The operator welcomes participants to Walmart's First Quarter Fiscal Year 2025 Earnings Call and introduces the speakers. The CEO and CFO will share their views on the quarter and answer questions. The call will also include segment CEOs and a cautionary statement about forward-looking statements. The CEO thanks everyone for joining and notes that the team had a great quarter.

The company's sales and operating profit exceeded expectations, with strong performance in all three operating segments. The growth is driven by increased units sold, transaction counts, and market share gains, not inflation. The company is also focused on lowering prices and providing value to customers, with an increase in rollbacks and a decrease in inventory. The improvement in customer experience scores is attributed to the hard work of associates, who are managing traditional tasks while also driving change. The company's success is also attributed to their ability to offer low prices and a wide selection of products.

In this paragraph, the article discusses the growth of marketplace sellers in the U.S. and Mexico, as well as the increase in eCommerce penetration. The company is also focused on improving the shopping experience, with store remodels and convenient options like curbside pickup and delivery. The results for the quarter were driven by strong core performance and growth in newer businesses such as advertising and membership. The company is also expanding its data analytics product into Mexico and Canada and continues to innovate with new technologies and platforms.

The company's automated storage and retrieval systems and distribution centers are on track and will have a positive impact. In Walmart U.S., a new private brand called Better Goods was recently introduced, focusing on quality and value for customers of all income levels. Same-day delivery is available globally, with delivery times getting faster and costs decreasing. The company made the difficult decision to close U.S. health care clinics due to low profitability. They will continue to focus on their pharmacy and optical businesses. The company also announced the elimination of some home office roles and a return to in-person work for the majority of associates.

The importance of in-person interactions is emphasized, as it leads to faster decision-making, increased creativity, and the development of future talent. Walmart International has shown strong results with double-digit growth in sales and profit, driven by e-commerce and improved delivery services. The use of computer vision technology in Sam's Club has improved the member experience and identified more items. Overall, it has been a strong start to the year for Walmart.

The company is focused on improving customer and member experiences, being great merchants, building newer businesses, and improving returns. The strong results this quarter reflect the company's ability to grow operating income faster than sales. All three operating segments performed well, with increased sales, traffic, and units. The company is investing in areas with strong capital returns and is widening its competitive advantages. The first quarter saw a 5.7% growth in net sales, exceeding the company's guidance of 4% to 5% growth. The leap year contributed approximately 1 point to the year-over-year sales growth.

In the first quarter, Walmart International saw strong sales growth, particularly in Walmex, China, and Flipkart. The company also experienced success in seasonal events and saw a significant increase in e-commerce sales. In Canada, marketplace growth was driven by Walmart fulfillment services, and in India, Flipkart expanded its same-day delivery service. Walmart U.S. also had better-than-expected growth, with strong sales and e-commerce performance. Sam's U.S. also saw strong sales growth, driven by the success of their private brand, Member's Mark, and digitally enabled solutions. Gross profit growth was a key driver of upside in Q1, with lower markdowns and favorable business mix contributing to strong margin flow through. As a result, consolidated adjusted operating income grew significantly higher than sales growth.

In the first quarter, Walmart saw expense deleverage in its U.S. segments due to higher variable pay expenses from its app performance. However, all segments contributed to operating income growing faster than sales. The company has been working closely with suppliers to lower costs and manage pricing, resulting in sustained sales growth and higher gross margins. Walmart has also seen success in its rollback program and seasonal events, driving customer engagement. Private brand sales and penetration continue to see strong momentum, with inventory levels decreasing while sales and in stock rates remain strong.

The company's focus on inventory management has resulted in minimized markdowns and improved in-stock levels. E-commerce growth has also increased, with reduced losses in delivery costs. The company is seeing success in increasing customer frequency and expanding into different product categories. While non-discretionary spending remains a challenge, the company is working on strategies to improve general merchandise sales and promote their e-commerce brand assortments. Share gains have been seen in fashion, home, and hard lines, and marketplace sales are growing in various categories. The company is also focusing on higher margin growth drivers, such as advertising and data analytics, to improve their profit composition.

In the first quarter, global advertising for Walmart grew by 24%, with strong growth from Walmart Connect in the U.S. and International markets. The U.S. ad sales saw significant growth from marketplace sellers, while active advertiser counts also increased. Sam's Club saw record high levels for member counts and membership income growth. The membership programs in China and Walmart Plus also showed strong growth. In the marketplace, all international markets grew double-digits, with strong results from Flipkart and Walmex. In the U.S., the marketplace saw strong results with the help of our Omni model. The data analytics and insights business also saw strong demand, doubling compared to last year. A new self-serve integration was announced in April to make it easier for supplier advertisers to combine Walmart Luminate's insights with Walmart Connect's retail media solutions.

The company is combining two solutions to improve shopping experiences for customers. They are also focusing on areas of the business that have not performed well and making decisions to close unprofitable ventures. The first quarter results exceeded expectations and the team is executing at a high level. Consumer economic conditions have been consistent and the company is gaining share by providing value and convenience. However, there is still uncertainty for the rest of the year.

In the second quarter, the company expects sales to increase by 3.5% to 4.5% and operating income to grow by 3% to 4.5%. EPS is projected to be between $0.62 and $0.65 per share. The company's operating income growth in the quarter may be impacted by investments in technology and wages. The company is confident in its outlook for the second half of the year, with first-half sales expected to grow by 5% and operating income by 8%. The company will revisit its full-year guidance after the second quarter. The management team is pleased with the results of the quarter, with profits growing and customer satisfaction scores increasing. The company is focused on serving its customers and controlling costs. The first question from a Goldman Sachs analyst asked about the company's observations on the lower end consumer during the quarter.

John Furner, the CEO of Walmart, thanked the team for their execution in the quarter and highlighted the improvements in in-store merchandising. He mentioned that consumer spending has been consistent across income groups, with more growth seen in the high-end segment. Walmart is focused on providing value, flexibility, and convenience to all customers. The pickup and delivery businesses are both growing, with delivery now exceeding pickup in size. Walmart also has almost 7,000 rollbacks in their food categories, which is helping to increase the gap between eating at home and eating out. Simeon Gutman from Morgan Stanley asked about the consumer and if Walmart is seeing any changes in their behavior, to which Furner responded that they have not seen any changes yet.

The speaker addresses a question about the company's ability to continue driving value and investing in their value proposition in a potentially choppy year. They mention that they will update their guidance at the end of the second quarter and that they are currently being patient due to uncertain consumer health. They also mention their past investments in price and wage and their ability to manage price gaps.

The company is committed to investing in its employees and has the flexibility to make various choices due to changes in business mix and inventory management. During the quarter, there was deflation in both general merchandise and food and consumables, but rollbacks in April were up 45%. The company is having internal discussions about the changing composition of gross margin, which is being impacted by newer businesses such as digital advertising and marketplace fulfillment. The company will continue to manage merchandise margins to provide value to customers.

The speaker, John David Rainey, responds to a question about Walmart's gross margins. He clarifies that the increase in gross margins is not due to price increases, but rather a change in business mix and a decrease in markdowns. Rainey also mentions that the company's revenue growth is driven by more units and foot traffic, and that they are becoming more relevant to consumers. He emphasizes the importance of incremental profit and highlights the contribution of newer businesses and improved e-commerce losses to the company's operating income improvement.

The speaker, Doug McMillon, emphasizes Walmart's strong performance in the e-commerce sector and its ability to adapt to changing market conditions. He downplays the impact of external factors and highlights the company's focus on customer satisfaction and cost savings as key drivers of growth.

The executives of Walmart do not worry about future pricing and are more focused on their own execution. They grade themselves on a perfect order system and have seen an improvement in this area. They also prioritize value, flexibility, and convenience for their customers, with delivery now being the most popular option. They have expanded their delivery services to be more convenient for shoppers.

The Business Center International and its strategies for first party e-commerce marketplace and advertising membership have led to a common focus among the company's different businesses. In Chile, the company has seen success by focusing on import metrics and building sustainable e-commerce businesses. Similarly, Sam's Club has achieved balanced results by emphasizing its value proposition and deepening digital engagement with members. This has led to an increase in plus membership and e-commerce growth, as well as the adoption of new technologies like Scan and Go. Both companies are focused on providing value and enhancing their member value propositions.

The speaker discusses the success of the company's international operations, including a 10.7% increase in sales and a 27% increase in operating income. They credit this success to the implementation of AI and computer vision technology in stores and the popularity of the company's own brand, Member's Mark. The speaker also mentions the strong performance of Flipkart, a recent acquisition, but does not provide specific details on its contribution. They also acknowledge the efforts of international associates in achieving these results.

The company saw some one-off expenses in Q1 op inc, but is maintaining its goal of bottom line growth outpacing top line growth. The international market, particularly in Walmex, has shown strength with new revenue streams from digital connectivity and health memberships. In China, Sam's Club has seen strong growth with its offline and online model. Flipkart has also shown growth and profitability in the last 2 quarters, with a focus on premiumization. Overall, the company is on track with its growth trajectory for Flipkart.

The speaker discusses the potential for an IPO for the business and their excitement about the Indian market. They also mention the strong performance of both Flipkart and PhonePe. The next question is about general merchandise, specifically what categories they are excited about and how they are using innovation and the marketplace to elevate the brand. The response highlights the success of their brands in providing high quality and value, particularly in apparel, jewelry, home, hardlines, auto, and consumer electronics. They also mention the strong performance of eCommerce and the momentum in the marketplace.

The speaker is pleased to see a large number of new sellers and a high assortment of products on the marketplace. The company has been focusing on improving the customer experience, including perfect order, which has led to more customers shopping more often. The apparel and hardlines categories have been strong, and the company is excited about the convenience and expansion of services offered. The CEO also mentions the progress made in general merchandise, specifically in apparel and home, which has been driven by in-store remodels and eCommerce. The marketplace and 1P will both be important for growth, and the company has new tools to improve the general merchandise business. The speaker also mentions progress in search.

The speaker is excited about the migration to a solution-oriented search and the use of generative AI to improve it. They expect this improvement to continue in the future. The questioner asks about operating expenses and any updates on planned investments for the year. The speaker explains that there may be some planned investments in the second quarter and that the first quarter's results were strong but may not be repeated.

The company's strong performance in the first quarter was aided by seasonal events and a LIFO charge at Sam's Club. However, these factors are not likely to repeat in the second quarter, so outperformance may be less likely. The team is confident in their operations and the potential to exceed their guidance. The growth of the third-party marketplace may be impacting the performance of general merchandise, but the company is still making progress in this area.

In paragraph 26, the speaker discusses the growth in various categories of merchandise and how it reflects a shift in consumer perception of the company. They also mention the impact of food inflation on general merchandise sales and the company's focus on providing a wide range of options for customers. In response to a question, the speaker emphasizes their goal of overall profitability rather than the specific sales channel. Later, they mention that share gains were led by higher income households and briefly discuss their targeting and engagement strategies for this consumer group.

The company defines its income groups as $50,000 and below, $50,000 to $100,000, and $100,000 and above. Their customer base is roughly one-third in each group. The company is focusing on convenience to attract higher income households, as shown by their high number of units shipped in the last 12 months. They are also seeing improvements in fresh food quality and supply chain, particularly in produce and meat. The company is excited about their Better Goods program, which offers better quality and value, with 70% of items under $5. This appeals to all income groups.

Doug McMillon and John Furner discuss Walmart's success in appealing to a wide range of customers, regardless of income level. They attribute this success to their focus on offering value and convenience, rather than targeting specific income cohorts. They also note that the mix of products being purchased has remained consistent, with growth in both brands and private brands and a wide range of price points. March was a particularly strong month due to the Easter holiday.

John Furner, CEO of Walmart, discussed the company's strong performance in the first quarter, with February and March being particularly strong due to favorable weather conditions. Although April was softer without Easter, the trends in May remained consistent. The company's inventory is in good shape and its merchants are managing price gaps, value, and initial margins well. Walmart Plus, the company's membership program, is growing double digits and is seen as an important part of the company's strategy to save customers time and money. The company is pleased with its progress and sees opportunities for further growth in the future.

In the paragraph, the speaker discusses the success of Walmart Plus and how it has improved the company's ability to fulfill customer orders. They also mention the impact of inflation on their sales and their expectations for the future. The speaker concludes by thanking their associates for their strong performance and highlighting the growth in eCommerce, convenience for customers, and the marketplace.

The paragraph discusses three positive headlines from the quarter, including a 24% increase in sales, good inventory management, and successful pricing strategies. The company's overall strategy remains focused on growing sales, profit, and returns through serving customers and making strategic investments. The conference call has now concluded.

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