Walmart's Fiscal Year 2024 Second Quarter Earnings Call began with Steph Wissink, Senior Vice President of Investor Relations, introducing Doug McMillon, the CEO, and John David Rainey, the CFO, who will give prepared remarks before taking questions. Results from the quarter were strong, with Walmart U.S. comp sales at 6.4%, Sam's Club U.S. at 5.5%, and international sales up 11%, led by double-digit growth at Walmex and China.

Flipkart is a people-led, tech-powered, omnichannel retailer dedicated to helping people save money and live better. The team is driving results in the short-term and building for the future, investing in technology, store and club remodels, and new stores and clubs in select markets. They are leveraging their unique data assets with generative AI to make shopping easier and more convenient for customers and associates, while also focusing on ROI to drive results and set their capital priorities.

The speaker recently visited Chile to attend the grand opening of a new hydrogen plant, and has also announced a collaboration focused on supporting US and Canadian farmers to improve soil health and water quality. They have observed that customers are discerning about their spending, buying more private brand items and grocery staples, as well as in-home meal options. Despite rising energy prices, student loan payments, and higher borrowing costs, customers are resilient.

Walmart is leveraging their physical assets to provide customers with a competitive advantage. They are offering same-day delivery from their stores and clubs, with 80% of digital orders in China being delivered in under an hour. They are prioritizing omni-retail but also have opportunities in healthcare and financial services. They are building financial products like Cashi in Mexico and through ONE in the U.S.

Walmart had a strong quarter, with sales, operating income, and adjusted EPS coming in better than expected. Constant currency sales increased 5.5%, and Walmart U.S. comp sales excluding fuel increased 6.4%. Walmart is increasing their full-year guidance and are well-positioned as they enter the back half of the year. They are focusing on saving customers' time and money, and their commitment to customers and members is as critical as ever.

In the U.S., Walmart saw strong sales in grocery and health and wellness, with a modest improvement in general merchandise. E-commerce sales were up 24%, driven by store pickup and delivery. Customers are stretching their dollars further and buying more staples and kitchen tools, while Walmart is partnering with suppliers to offer rollbacks and baskets of goods at the same prices as last year. Internationally, sales were up 11%, with e-commerce growing 26%, and customers spending more on food and consumables. Sam's Club U.S. also saw strong sales.

Walmart is pleased with its progress in improving digital margins and increasing customer buying on its marketplace, which has resulted in double-digit growth in sales across home, apparel, and hardlines. It is on track to achieve its goal of 200 basis points of improvement in contribution profit this year, and has opened its first automated e-commerce fulfillment center in Canada to expand two-day shipping to 97% of households.

Myntra is India's largest e-commerce marketplace for fashion and lifestyle products, and Walmart Connect sales have grown 36% in Q2. Advertising businesses have seen strong growth, with advertiser count increasing 60% and Sam's advertising business growing 33%. Sam's Club U.S. member counts have increased mid-single digits and SG&A expenses have increased due to higher variable pay expenses, tech investments, and store remodel costs.

Automated e-commerce fulfillment centers are achieving 30% higher efficiency than non-automated buildings and 15% of stores are now being served by automated regional distribution centers. Second quarter adjusted operating income grew 8% and adjusted EPS was up 4%. Inventory was down 5% and ROI declined 100 basis points due to charges related to an opioid legal settlement framework and the separation of Flipkart and PhonePe.

Walmart U.S. saw a 6.4% sales comp increase in Q2, with high single-digit growth in grocery and high-teens growth in health and wellness, and a 240-basis point shift in sales mix from general merchandise to grocery and health and wellness. Grocery inflation moderated and private brand sales increased more than 9%. Lower markdowns and supply chain cost resulted in a 40 basis point increase in gross margin rate. Other income grew nearly 4%, and overall Walmart U.S. operating income increased 7.6%. Walmart's international segment also saw double-digit sales growth and strong underlying profit growth.

Walmex had a strong quarter with sales up 10%, driven by Bodega stores, Sam's Club, and E-commerce. In China, sales increased 22%, led by Sam's Club and e-commerce. In India, Flipkart delivered strong GMV and net sales growth, and PhonePe surpassed $1.15 trillion in TPV. Sam's Club had solid unit growth and e-commerce up 18%. Operating income increased 2.2%, but was negatively impacted by 20 percentage points from lapping last year's insurance recovery.

Sam's Club saw an increase in Scan and Go and curbside pickup in Q2, with grocery and healthcare categories leading the sales strength. Due to lower LIFO charges, operating income was up 22%. For the full year, Sam's Club is expecting net sales in constant currency to grow 4-4.5% and operating income to increase 7-7.5%. For Q3, they are expecting net sales growth in constant currency of approximately 3%.

Judith has done a great job during her 27 years with the company, leaving a better-positioned business and culture. Kath has been successful leading Sam's Club and is now taking on the international leadership role. The company is pleased with their financial performance and optimistic about their ability to improve in the future.

Doug McMillon is optimistic about the back half of the year in general merchandise due to disciplined buying and the depth of leadership in the company. He congratulated John, Kath, Chris and Kieran for their work in all three operating segments of the business, which includes digital and e-commerce experience.

Walmart U.S. is seeing a better run rate compared to the previous quarter, likely due to the strong start of back-to-school. Food and consumables sales are increasing due to inflation and disinflation in the GM categories. Store managers and merchants are being optimistic about GM going into the back half. Additionally, e-commerce teams have launched new products and seasonal events to help with back-to-school, and customers are looking forward to celebrating again.

Walmart experienced strong sales during Memorial Day, July 4, and back-to-school, and is expecting a big holiday season. The company has seen double-digit increases in categories such as home, apparel, and hardlines, and has seen share gains across all income demographics due to its value proposition of convenience and everyday low prices.

John David Rainey discusses the primary contributor to their gross margin expansion, which was lapping of markdowns from the previous year, and points to their success in advertising as evidence of their flywheel business model. He also mentions that their advertiser count was up 60% year-over-year in the quarter and that they are encouraged by this progress. Finally, he states that they are planning inventory, price point, and assortment for the upcoming holiday season.

Doug McMillon is excited about the potential of using data to personalize experiences for customers while still protecting privacy. He believes this could unlock many use cases on the customer side, as well as for associates and in the supply chain. John David Rainey adds that in the second quarter, ticket and traffic were both up roughly 3%.

Walmart is seeing strong growth in terms of sales and market share due to their value proposition resonating with customers. They are offering flexible shopping options and rollbacks on items such as backpacks and Frito-Lay multi-packs. This is allowing customers to be more choiceful and thoughtful when shopping, resulting in increased transactions and traffic.

Judith McKenna reported that the international business in China was strong for the second consecutive quarter, with Walmex having a 10% growth, and Flipkart and PhonePe having strong quarters as well. McKenna visited China for the first time in 3.5 years and noted the speed with which the consumer has moved to online and digital penetration, which is in the mid-40%. Sam's Club is performing well, having opened a couple of new clubs and gaining market share due to the combination of value, quality, and trust. There is also a trend of high-ticket items being purchased at Sam's Club.

John Furner discussed the transformation of hypermarkets, noting the thoughtful way in which stores have reduced assortment, brightened and freshened stores, and increased signage to help customers navigate. He also discussed the current landscape from a promotional perspective, noting that inflation is at a lower rate than a year ago, and that the grocery business is gaining share with higher rollback counts than last year. He also noted that price gaps are something that is discussed regularly, and that value is right.

Judith was congratulated for her promotions, and Simeon Gutman of Morgan Stanley asked about the inflection of EBIT dollar growth. Judith believes that there is a lot of work in tracking the cost of transportation and working with suppliers to roll back costs. She also suggested that promotions should not be the easy solution to inflation, and that cost decreases should be passed on to members. To achieve an inflection of EBIT dollar growth, healthy sales, leveraging over fixed costs, and a ramping of Marketplace are necessary, as well as advertising.

John David Rainey and Doug McMillon discussed the success of Walmart's strategy in the first half of the year, which saw sales grow 6% and operating income almost double that. They also discussed the company's efforts to diversify their earnings streams and their supply chain automation, which has led to increased efficiencies. They expressed optimism that this would lead to operating income growing faster than sales.

John David Rainey and Judith discussed the transformation of Walmart's business model, which is consistent across the company's international locations. They also discussed the return on investment for the year, which is expected to be higher than initially anticipated. Finally, Kelly Bania asked about e-commerce growth, which is projected to be 24% and is led by pickup and delivery.

Doug McMillon is pleased with the performance of Walmart's e-commerce business and delivery services, which have been enabled by their store locations and fulfillment centers. He is also pleased with the progress of their Marketplace, which was highlighted by their Plus event, where the majority of revenue was driven by Marketplace sellers. He also discussed their strategy of densifying inventory at the first mile, making the middle mile efficient, and shortening the last mile.

Walmart Connect is an initiative to help buyers, suppliers, and sellers connect with customers in a way that enhances the customer experience. Flipkart, an e-commerce platform, has grown and had consistently positive contribution margins. They have launched a luxury holiday package in India and Myntra, the largest fashion online retailer, has launched MyFashionGPT, an online tool to help customers find what to wear for different occasions.

Walmart+ has seen success due to its core offer of free deliveries from both fulfillment centers and stores. The company has worked to improve the availability and inventory imbalances in the last year, focusing on perfect order and first-time pick rate measurements.

Walmart is committed to providing a wide range of products for customers across the country, and does not set targets for the amount of private label products they offer. In recent quarters, customers have chosen private brands at Walmart more often, likely due to the quality and value they offer. Walmart aims to provide quality and value across their portfolio of e-commerce and stores.

Doug McMillon and the Walmart executives discussed the quality and value of Member's Mark and other private brands, such as Great Value, that are available globally. They noted that metrics around value for money, NPS, and quality have improved. They also discussed a private brand item in Canada, tomato ketchup potato chips, that Doug McMillon was not a fan of. Corey Tarlowe asked about the health of the customer in the U.S. and internationally and the shrink levels.

Doug McMillon states that Walmart is in a good position to provide customers with value and trust through its breadth of product categories, delivery options, and store club services. John David Rainey adds that Walmart is committed to providing customers with the lowest prices possible, but that shrink has increased this year and is not consistent across the country.

Walmart's CEO Doug McMillon discussed the company's focus on shrink, which is comprised of crime and controllable elements. He was then asked a question by Krisztina Katai of Deutsche Bank about Sam's Club's membership growth and private label penetration. McLay responded that there has been historic growth in the membership base, and the tenured renewal rate held steady. She also mentioned that private label penetration is increasing, and they anticipate that national brands will be more popular in the back half of the year due to increased rollbacks.

Walmart has seen consistent growth in their membership over the past few quarters, and they attribute this success to delivering a core offer of perfect order or fill rates and availability. They have also seen growth in private brands since the beginning of 2022, focusing on quality and value. To further invite people to experience the value of membership, Walmart has offered great prices for new members on their 40th year birthday.

Walmart has more visibility into its gross margin rate heading into the next year than it has had in recent memory due to the profitability of its ecommerce business, alternative profits, and less of a drag from GLP-1 drugs. Additionally, Walmart is being aggressive in its investments and is currently going through its long-range planning cycle to look for opportunities to invest in the next year and over the next five years.

The executives at the company discussed their plans to invest in the business to improve its productivity and ROI, as well as diversifying their income streams. They are confident in their outlook due to their resources and talent to execute their plans across multiple fronts, such as running great stores and clubs and growing an excellent eCommerce business.

Doug McMillon acknowledges the tragedy that happened in Maui and expresses gratitude for Walmart's contributions to the community. He also expresses gratitude to Judith for her contributions to the company, and acknowledges the deep bench of Walmart. He then expresses excitement for the future of the company and wraps up the call.

This summary was generated with AI and may contain some inaccuracies.