to come down in some places in the country. But we'll mix this out. Our merchant team, they've done this for a while. And in any situation with the consumer, we want to focus on value and be there for them, and we'll manage the mix on the back side.
Chuck Grom: Thanks, John.
Operator: Thank you. Our next question is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.
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Operator: Thank you. Our next question is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.
Rupesh Parikh: Good morning and thanks for taking my question. Also congrats on a nice quarter. So just going back to the commentary on Walmart Plus. It sounds like it's growing double digits. As we look at the backdrop out there for membership and subscriptions, you're clearly seeing a more crowded landscape. So just want to get a sense of how you guys feel about the value proposition today and then further opportunities -- different plus going forward?
John Furner: Rupesh, it's John. I'm pleased with the progress in Walmart Plus. It is an important part of what we do, and it is a great way for customers to save time and save money. By joining Walmart Plus, you get access to unlimited deliveries, which is great. And I talked to a lot of people over the country that use it all the time. It's also been important for us to improve the perfect order. As we mentioned earlier, we launched Walmart Plus in 2020 at a time the supply chain was difficult. And so the continued momentum and improvements and being able to fulfill customers' orders with what they ordered when they order has been important. But again, it's an important part of what we do. We think it's a great solution for customers, and it's been exciting to see the progress.
Rupesh Parikh: Great. Thank you.
Operator: Our next question is from the line of Greg Melich with Evercore ISI. Please proceed with your question.
Greg Melich: Thanks. I'd like to pivot a bit back to the top line. And I think you said inflation was 40 bps in the quarter. If you look at your guidance for the rest of the year, do you expect it to settle at that kind of low level or even fall further?
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John David Rainey: Greg, we expect it to be relatively close to what we saw in the current quarter. It's a mix across the baskets. We've seen general merchandise be more deflationary, but consumables and food are hovering slightly above flat to up one. So we generally expect it to be in this level.
Greg Melich: Thank you.
Operator: Thank you. At this time, we've reached the end of the question-and-answer session. And I'll turn the call over to Douglas McMillon for closing remarks.
Doug McMillon: Thank you all for joining the call. Again, thanks to our associates for a really strong quarter. When I think about the headlines from the quarter, what goes through my mind is, first, the eCommerce growth. I think the progress we're making on convenience for customers is a big deal, and that's happening through. Our store fulfillment as well as through fulfillment centers, the marketplace is growing, and that brings along with it growth in advertising and membership. It was great to see both of those up 24%. Second headline's related to really good inventory management. And the third headline's related to pricing. I think the number of rollbacks that we have and the value that we're offering to customers and members is resonating and those really set this quarter apart. Big picture our thought is the same as it has been. We're going to be able to grow sales because we're positioned to serve people how they want to be served, we're going to grow profit faster than sales because of business mix and we're going to be able to grow returns as we make the right capital investments. So we'll be really consistent as it relates to that through the year, and we appreciate your time and attention.
Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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2025-01-31 03:30:00
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Exxon Mobil Corporation
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Jim Chapman: Good morning, everyone. Welcome to ExxonMobil's fourth quarter 2024 earnings call. Today's call is being recorded. We appreciate your joining us today. I'm Jim Chapman, Vice President, Treasurer and Investor Relations. I'm joined by Darren Woods, Chairman and CEO, and Kathy Mikells, Senior Vice President and CFO. This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They're meant to accompany the fourth quarter earnings news release, which is posted in the same location. During today's presentation, we'll make forward-looking comments, including discussions of our long-term plans, which are still being developed, and which are subject to risks and uncertainties. Please read our cautionary statement on Slide 2. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides, which are also posted on the website. And now I'll turn it over to Darren for opening remarks.
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Darren Woods: Good morning, and thanks for joining us. I'll focus my comments this morning on ExxonMobil's 2024 results and the company we've become. In our prepared presentation available on our website, Kathy dives deeper into our results and long-term growth outlook. What our 2024 performance makes clear is that the transformed company we've built is delivering. We strengthened and further capitalized on our unique competitive advantages, technology, scale, integration, execution excellence, and, of course, people. We demonstrated the strength of our consistent strategy now in its eighth year of driving greater value for society and shareholders alike. We set and achieved ambitious objectives. When we say we'll do something, we deliver. And we expanded our unrivaled set of opportunities for profitable growth both now and long into the future. The ultimate source of cash, distributions, and shareholder value is unchanging, investments in advantaged high-return assets and projects. The proof of our transformation shows up in our performance. Operationally, we delivered strong results across the board, including safety, a bedrock commitment underpinning everything we do, reliability, where we achieved record performance in our product solutions business, and emissions, where we've achieved a more than 60% reduction in methane intensity since 2016. Financially, we demonstrated our steadily improving earnings power across a range of metrics. We delivered earnings of $34 billion in 2024, our third highest result in a decade despite softer market conditions. Over five years, we've grown earnings, excluding identified items, a compounded annual growth rate of nearly 30%. We generated cash flow from operations at $55 billion, also our third highest in a decade, to fund profitable growth, maintain our financial strength, and reward shareholders. Excluding working capital, our free cash flow more than covered shareholder distributions. And we delivered a return on capital employed of 13%. Over five years, our average
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more than covered shareholder distributions. And we delivered a return on capital employed of 13%. Over five years, our average return on capital employed is an industry-leading 11%. When you set aside cash balances in capital and projects that are under construction and yet to start up, our 2024 ROCE rises to roughly 17%, with a five-year average of about 15%. Our disciplined approach to investing continues to generate returns well above our cost of capital. Every part of our business contributed to our success. We built the best upstream portfolio in the industry. In 2024, we achieved the highest-ever production from our advantaged assets and the highest liquid production from our overall portfolio in more than 40 years. In the Permian, we delivered record production from both our Heritage ExxonMobil assets and our Pioneer assets. Together, the two are even stronger. As we said last month, we now see an average of more than $3 billion per year of synergies from our combined assets, with production growing from 1.5 million oil-equivalent barrels per day at the end of 2024 to 2.3 million barrels per day by 2030, a more than 50% increase. This growth will further strengthen U.S. energy security and will do it with even better overall environmental performance. In Guyana, we delivered record production from the world's premier deepwater development. We've gone from discovery to 650,000 barrels per day in just 10 years, a pace for deepwater projects the world has rarely seen. The benefits are tremendous, not just profitable growth for ExxonMobil, but rapidly rising living standards for the Guyanese people. The GDP per capita more than tripling since we started production in 2020. Turning to product solutions, we've further enhanced our already industry-leading portfolio by divesting non-strategic assets and establishing the foundation for new-to-world products that outperform existing alternatives. The advantage projects we brought online over time drove record sales of high-value products in 2024. Our ongoing
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alternatives. The advantage projects we brought online over time drove record sales of high-value products in 2024. Our ongoing shift to a more profitable product mix is a key driver of earnings improvement in product solutions. We also advanced our plans to develop and grow new businesses, most notably our Proxxima resin systems and carbon materials, with an estimated total addressable market of $100 billion by 2030. Within low-carbon solutions, we demonstrated strengthened commercial interest through additional customer contracts and equity partnerships. We're the only company in the world today with an end-to-end system capable of capturing, transporting, and storing carbon emissions. At 6.7 million tons per year, we've contracted more CO2 for transport and storage than any other company by far. We're also well-positioned to meet surging demand from data centers for low-carbon power, and on a timetable that alternatives such as nuclear simply can't match. On the hydrogen and lithium fronts, we announced new equity partnerships and off-take agreements that demonstrate the significant market interest these new businesses are generating. Our success in 2024 and every other year is due to our people. It's not just that we recruit the best or that we give them the most challenging assignments to build the best capability. It's our culture, our mindset. When this team takes the field, we expect to win. That drive underpins our value creation in 2025 as well. We'll bring online a full slate of major projects to increase profitable volumes, make more profitable products, and lay the foundation for profitable new businesses. To name a few, we'll start up Yellowtail in Guyana, our fourth and largest development to date. In the Permian, we'll further improve resource recovery using our next-generation cube design and patented lightweight proppant. This is the right kind of growth, low cost of supply, low emissions intensity, and high returns. At our Singapore refining and chemical complex, our residual upgrade project,
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low emissions intensity, and high returns. At our Singapore refining and chemical complex, our residual upgrade project, we use new-to-the-world technology to transform bottom-of-the-barrel molecules into a new grade of high-value lube-based stocks. We'll transform high-sulfur, low-value export fuels into higher-value diesel for the U.K. market at our expanded refinery at Fawley. We'll expand our capacity to produce higher-value performance polyethylene and polypropylene at our petrochemical complex in China. And we'll add new advanced recycling facilities at Baytown to meet the growing demand for certified circular polymers, which has the added benefit of keeping hundreds of millions of pounds of plastic waste from being burned or buried. Earlier this month, we sued the California Attorney General and activist groups for defamation and interference in our advanced recycling business. As our filing made clear, this suit is about abuse of the public trust and the hijacking of the legal system for financial and political gain. I want to emphasize that we don't take these actions lightly. Unfortunately, it's another example of what it takes to defend our company and preserve the value we create for our customers, shareholders, and broader society. Overall, the major projects we start up in 2025 will deliver more than $3 billion in earnings potential in 2026 at both constant and current prices and margins. And this earnings gain excludes the uplift from our Permian growth plans. As we showed at the corporate plan update, ExxonMobil's runway of profitable growth extends along into the future. Our new technology-driven businesses, such as Proxxima Products and Carbon Materials, creates huge opportunities to expand beyond traditional fuels and chemicals into higher growth, higher margin markets that are decoupled from commodity price fluctuations. This year, we expect to start up a new facility that can produce 25,000 metric tons of Proxxima products and plan to grow to nearly 200,000 tons by 2030. We're committed to
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that can produce 25,000 metric tons of Proxxima products and plan to grow to nearly 200,000 tons by 2030. We're committed to investing in these new businesses in a stepwise fashion, progresses in tandem with demonstrated success in the marketplace. To change in administrations in the U.S., I want to say a few words about the right policy framework for a successful energy future. I'll begin by noting that through 2030, roughly 90% of our planned CapEx is allocated to established, fully-functioning markets for energy and products that require no policy support. Only about 10% is earmarked for nascent, lower-emissions markets where market forces have yet to fully take hold. The case in point is our Baytown low-carbon hydrogen project, which requires incentives under Section 45B of the Inflation Reduction Act to be economically viable. We believe these incentives are critical to establishing a fully market-based future where hydrogen competes head-to-head with traditional fuels. But the end goal is clear, a system where no energy source remains dependent on government subsidies. Just as energy sources should not be supported by governments in perpetuity, they should not be artificially discouraged either. The prior administration's moratorium on new LNG export facilities and its executive order limiting offshore drilling were policy mistakes that the new administration is right to reverse. Oil and natural gas remain essential to economic growth, jobs, and national security, both for ourselves, and our allies around the globe. Over the longer term, to achieve broad decarbonization, government policy should set carbon intensity standards on products. We believe this is the best way to engage the collective efforts of industry and leverage competitive market forces. To drive further innovation and reduce the most emissions at the lowest cost, policies must remain technology agnostic. Governments should not pick winners and losers. Intensity standards establish a level playing field and have a strong precedent. They
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should not pick winners and losers. Intensity standards establish a level playing field and have a strong precedent. They were most recently used to successfully and affordably reduce sulfur and marine fuel. In closing, I want to say again how proud I am of the people of ExxonMobil and how pleased I am that we are creating unmatched value for our shareholders. Compared to the IOCs, over the last five years, we've grown cash flow from operations at a roughly 15% compounded annual growth rate, more than double the closest competitor. We've distributed more than $125 billion in dividends and buybacks, $30 billion more than the closest competitor. And we've delivered a total shareholder return compounded annual growth of 14%, 600 basis points higher than the closest competitor. Looking ahead, the value creation arc of the company is equally distinguished. We're going to build an even more advantaged asset portfolio with 60% of our option production from advantaged assets by 2030. That's nearly the same amount as the next largest IOC's total production. We're going to develop an even more profitable product mix with 80% growth of high-value product sales and product solutions by 2030. We're going to be an even more efficient operator, taking an additional $6 billion in costs out of the business. We're going to generate even more earnings in cash on a constant price and margin basis. We're confident we'll deliver 2030 by 2030, $20 billion more in earnings and $30 billion more in cash flow, all of which enables us to keep our commitment to sustainable, competitive, and growing shareholder returns. With that, I look forward to your questions.
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Jim Chapman: Thank you, Darren. Now let's move to our Q&A session. As a reminder, we ask each participant to keep it to just one question. And with that, operator, we'll ask you to please open the line for the first question.
Operator: Thank you. [Operator Instructions]. The first question comes from Neil Mehta of Goldman Sachs.
Neil Mehta: Yes, thank you so much, Darren, and good rundown there. The question I had was really around project startups and specifically Guyana. Can you give us a sense of the key milestones you're watching for in 25 at this asset, how it continues to track relative to expectations? And there's been a lot of investor debate following the upstream day about what the long-term capacity of this asset could look like. So any thoughts on terminal plateau would be great.
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Darren Woods: Yes, sure. Good morning, Neil, and thanks for the question. I'd say as you look across the portfolio of projects that we've got slated for startup in 2025, we feel really good about where they all are, the fact that they're tracking consistent with what we've talked about publicly. And, in fact, my guess is that many of them will come in slightly ahead of that. With respect to Yellowtail specifically, I'd say we really like what we're seeing there. I think that team who's managing the Guyana developments continues to demonstrate project after project that you just find new ways to innovate and to overcome the challenges and to deliver these things below budget oftentimes and certainly ahead of schedule. And my guess will be for Yellowtail that will come in a little better than what we've publicly talked about. But 3Q25 is a good number, a good date to be thinking about. Longer term, I know I've been part of the conversation in December about what we project going forward and the capacity versus utilization. All I would say is that that's a challenging, to project that far in the future. There's a lot of variables that go into the developments across all of our upstream portfolios. We're going to move from where we're at today of roughly 10 reservoirs to roughly 40 by 2030, a lot of optimization that goes around that, managing those reservoirs, a lot of unknowns. Obviously, there's a depletion curve that continues to bring volumes down, but at the same time our teams are working hard on infills and keeping the utilization up. So we've given our best guess or estimate as to where we'll be, but I would tell you that Neil, myself, all of us, frankly, including the team who's managing it, are challenging themselves to make sure that we're fully utilizing those assets. And my expectation is, as we've demonstrated over the last several years, we'll probably do better than what we're estimating, but I think I want to make sure that we're not over-promising and under-delivering and so we've got, I think, a
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estimating, but I think I want to make sure that we're not over-promising and under-delivering and so we've got, I think, a really sound forecast for where those units will be producing. And, again, we're challenging the team and they're challenging themselves to deliver more than that. And if I was a betting person, which I am, I would bet they'll do it.
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Operator: The next question is from John Royall of JPMorgan.
John Royall: I was hoping for an update on your expectations around North American tariffs, assuming those are implemented and assuming they're in place for a material amount of time. You have upstream and downstream assets in Canada, but also downstream assets in the U.S. that could be impacted. So how should we think about what that could mean for ExxonMobil overall?
Darren Woods: Good morning, John. Thanks for the question. I'll tell you the way that we're looking. Obviously, there's a lot of noise and speculation in this space, and I would put it in the same category as we think about prices and where prices are going. At the end of the day, what we can control is how effective and efficient we are as operators, making sure that we're producing the highest value products for the kit that we have and efficiently getting it to market. And I think that's going to, at the end of the day, no matter where the market moves, there's a cost-to-supply curve. All the work we've been doing over the last eight years has been to drive our production to the low end of the cost-to-supply curve so that we have a significant margin versus the last marginal barrel of production that's required to meet the market demand. None of that's going to change with tariffs. That's all going to get shifted around, and our view is we're going to continue to be a very cost-competitive, low-cost-to-supply source, and therefore we'll continue to outperform competition, and that's basically how we're looking at it as we kind of wade through the noise that's out there in the media and the press with respect to all the speculation around policy.
Operator: The next question is from Betty Jiang of Barclays.
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Operator: The next question is from Betty Jiang of Barclays.
Betty Jiang: I want to ask about your data center strategy for enabling the expansion of AI in the U.S. Carbon capture CCS value chain is a key competitive advantage for Exxon. Are you seeing any interest in the market for the low-carbon gas solutions versus just traditional gas power plants? How quickly do you think Exxon can bring these solutions to the market? And just given the recent news with DeepSeek, are you seeing any changing, too, from your conversation with the end customers? Thanks.
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Darren Woods: Yes, good morning, Betty. Thanks for the question. Yes, I think you hit on really what is the nexus of our strategy with respect to data centers, which is offering decarbonized power for data centers. We're not interested, as we mentioned in December, in going into a utility business like power generation. Utility returns for power generation would not compete in our portfolio, but leveraging, the end-to-end system that we have for capturing, transporting, and storing CO2 is a huge advantage and brings a lot of value for hyperscalers who are looking to have decarbonized power and to manage their emissions. And I would say that there continues to be a very strong desire for many of these customers to build data centers that are decarbonized. And so a lot of interest in that space. We're having a lot of continuing conversations. We have sites that have been selected. We've got -- we've been doing the work to decarbonize our natural gas, which would be an important feed in a low-carbon data center. And, of course, we've got the work we've been doing with our partners around carbon capture and storage, and we've got the green line. And so we've got all the pieces today. We've been in early engineering for these centers, so we know exactly what it's going to take. We've got a very, as you know, large and successful project organization. This is right in their wheelhouse. And so we're acting as a bit of an integrator in the early days to accelerate the schedules, which is really important to many of the customers. Our view is, we'll bring this on faster than anybody else in industry, and we'll certainly bring it on faster than any other opportunities for decarbonization. My guess would be, depending on how the discussions go with customers, that we could get a site up and going by 2028 and then have it decarbonized into 2029. I would say it's a rough order of how to think about that. But we're well into the development phase. Obviously a lot of dynamics here, a lot of moving parts and variables, in large
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But we're well into the development phase. Obviously a lot of dynamics here, a lot of moving parts and variables, in large part on the customer side, so we're there, we're available. We want to make sure that we've got an offering that meets their needs, and when they're ready for them, we'll be ready. With respect to DeepSeek, I would say that hasn't impacted the conversations to date that we're having with our customers.
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Operator: The next question is from Devin McDermott of Morgan Stanley.
Devin McDermott: So I wanted to come back to Neil's earlier question on growth. There's a lot in the queue in the near term beyond just Guyana. You highlighted 10 startups with over $3 billion of earnings, earnings that also hold the current margins, and I appreciate that guidance. But I was wondering if you could provide a little bit more detail on the timing for some of the key projects driving that growth as we move through 2025, how the impact earnings through the year, and then when you expect to get to that full over $3 billion run rate. Thanks.
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Darren Woods: Yes, sure. Devin, thanks for the question. I think you're right. It's going to be a busy year with a lot of startups. I'll maybe just kind of walk through the key projects that we've been talking with you all about and start with the China Chemical Complex. We mechanically completed that at the end of last year. We've been going through startup sequencing and making sure that each piece of that kit is working as designed, and we'll bring all that integrated together. And my expectation is, we'll get it started up here sometime in the first quarter, back into the first quarter. In Fawley, we're building a conversion facility to produce low-sulfur diesel. My expectation is we'll have that in early second quarter. We've got two advanced recycling units that we are building at Baytown. So despite the Attorney General's accusations that these are myths, we've actually got two more units starting up, one in the second quarter and one in the fourth quarter, which continues to see a lot of interest by consumers for recycled product. And so that capacity is desperately needed to meet that customer demand. We've got all the modules that we need for the Strathcona Renewable Diesel, looking to basically try to get that started up here in the second quarter, expect that to happen. The other real big project that we've got is the Singapore Resid Upgrade Project. That is new-to-the-world technology. I feel really good about the progress we've made there. We've got all the vessels loaded with catalyst. Some of that catalyst is proprietary. It's the largest catalyst load we've ever done, and we did that successfully and expect to be mechanically complete sometime here in the first quarter and get into the start-up and sequencing and expect to be up and running kind of the back end of the second quarter, I would hope. Proxxima, second quarter, is when we expect to get some more capacity on, and then going forward in time, a lot more capacity coming on as we continue to work with customers and sell into what we think
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and then going forward in time, a lot more capacity coming on as we continue to work with customers and sell into what we think are some very attractive applications where there's really good demand. So continue to see good progress there, and that project is coming along. Bacalhau, I expect sometime in 2025, probably closer to the third quarter. Yellowtail, third quarter, and then, as we've said, with Golden Pass, probably the back end of 2025, expect to see first LNG and mechanically complete kind of around mid-year is the time frame that we run through all of those. And then, as we mentioned, on a constant price basis, which we provide for you guys to kind of see the underlying fundamentals of these projects, expect to see more than $3 billion of improved earnings once they're up and running full, which we're considering in 2026. And at the same time, you look at the current price margin environment that we're in, which is obviously pretty challenging. We're still, as you rack up all those projects, still about $3 billion of earnings contributions. And that's, frankly, the goal is to make sure that these projects are resilient to the bottom-of-the-cycle conditions, so feel pretty good about that portfolio of projects and where we are.
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Operator: The next question is from Doug Leggett of Wolfe Research.
Doug Leggett: Thanks for all the details. Darren, I think you missed out your 25% of [indiscernible] in your startup list, but who's counting? My question specifically is about -- I hate to be predictable. It's about your cash distribution philosophy, buybacks versus dividends. And I want to kind of position it like this. If I look at buybacks last year and the $20 billion commitment for the next two years, you could make a case that you're basically buying back the shares that you issued for Pioneer. And I know it's not as cut and dried as that, but I'm curious with the inflection in free cash flow that you clearly have, your capacity for dividend growth is substantially greater than the 4% bump that you gave to shareholders now for several years running. Are you waiting to buy in the Pioneer stock before you step up that dividend, is my question?
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Kathy Mikells: And so that's really, Doug, a coincidence, right, that we moved up our buyback pace in conjunction with Pioneer, obviously because Pioneer was giving us incremental cash flow to be able to do that. So that moved up our pace from $17.5 billion to $20 billion annually, and we've guided that we expect to be at that pace for this year and next year, assuming continued reasonable market conditions. But it is, I would say, just a coincidence that that $20 billion pace means that we'll essentially buy back the shares from Pioneer over a three-year period. If we go to look at our philosophy overall in terms of the dividend, we have been clear that we look at that dividend and we want it to be sustainable, we want it to be competitive, and we want it to be growing. And we're always looking at it through that lens. The share buyback program as a secondary benefit, actually reduces the overall dividend in absolute terms as we continue to take shares out of the market. But that's how we look at the dividend philosophy. And as you know, we've increased the annual dividend for 42 years running, which is a claim only 4% of companies in the S&P 500 can make. And so we're very focused on and understand the importance of that dividend for our shareholders. And we also realize compared to other companies, we have a quite large retail shareholder base that are very focused on the dividend. And so that's how we look at and evaluate things.
Doug Leggett: I appreciate the answer. I would just footnote that dividend growth per share seems to be the driver or at least the mechanism for market recognition of value. So that's why we came on this issue, but I appreciate the answer. Thanks so much.
Operator: The next question is from Steve Richardson of Evercore ISI.
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