summarise in bullet points:

PM’s take: shifting tone on consumer plus some one-time headwinds raise 
questions on algo; low end consumer remains our big hang-up. As we 
previewed, the risk-reward on WMT into the print was negative given we believed 
the company’s tone would have to acknowledge a more uneven consumer and 
considering it was the most crowded stock in our coverage. The market squeeze the 
last two days on rates put WMT at an all-time high into the release as well. 
Exacerbating these factors was another quarter where the long-term margin 
narrative was undermined by “one-time” impacts. WMT’s CEO responded to a 
sell-side peer that the financial algo turn is a “build” not “an inflection,” with the 
latter the market view that’s been solidified all year at countless investor 
conferences. Our big hang-up has been the consumer, with the low end seeing more 
pressure now given moderating wage growth and balance sheet pressures, while 
grocery inflation (~60% of WMT US mix) has come down all year (to 3% in 3Q 
vs. LDD earlier in 2023). On the latter, units have seen little elasticity and the 
headwinds on gen merch appear more cyclical driven now vs. share of wallet for 
the prior two years. Taken together, this suggests the US business could be a 2-3 
comp story in early 2024, which isn’t favorable from a multiple perspective given 
valuation attribution is typically highest on comps for retailers. Our 2024 and 2025 
estimates are largely unchanged at $7.25 and $8.10 with our $163 Dec 24 price 
based on 22.5x on our 2024 EPS forecast. 
• BJ comp lateral. Using the four-year CAGR trend from Sam’s indicates an 
~1.5% for BJ (up ~70 bps sequentially on a 4Y basis), above the Street’s +0.9% 
per Consensus Metrix and our previewed +1% but towards the high end of +1-
1.5% buyside expectations, per our conversations. 
• Key takeaways from the earnings call and our follow-up with mgmt: (1) 
Tighter peaks and longer/wider valleys: softer tone on the consumer with 
QTD improvement benefitting from deal shopping/weather/compares. 
WMT noted it is more cautious on the consumer vs. 90 days ago given more 
choppy trends exiting the quarter, with 2H October softening due to a 
combination of weather, rising rates/tightening credit conditions, consumer 
balance sheets normalizing to pre-pandemic, student loans, etc. Indeed, 
consumers shopping around events and on promotion has increased over the 
year with these periods taller but more narrow and the in-between worse. 
Indeed, we believe QTD gen merch trends have improved and could be positive 
due to the launch of holiday deals, an assist on the weather, and lapping some 
election disruption a year ago. Taken together, this jibes with our view of 
spending becoming increasingly episodic as consumers consolidate spending 
around needs/events alongside our “boiling the frog” analogy on a softening 
consumer. (2) Inflation moderating with little modeled in 4Q; grocery 
deflation not per se the base case. Grocery inflation moderated ~300 bps to 
+MSD in 3Q, though the pace of disinflation continues to moderate with 
grocery ~2.5% and consumables >4% in 3Q and holding these levels exiting 
the quarter, while gen merch pricing was down ~3% in 3Q and -MSD in the last