The paragraph is an introduction to Walmart's Third Quarter Fiscal Year 2025 Earnings Call. The operator begins by welcoming participants and explaining that the call will be in a listen-only mode until a question-and-answer session following the presentation. Steph Wissink, Walmart's Senior Vice President of Investor Relations, then introduces the main speakers: CEO Doug McMillon and CFO John David Rainey. They will discuss the quarterly results, and segment CEOs will join for the Q&A. Participants are directed to limit their questions to one. The call includes forward-looking statements subject to risks, as detailed in the company's SEC filings and on their website. Doug McMillon is set to begin the presentation.

Walmart reported a strong quarter with significant growth across various segments. Sales grew by 6.1% and profits by 9.8%, driven by a 27% increase in eCommerce and a 28% rise in advertising. Membership income grew by 22%, aiding profit growth despite efforts to lower prices and invest in associates. Walmart International sales increased by 12.4%, while U.S. comp sales improved at both Sam's Club and Walmart U.S. Positive transaction counts and market share gains in grocery and general merchandise contributed to success. High-income households accounted for 75% of market share gains. Growth was fueled by increased convenience for customers, with significant gains in curbside pickup and delivery sales. Despite a lack of inflation and a 4% deflation in general merchandise prices, sales remained positive due to strategic rollbacks and effective inventory management. Challenges like a U.S. port strike and hurricanes were well managed.

The paragraph highlights Walmart's effective emergency response efforts, emphasizing their collaboration with federal, state, and local leaders to ensure safety and provide aid in disaster-affected areas. The company committed $16 million, delivering supplies, cash grants, and facilitating meals with the help of their associates and non-profit partners. Customer contributions added $14.5 million. Despite challenges from storms and a port strike, Walmart maintained robust sales growth and developed new capabilities, enhancing their customer-centric approach. The company celebrated a successful Sam's Club opening in Texas, showcasing design improvements.

The paragraph discusses several innovations and expansions within Sam's Club and Walmart. In the U.S., a new Sam's Club model features no traditional checkouts and utilizes modern technologies like Scan & Go and computer vision for faster exits. Internationally, the company has successfully expanded in China with 50 clubs, focusing on digital sales and efficient delivery through club distribution points. In Mexico, Walmart's team is innovating through cellular service, financial services, healthcare clinics, and growing eCommerce, aiming to become an omnichannel retailer. The company is also beginning to see results from using generative AI and acknowledges the rapid evolution of technology.

The paragraph discusses the application of generative AI and machine learning to enhance customer and associate experiences. A personal shopping assistant, in beta for five months, aims to improve the shopping process beyond basic search functions. Simultaneously, "My Assistant," a tool deployed 15 months ago, aids U.S. and international office associates by providing access to knowledge and time-saving actions, resulting in 1.5 million queries from 50,000 users since its launch. This enhances productivity, supports decision-making with insights, and resolves common inquiries, allowing associates to focus on high-value tasks like customer service.

The paragraph highlights the positive developments within a company's operations, with the team adapting and delivering a strong quarter. The CFO, John David Rainey, expresses gratitude for the team's efforts and notes the company's growth in operating income surpassing sales growth. The business is benefiting from investments in their omni retail strategy, leading to improved customer experience and trust. Challenges arose from hurricanes in the Southeastern U.S., causing unexpected expenses and store closures, but the company effectively responded with their logistics and resources, ensuring associates' safety and reopening most stores promptly.

In the third quarter, the company exceeded expectations in sales, operating income, and EPS, with a 6% growth in enterprise net sales on a constant currency basis. Walmart U.S. saw a 5.3% increase in comp sales, boosted by a 22% rise in eCommerce and a 50% increase in store fulfilled deliveries. Food categories reached their highest unit volume growth in four years, and health and wellness achieved mid-teens growth through branded pharmacy prescriptions like GLP-1, despite pressures on gross profit. General merchandise showed low-single digit growth with strength in home, hardline, and toys. Consumer behaviors remained stable, favoring value and convenience, while inflation rates stayed flat. There was increased engagement across income levels, with upper income households driving share gains. Internationally, sales grew 12.4% in constant currency, with strong performance in Flipkart, Walmex, and China, and positive unit growth in general merchandise and food.

The paragraph highlights significant growth in eCommerce and delivery services across various markets. eCommerce sales increased by 43%, with a strong focus on fast delivery. The international market delivered over 2.1 billion items, with 45% arriving in under an hour. Flipkart's Big Billion Days event experienced substantial growth, although earlier timing may affect future comparisons. Walmex outperformed the market for the sixth straight quarter, and business in China showed double-digit growth, particularly in Sam's Club and eCommerce. PhonePe reported strong performance with over $8.7 billion in monthly transactions. Sam's Club in the U.S. saw a 7% increase in comp sales, driven mainly by a 26% rise in eCommerce. New member perks, such as express delivery and no curbside pickup fees, resulted in further eCommerce growth. Innovations like Scan & Go and Just Go technology improved member satisfaction significantly.

The paragraph discusses Walmart's improved financial performance and strategic initiatives. The company highlights its successful technology-driven approach with the opening of a new club in Grapevine, Texas, part of a larger expansion plan. Walmart U.S. saw improved gross margins due to strong inventory management and fewer markdowns, leading to effective pricing strategies. The company rolled back prices on thousands of items, solidifying its commitment to providing low prices. Global eCommerce losses narrowed, aided by delivery densification, a higher rate of paid expedited deliveries, and supply chain automation, resulting in improved efficiency and order density. Overall, Walmart is pleased with customer responses and is encouraged by the margin improvements across diverse offerings.

The paragraph highlights several key developments and successes for the company. Expedited delivery has become popular, with over 30% of orders opting to pay for faster service. Automation in supply chain operations has doubled, reducing U.S. net delivery costs per order by 40% for three consecutive quarters, while enhancing customer satisfaction. The company continues to reshape its profit model, focusing on growth areas such as advertising, which saw a 28% increase globally, driven by international markets and Walmart Connect in the U.S. Membership programs are thriving, with Sam's Club and Walmart+ in the U.S. showing significant growth in membership income, and international memberships in China also seeing strong increases. The company's retail media platform is receiving positive feedback, helping customers find and enjoy relevant products at competitive prices.

In the U.S., Walmart's Marketplace and Fulfillment Services saw a significant 42% growth in Q3, with over 30% growth in each of the last five quarters. The number of sellers and product listings has increased substantially, with certain categories like beauty, toys, and home goods experiencing over 20% sales growth. More sellers are using Walmart Fulfillment Services due to competitive rates, pushing sales penetration past 40%. Internationally, marketplaces in Mexico, Canada, and Chile saw a combined item increase of 20%, with notable growth in WFS deliveries in Mexico. During Flipkart's Big Billion Days, same-day delivery rose significantly, and Flipkart began offering quick commerce with 15-minute delivery in several cities. Walmart Data Ventures is also expanding rapidly, with net sales up double digits and the client base doubling over the past year. In the U.S., while general merchandise sales have been impacted by growth in health and wellness, Walmart anticipates improvement in future quarters.

The company is focusing on expanding its marketplace with emerging categories like apparel and home decor, while optimizing for efficiency. With a more diverse profit model, they're balancing investments and returns, advocating for lower prices for customers. In Q3, operating income grew 9.8% and adjusted EPS rose 14%. They're raising their full-year guidance, with expected sales growth of 4.8% to 5.1% and operating income growth of 8.5% to 9.25%, exceeding previous predictions. Adjusted EPS is now anticipated to be $2.42 to $2.47. Despite currency fluctuations negatively affecting Q3 results, the company expects Q4 sales growth of 3% to 4% and operating income growth of 5% to 7.5%. Wage investments announced for Sam's Club will impact Q4 performance.

The paragraph discusses Walmart's financial outlook and performance. It mentions potential challenges in Q4 due to current rates affecting reported sales and operating income growth by approximately 100 and 200 basis points, respectively. Despite this, the company remains optimistic about its operations and strategy. The CEO, Doug McMillon, acknowledges challenges with general merchandise mix but expresses enthusiasm for its potential growth across stores, clubs, and eCommerce platforms. The company is confident in its strategy and leadership and invites questions from investors, with Kate McShane from Goldman Sachs asking about general merchandise and gross margins. Doug McMillon responds, highlighting Walmart's commitment to growing its general merchandise segment.

The paragraph discusses the excitement and optimism for the upcoming holiday season from a general merchandise (GM) perspective. John Furner, speaking first, mentions visiting various stores and notes they are prepared for the season, having built momentum from successful back-to-school and Halloween sales. Despite experiencing some deflation in general merchandise, there are positive sales figures due to increased unit growth, particularly in home, toys, and hardlines categories, with fashion and apparel also showing promise. There is a strong focus on maximizing customer delivery through both physical stores and their growing eCommerce business. Chris Nicholas adds that, similar to John's strategy, their approach involves prioritizing general merchandise beyond just consumables and food.

The paragraph discusses the company's strategy to boost digital engagement and eCommerce, especially in general merchandise (GM). There's a focus on improving both in-store and online shopping experiences, leading to increased participation in GM. They highlight strong sales in categories like home tech, toys, and seasonal decor, along with significant growth in GM in international markets such as Mexico, India, and China, where convenience and quick delivery are key drivers. Doug McMillon emphasizes the importance of eCommerce for future GM growth, noting opportunities in both physical and digital spaces to create excitement for customers.

In response to Michael Lasser's question about Walmart's strategy for driving steady growth while reinvesting in areas like pricing and wages, Doug McMillon explains that the company is continually evaluating its investment strategies. He believes they are investing the right amounts in key areas and effectively responding to market dynamics. McMillon emphasizes aggressive investment in both the income statement and capital sides, including automation and store remodels. He suggests that Walmart's setup allows them to grow profit faster than sales, and their approach is adaptable week-to-week.

The paragraph discusses the company's strategic balance between profit growth and business investment, aiming for sustainable financial performance in the long term. They anticipate operating income to grow faster than sales, with sales averaging around 4% annually, though this may vary. They report successes in achieving approximately 5% sales growth and 10% profit growth, attributing this to effective execution by their team. While acknowledging potential for faster profit growth with improved execution, they remain committed to their current financial strategy.

In the paragraph, Simeon Gutman from Morgan Stanley inquires about the acceleration of the top line in Q3 compared to Q2, questioning if it's due to merchandising, marketplace, or membership factors, and asks if the growth rate has increased. Doug McMillon responds that the growth feels consistent despite some boosts from storms, and he anticipates similar momentum in Q4 despite a shorter holiday season. John David Rainey adds that the Big Billion Days event contributed to Q3 growth but will negatively impact Q4, emphasizing that the business performance remains consistent overall. The operator then introduces the next question from Christopher Horvers of J.P. Morgan.

In the paragraph, Doug McMillon and John David Rainey discuss the company's operating income guidance for the fourth quarter, noting a modest improvement compared to previous expectations despite consistent performance throughout the year. They highlight that gross margins, particularly in the U.S. and Sam's segment, have been slightly better than anticipated due to lower shrinkage. The growth in digital and newer business sectors was also noted, including significant increases in advertising, marketplace, and membership income, attributed to their value proposition resonating with customers. However, Rainey cautions against rushing to profitability in eCommerce, emphasizing a strategic, long-term approach.

The paragraph discusses a company's approach to eCommerce profitability and growth strategy. The company prioritizes carrying more first-party items and improving delivery speed, even if that delays profitability, because it aligns with customer desires and growth potential. They express confidence in eventually achieving eCommerce profitability, focusing on long-term growth rather than immediate profit. The company has invested in various aspects, such as membership, advertising, and data monetization, which have made the income statement more profitable over time. They aim to grow profit faster than sales and view their omni-channel presence as advantageous. The speaker anticipates eventually announcing global eCommerce profitability, acknowledging variability by country.

In the paragraph, Doug McMillon discusses Walmart's strategy for appealing to upper-income consumers by addressing various market segments such as grocery and general merchandise. He highlights the company's intention to maintain its strong market share in food and consumables while noting that their market share in fashion categories has historically been lower. McMillon sees growth opportunities in fashion through eCommerce and improving brand presentation. He also notes that while price and convenience are important to all customers, upper-income consumers, in particular, appreciate Walmart's pickup and delivery services that save time.

The paragraph discusses the sustainability of Walmart's current business strategy, highlighting the advantages of their membership program, store remodels, and convenience improvements. John David Rainey emphasizes Walmart's omni-channel capabilities, allowing them to serve customers in-store, curbside, or at home, focusing on both price and convenience. He mentions the reduction in delivery costs due to expanded delivery options and hours, enabling flexible customer service. Rainey also points out market share gains, particularly from higher-income customers, with a notable increase in pickup and delivery for specific categories such as gluten-free, organic, and grass-fed products.

The paragraph discusses Walmart's strategic focus on being a strong value proposition with high-quality products that meet customer demands. It highlights significant growth in eCommerce, driven primarily by the marketplace team, with a 22% increase indicating customer interest in a wider product assortment, including categories like apparel, toys, and healthy food. Chris Nicholas notes that Sam's Club, part of Walmart, targets various income groups but prioritizes value in pricing. However, success isn't just about price; enhancing the customer experience and convenience is also crucial. The paragraph concludes with a question from Krisztina Katai of Deutsche Bank, asking about sustainable growth expectations for eCommerce, considering factors like marketplace dynamics and membership.

In the paragraph, Doug McMillon discusses the expansion of marketplace sellers and SKUs, emphasizing its contribution to eCommerce growth and profitability improvement over the coming quarters. He highlights the potential of eCommerce due to the company's relatively low market share compared to brick-and-mortar, positioning this as an opportunity for growth. Investments in supply chain automation and technology are expected to enhance customer experience and drive growth. McMillon points out the interconnected nature of eCommerce businesses, where growth in first-party sales can drive third-party sales, ad sales, memberships, and data collection, ultimately boosting both top and bottom-line growth. He concludes by acknowledging the ongoing importance and enjoyment of their core item business.

The paragraph discusses the contribution of ancillary revenue streams, such as membership fees and advertising income, to the company's EBIT growth this quarter. These streams make up a significant portion of the operating income improvement and overall operating income. John David Rainey notes that the company's eCommerce business has grown by 18%, marking a 300 basis point improvement from the previous year. Kath McLay highlights that the company has consistently grown profits faster than sales, largely due to higher-margin ancillary businesses, while emphasizing the importance of maintaining a balance in core retail operations.

The paragraph discusses the growth of a company's advertising business, which increased by 50%, driven largely by a focus on local markets and tailored offerings for consumers. This growth is attributed to both advertising revenue and membership expansion across various markets. Additionally, the inclusion of financial services has contributed to the business model's consistent execution. John David Rainey mentions that growth in GMV (Gross Merchandise Value) is balanced between increased traffic and improved conversion, meaning more customers are visiting and completing purchases due to enhanced value and service. While progress is noted, there is acknowledgment that more improvement is needed. Lastly, Peter Keith from Piper Sandler is introduced, hinting at a follow-up question regarding the improvement of general merchandise in future quarters.

The paragraph features a conversation about the implications of continued improvement in higher-margin revenue streams, like marketplaces and supplier advertising, for a company's profit and loss (P&L). Doug McMillon acknowledges that these items generally offer higher margins than grocery products, suggesting potential benefits if the economy remains stable. Peter Benedict then shifts the focus to competitive responses to the company's market share gains, particularly in the U.S. McMillon responds by noting that the competitive landscape is evolving rapidly, with strong competitors in different regions like China and Mexico, and emphasizes the importance of staying aware and responsive to customer needs in the U.S. market.

In the article paragraph, the discussion centers around financial strategies and operational expenses. John David Rainey addresses Karen Short's questions about the company's operating expenses (OpEx) and alternative revenue streams. He specifies that the company currently reports on a segment basis, including international, Sam's, and U.S., and will reassess if necessary. The increase in OpEx is attributed to additional marketing investments in the U.S. and incentive pay for frontline associates, which aligns with rewarding them as shareholders benefit. Rainey also alludes to the evolving business mix influencing expenses.

The paragraph discusses the financial impact of increasing digital sales on SG&A (Selling, General, and Administrative expenses). As the company grows its eCommerce business, there is pressure on SG&A expenses, but the focus remains on maintaining low costs to offer competitive prices to customers. The team aims to return SG&A to around 20% by finding efficiencies and leveraging technology. During a Q&A session, Seth Sigman from Barclays asks about the increase in average ticket prices in the U.S., noting possible factors like hurricane impact, an uptick in basket size, or attracting higher-income consumers. John Furner responds, acknowledging these factors and expressing pride in the team achieving significant growth in units and food sales.

The paragraph discusses the performance of the general merchandise business, noting positive growth despite some deflation. It highlights the importance of selling seasonally appropriate products and the successful integration of digital business with physical stores, which has attracted new customers. The company has seen significant growth in deliveries under three hours, emphasizing the demand for both value and time-saving options. Greg Melich from Evercore ISI asks about the impact of Walmart+ membership on customer behavior and data usage. John Furner responds, emphasizing Walmart+'s importance and the growth of eCommerce as indicators of customer trends, with Walmart+ allowing customers to spread delivery costs over time.

The article paragraph discusses the importance of delivering orders accurately and on time for a program, emphasizing customer satisfaction to foster further interaction, such as offering additional services. It highlights positive growth momentum in Walmart+ memberships, particularly during the important family season, and the necessity of executing well. Internationally, loyalty and membership programs vary, from free initiatives in Chile and Mexico that help collect significant customer data to paid memberships that bundle delivery services. Membership growth is evident across major markets, with an example of over 30% growth in membership income at Sam's Club in China.

The paragraph discusses the growth and success of Sam's Club, highlighting a 15.1% increase in membership income, driven by the company's member value proposition focused on value, assortment, and building trust with members. Key achievements include rapid delivery times, increased digital engagement, and rising membership renewals. Executives emphasize the importance of listening to member needs and executing strategies effectively to achieve these outcomes. Furthermore, there's mention of an upcoming investment community meeting in 2025.

The paragraph discusses the company's leadership and global associates successfully balancing short-term results with long-term growth by making strategic investments in areas like pricing, associates, and automation. The company aims to improve collaboration with tech teams for effective and faster solutions. The focus is on sustaining revenue growth and profitability while meeting customer needs for low prices, a wide product assortment, good experiences, and trustworthiness. The company is committed to maintaining its momentum and continuing its success in future quarters.

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