Q2 2022 Walmart Inc Earnings Call

As there is more customers are shopping with us across channels.

Our ecommerce marketplace in India flip cart continues to drive strong growth in <unk> in line with our high expectations. This team has been busy.

They introduced flip cart camera, a first of its kind technology at scale for the Indian customer that allows users to view products in their physical environment.

[noise] Spaniard their grocery business to over 70 cities and launched a new commerce platform called shop see to help reach the reseller community.

We're also increasing customer stickiness with flip cart plus it's a tiered program based on spend that helps us drive higher repeat rates.

Customers in the program transact or frequently and we see lower churn than others.

They also recently completed a new funding round, which placed a value on the business of about $38 billion significantly higher than the valuation when we invested just three years ago.

There were large votes of confidence from a strong group of investors and we'll put those dollars to work to deliver growth in key areas, such as grocery fashion and our supply chain.

You should see the common threads in leverage points across our businesses increasingly.

Increasingly we think about global businesses and global tech products, rather than thinking or working our country at a time.

There is more of a digital first mindset here.

Before I close today I'd like to remind everyone of the new ESG report, we published last month I encourage you to invest time with each of the briefs to understand our priority issues along with the progress we're making against our commitments for.

For example on emissions, we've reduced absolute scopes, one and two greenhouse gas emissions by more than 17% since 2015.

Our original target was 18% by 2025.

The tremendous progress we've made it means we're on track to achieve the updated target we announced of a 35% reduction by the same date.

Additionally, our suppliers report, having avoided more than 186 million metric tons of Cotwo <unk> and 2020 for a cumulative total of more than 416 million metric tonnes avoided since we started project gigaton in 2017.

I also want to take a moment to mention an announcement we made on July 27th regarding the live better you education program.

Walmart will now pay 100% of college tuition and books for associates as part of our commitment to invest nearly $1 billion over five years and career training and development.

This means that roughly $1.5 million full and part time associates in the U S. Can earn a college degree are learn or are there other skills without the burden of debt.

This is a fantastic initiative, giving our associates the opportunity to learn and grow.

I'll close by thanking our associates for how they serve others and our leadership team for their vision and ability to lead so much positive change so quickly.

They built us into a global leader in Omnichannel retailing with a model that is uniquely Walmart R.

Our team is designing with the customer at the center of our flywheel, which is coming together nicely.

It's exciting to imagine how far we can go.

And now over to Mr. Biggs.

Thanks, Doug our strong second quarter, and a solid start to the third quarter position us to deliver great year financial results, while making steady progress against our strategic priorities.

Our results continue to demonstrate the power of the omni strategy, providing customers with new products services and tools.

No matter, how customers want to shop, we're here for them.

In some periods and in store shopping will lead the way and in some ecommerce will lead the way.

While we're always striving for more in each part of the flywheel I'm pleased with the overall growth of the business.

In Walmart U S comp sales grew five 2% and transactions grew more than 6% as customers are returning to the convenience of one stop in store shopping.

E Commerce sales grew 6% in Q105% on a two year stack.

We continue to build a very sizable e-commerce business around the world. In fact, we're on track to deliver 75 billion and global ecommerce sales this year and on our way to $100 billion in the near term.

We're also seeing continued strong U S market share gains in grocery which is a key part of our business.

Sams club members are increasingly utilizing curbside pickup for online orders and the adoption of scan and go technology in club is at an all time high.

The success of scan and go at Sam's is one of the reasons. We included this as part of the Walmart plus offering.

And International E. Commerce penetration is now at nearly 19% of sales and we're rapidly expanding omni services in key markets such as Mexico.

We're also rapidly expanding higher margin businesses like advertising data monetization and ecommerce marketplace, which gives us flexibility to invest aggressively for the future while growing profit near term. These businesses are in different places along the maturity curve, but we're scaling them for example, Walmart connect U S advertising sales nearly doubled in <unk>.

Q2, and we expect a rapid growth to continue.

While businesses like our new Fintech JV are still in a startup phase we know the opportunities are significant and we will share more in the coming quarters.

Now, let's discuss Q2 results.

As a reminder, the previously announced international divestitures significantly affect year over year comparisons. So my comments today will focus on the underlying business, excluding the effects of divestitures.

In addition, the pandemic continues to create both tailwind and headwinds for the business U S. Government stimulus benefited sales this year than last year, but many international markets continued to be negatively affected by COVID-19 and related government operating restrictions COVID-19 costs remained elevated but significantly lower than last year.

Total constant currency revenue growth was strong up seven 6% to more than $138 billion with strength across all reporting segments.

Walmart U S comp sales increased more than 5% in Q2 and more than 14% on a two year stack basis.

International sales growth was strong up nearly 13% in constant currency with strength in India, Mexico, and China, While Sams club comp sales grew more than 10%, excluding fuel and tobacco.

Currency benefited sales by about $2.4 billion.

Gross margin rate declined 22 basis points, reflecting category mix shifts at Sams club and format mix shifts in international, but Walmart U S. Gross margin increase with favorable mix and strong Walmart connect results.

SG&A expenses leveraged 78 basis points, reflecting strong sales lower COVID-19 costs, and a 36 basis point benefit from last year's adjusted items.

Partially offset by increased wage investments in the U S.

Adjusted operating income on a constant currency basis was up 15, 1% leading to strong adjusted EPS of $1.78, with a <unk> <unk> benefit from currency.

As anticipated free cash flow declined about $8 billion.

Due primarily to inventory increases from improved in stocks and higher capex.

We repurchased $2.4 billion of stock in Q2, and $5.2 billion year to date, which is up significantly from last year.

This is one of the largest quarters for buybacks over the past two years, demonstrating our financial strength and belief in the value of our company.

Now, let's discuss the quarterly results for each segment.

Walmart U S had another strong quarter.

Underlying business trends continue to be solid, including strong grocery market share gains according to Nielsen and an acceleration of store traffic and.

In fact comp sales increased each month through the quarter and we're off to a good start with the back to school season.

On top of extraordinarily strong growth last year E. Commerce sales were up 6% and have more than doubled over the past two years.

Strong sales trends were led by grocery health and wellness in apparel as well as reopening categories, such as automotive travel and party supplies.

Grocery sales were up 6%, including the benefit from modest ticket inflation and increased low double digits on a two year stacked basis.

That results in $2.4 billion of growth in food sales year over year and about $5.5 billion of growth on a two year stack.

Strong price positioning great fresh quality and improved in stocks are driving results.

We're excited about the traction we're seeing in strategic growth businesses, Walmart connect sales roughly doubled in Q2 versus last year as we ramp up new advertisers.

The spark driver platform continues to grow supporting last mile deliveries from stores over the past 12 months, we've doubled sparks coverage to more than 500 cities nationwide, providing access to more than 20 million households.

Our E Commerce marketplace is also expanding and we expect to make hundreds of thousands of additional items available for fulfillment services. This year alone.

The Walmart business model is evolving and these newer businesses are contributing to results in a more meaningful way.

Walmart U S. Gross profit rate improved 20 basis points with lower markdowns and strong advertising revenue.

Partially offset by increased supply chain costs margins were also helped by administering COVID-19 vaccines. This year and lapping last year's covered related closures of vision and auto care centers.

We're continuing to see a bit more cost inflation than normal, but our merchants are working with suppliers and monitoring price gaps to keep prices low while managing margins.

Operating income was strong up about 12% on an adjusted basis inventory increased 20% due to lapping COVID-19 related inventory effects last year and strong sales growth this year.

We continue to monitor industry trends related to transit import delays, our merchants continue to take steps to mitigate challenges, including adding extra lead time to orders and chartering vessels, specifically for Walmart goods out of stocks in certain general merchandise categories are running above normal given strong sales and supply constraints.

International had a great quarter with strong sales and profit growth net sales grew nearly 13% in constant currency, including strength in India, Mexico and China is.

It's encouraging to see the continued progress of our large and growing ecommerce business and our markets E. Commerce sales grew 86% and penetration accelerated more than 700 basis points to nearly 19% of constant currency sales.

Comp sales in Mexico increased four 7% as the Omnichannel strategy continues to accelerate we're seeing strong response to the launch of Walmart connect media in Mexico with the number of advertisers and campaigns growing rapidly.

Flipped card had another good quarter sales growth was strong even as they dealt with coven and we continue to see improving trends in monthly active customers and users.

We are excited to take another step to position the flip cart group for future growth with the completion of a $3.6 billion funding round in July that included strong representation from external financial investors valuing the business at nearly $38 billion.

In Canada, Covid related government restrictions on our sale of non essential categories like apparel and general merchandise pressured sales and profitability, but we're optimistic that we will see a more normalized sales and profit environment in the back half.

China comps increased two 9% and were up 11, 6% on a two year stack and ecommerce penetration has now reached more than 25% of sales in China.

International operating income was strong increasing about 28%, reflecting sales strength the benefit from lapping last year's discrete tax items and lower COVID-19 costs excluding.

Excluding the discrete item adjusted operating income increased over 12%.

Sams club delivered excellent results with strong growth in sales membership and profit.

Comp sales grew 10, 6%, excluding fuel and tobacco and were up nearly 28% onto your stack basis, including strong ecommerce growth.

Membership trends were also strong as we achieved a new high for overall member counts saw significantly higher renewal rates and delivered record plus member penetration.

<unk> operating income was up 11, 5%.

Now, let's turn to guidance, we're closely monitoring the evolving COVID-19 impacts around the world.

Guidance discussed today assumes a continued strong U S economy with no new significant government stimulus for the remainder of the year.

All of the guidance discussed excludes the impact of international divestitures.

We now anticipate higher full year sales growth due to the strong first half performance and unexpected good back half of the year with consolidated net sales growth expected to be up 6% to 7% versus prior guidance of a low to mid single digit increase.

Walmart U S comp sales are expected to increase 5% to 6% representing about $20 billion of growth.

We anticipate Sam's club comps to increase seven five to eight 5%, excluding fuel and tobacco and international constant currency sales growth of 7% to 8%.

We're also raising full year guidance for operating income and EPS on.

On a constant currency basis, we expect full year consolidated adjusted operating income to increase 11, 5% to 14%, which is a material step up from our prior guidance of high single digit growth and an even more significant increase from our initial guidance in February.

Walmart U S. Adjusted operating income is expected to increase 11 to 13, 5%.

Full year adjusted EPS is now expected to be in the range of $6.20 to $6.35.

This is an increase from prior guidance of low double digit growth as well as above the initial guidance of flat to up slightly.

The third quarter has started off well as back to school shopping is underway and we expect grocery market share gains to continue.

We now anticipate Q3 adjusted EPS in the range of $1.30 to $1.40.

With Walmart U S comp sales, excluding fuel increasing between six and 7%.

Again, I'm very pleased with our second quarter results and feel good about the underlying momentum of the business.

Thank you for your time and interest this morning, and we'd be happy to take your questions.

Thank you.

At this time, we will now be conducting a question and answer session.

Would you like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Maybe first start to if you would like to remove your question from the queue.

So efficiency speaker equipment may be necessary to pick up your handset before questions Jacky.

One moment, please while we poll for questions.

Thank you and our first question today comes from the line of Bob durable with Guggenheim. Please proceed with your question.

Hey, guys good morning.

I guess the question I have is you guys talked about inflation running through I was just wondering if you could maybe give us some categories that you're seeing the most pressure.

Adjusting with pricing sure what youre seeing competitively with pricing throughout the business that would be helpful. Thank you.

Hey, Bob Good morning, it's Sean.

A couple of things.

First I want to.

Okay. Thanks to my team for the quarter. They just completed and the work they've done to position the business so well for for now and in the future in.

Merchant team, that's as broad as the team at Walmart and Unfortunately, they have to have a lot of levers that they can use it all across the business to make sure our values right for customers, we've seen strength in food and general merchandise and other categories.

And as the environment has changed.

And the team they've just done an amazing job reacting to so many things over the last 18 months and continue to do so and they've been quite deliberate about ensuring that our value remains strong I'm happy to report that our price value is as strong as it has been throughout the pandemic and above what it was before the pandemic began.

And so the team's doing things like driving strong businesses in apparel and home and general merchandise in addition to food.

The mix out inventory management is another key to this we finished the quarter up about 20% and inventory, which I think we're well positioned going into the rest of the year based on where the inventory is and we've had we've had strong sell through as the comp sales always helps.

I know the cost pressures that we do see across the supply chain. I mean, you heard Brad mentioned that we're doing things like chartering vessels and securing supply which should ensure that we are ready for the third and fourth quarter and we've seen some inflation in the low single digits, but the thing I watched it I think is most important is that we see our unit share in categories like food.

Growing faster than our dollar share to ensure that we can position ourselves well in terms of retail value for the customer and.

And play a role in keeping inflation down for the country.

Thank you.

The next question is coming from the line of Simeon Gutman with Morgan Stanley. Please proceed with your questions.

Hey, good morning, everyone I have one for Doug and one for Brent and Doug minded for U two parts.

First question is.

Can you give us a sense of the most important strategic imperative. That's on your plate and I was going to throw out a couple of like supply chain associates and alternative profit pools, and I know it may be hard to pinpoint one, but I'm curious where you where the focus is and then the second part for you Doug is how active of a debate.

Is there about plowing money back into the business because EBIT dollars are growing well above the algo and I'm curious.

Why not put more back into the business when the business is over delivering.

Hey, Simeon good morning.

And as it relates to the most important strategic imperatives. The thing that came to mind first with speed stinky.

<unk> innovation and speed, maybe together, we're trying to change the company and as we've said to everybody for a while now our purpose and our values are constant but everything else is open to change and we're becoming more digital we're learning how to work differently.

The reason that I would have that top of the list just because thats what bears fruit forever.

We've launched new businesses, we've scaled new businesses a year from now we're going to be doing the same thing five years from now we're going to be doing the same thing and so my focus working with this team and with Suresh and everybody else is to try and get into how we're working and increase the speed of innovation and productivity of the company.

As it relates to putting money back in I think we've been on our front foot for a while and we will stay there and we're not going to give you any additional guidance today as it relates to capital needs or things like that but as we shared with you back in February we've got opportunities to play offense, we're confident in what we're doing we like the assets we've got.

I think some people view stores. These days is boring we don't love.

The business that we've got and we love, what we're adding to it and if we see opportunities to be more aggressive either.

On the income statement side or the balance sheet, we'll take them then we'll shared at that time.

Thanks, and I guess the follow up for Brett is that.

About 22, and without giving concrete guidance you initially set up 'twenty. One is this investment year and now youre growth by at least for sorry for 'twenty to your fiscal 'twenty two is coming in faster than you expected. So now that that physical growth is coming in better than expected does it change any algo into next year or are you still confident that the business can keep.

Boeing Algo going forward.

Thanks Simeon.

<unk> talked about in February that.

At the time, we gave guidance for this year, we did it assuming they're worse.

No no government stimulus, we certainly have gotten some of that.

During the year and we've benefited from that we've been we've been straightforward on that front.

So.

As Doug said, we've been a front footed we continue to lean in and we're making investments where we need to make investments. There is nothing that we're pulling back on that we feel is important for the long term.

Value of the company and as you look at the longer term.

Growth that we talked about 4% type growth for <unk>.

For the company longer term I still feel good about that I feel good about our ability to grow profit greater than sales as we talked about in February none of that has changed but we said at the first year to.

Year to year growth depends some of what we say on stimulus this year, which we've gotten quite a bit so.

Year to year Simeon, we'll we'll come on to talk about that but longer term I remain very very optimistic about the company.

Thank you.

Our next question comes from the line of Karen short with Barclays. Please proceed with your question.

Hi, Thanks, very much actually just I guess following up on that.

I think.

The knock that Walmart would get obviously, but.

<unk> been in a perpetual kind of investment cycle and it does seem that that.

And a little bit more of a steady state. So wondering if you could just elaborate a little bit on that with respect to the longer term outlook of where you think youre out on capex and wages beyond fiscal 'twenty two because again I think it does seem that the algorithm seems a little bit more sustainable this with the sales versus the USA sales versus.

U S EBIT relationship.

Yes, Kevin This is Doug I'll go first and then Brent can chime in if he wants to.

Business, it's interesting to think about it in terms of investment cycles in the business is always going to make investments and it's going to grow and it's going to grow earnings and why can't we do those things at the same time why can't we invest capital in automation for example, and increase productivity and have earnings growth to the degree that we should.

We manage the short term and the long term as everybody knows we're a company that's particularly focused on our long term, particularly focused on the top line, we will manage the bottom line.

Kind of.

I would like to push back a little bit on this.

Are you an investment cycle today will you be tomorrow, we will be announcing investments all the time and you guys should expect us to grow and grow the top line and the returns of the company over time as we do that the business is changing shape and I think that's the key we're not just buying and selling merchandise in super centers at this point.

We're changing how the company is comprised if you look at just imagine a bar charter revenue of our charter profitability. The mix is shifting and that unlock as we stick with it creates a different financial equation and what we would have had years ago.

Yes, I was thinking about Karen.

Five years ago, almost six years ago now when we we talked about the we need to take the opportunity to invest in wages in ecommerce and we were a little bit behind where we wanted to be in some areas and now when we invest it feels very offensive feels like we're improving our competitive position is very broad based when you.

Look at the results.

This quarter is an example of Walmart U S and Sam's club and international very broad based.

Our strong performance and.

<unk> point I think we will continue to be able to do both grow top line returns grow bottom line, while we continue to invest in the business I think all of those are a critical piece of what we're doing.

Our next question is from the line of Peter Benedict with Baird. Please proceed with your question.

Hey, guys. Good morning. Thanks.

Thanks for the question just one follow up on one of the previous questions. Just right you mentioned stimulus impact I don't know if you can maybe build on that a little bit more I mean I would.

Just noticed there's been a lot out there, but you're able to frame that at all and then my other question just around supply chain.

Management of inventory levels looking good in stocks better.

How do you feel about kind of as we look forward to the second half holidays. Obviously the comp guide is good but just access to product for whether it be Halloween Christmas that time timing of events Youre planning just how are you thinking about that as we think more towards the fourth quarter.

Okay.

Yes, Peter spread I'll start out I mean, we did.

We gave guidance in February that that didn't include stimulus at the time, we didn't know what's going to happen. So it was an easier way to give guidance we've gotten stimulus.

Yes.

Given what's happened in the last 18 months it gets pretty challenging to try to pick apart what things benefited what part of the business. We know we benefited from from stimulus, but the underlying business is really strong.

John will talk about in a minute, but what you see in our food business, which sometimes gets overlooked despite the size.

And the importance of that to our company back to school is really strong so I feel good about the underlying.

Underlying business that I see regardless of whether there is there are stimulus or not.

Good morning, Peter This is John I'll, just thinking of a great lift off as Brad mentioned in the opening comments the comps improved sequentially each month on month of the quarter and we feel great about the momentum that our team has worked really hard this year to position the business well going into this what seems to be a strong back to school season early we're happy with the results in category.

It's like like apparel, and stationery and others that you would expect in a strong time like this I mean as far as the supply chain on the team and I'm really really proud of the work. The team has done and thankful that we have such an experienced team who can manage this.

These types of disruptions that we've seen around the global supply chain. So we have chartered vessels as Brett said, we have secured capacity for the third and fourth quarter and feel good about the inventory positioning, particularly compared to last year with inventory up 20% across the segment. So I think we're in good shape going into the fourth quarter third and fourth quarter of course, we'll manage this the entire time.

And look for strong results as we get into the third quarter and good to hear from Katherine maybe Judy if you want to on supply chain challenges around the world.

<unk> faces the same set of issues, whether it's the tailwind from stimulus show, what's happening with supply chain and you've got some seasonal categories, where you can reach sales earlier than we would in Walmart U S.

We saw strong seasonal sales trends Q1, particularly in a jam areas.

And that was certainly assisted by stimulus, but what we're seeing in Q2 is that same strength continuing so whether we are sitting in back to school and Halloween as a whole was saying amendment highly participating in those categories and we thought we bought aggressively we wish we bought even more aggressively I think theres a lot of upside in that space.

And international it's very similar trends with our market.

John outlined one of the unique capabilities that will not have.

Is it scale.

He collaborates across the Sky also.

We have.

With the U S businesses, so the Canada business and particularly on for our Mexico business to try to make sure that we keep in stock for the customer front of mind, we continuing to see strength in order to catch some grades that we've got but we're prioritizing the holiday season coming up Canadian India prioritize.

<unk> billion, which is bad Diwali Festival, which is coming up in early November.

Okay.

Okay.

Thank you. The next question comes from the line of Steph Wissink with Jefferies. Please proceed with your questions.

Good morning, everyone. Thanks for taking our question wed like to focus on omni and economics, we could I think you mentioned in your prepared remarks that the business is becoming more global and orientation versus regional and I think you also said our stated some really strong penetration levels for E com and some of your international markets.

Places like China on fixed <unk> and other event I'm. Just wondering if you can talk about your $100 billion E Comm channel golf through that lens of international how do you think about the international markets influencing and maybe the domestic market or vice versa in terms of your investment strategy.

You.

Yes. Thanks for the question I'll I'll get Judah to chime in here too and it's exciting to see what's happened in and it hasnt been.

Forced by us, but the world changed as it became more digital and the business models and the products we need to build the work we need to do ends up being even more common than it was before it feels like and so with the shift in the international portfolio that Judy just led we found ourselves positioned with the flip cart investment in.

<unk> towards more of a digital business and more than the E comm business.

I started learning about E comm for food from the UK. Many years ago. Then we all saw China explode now we're living in a very different environment in India versus what we see in the U S.

Walnut Street, it has become more of a digital company and it looks more like the U S. In some ways and so it's exciting to see a pure ecommerce percentage for international and for the total company grow I think the story that gets buried there is that the business overall is becoming more digital and its mindset, yeah, we've definitely seen.

A transformation in the way and the businesses are thinking India are different because sitkoff costs at southern power payment fitness that have always being digital effect and we've learned an awful lot from them and on southern courage by what I'm seeing out and yet you've got to remember this is a market wide digital penetration.

So it's really quite low when we made our original investment.

It is just continue to increase.

<unk> status as a patent on that could help to reinforce that.

All in we were really pleased to say that such a billion fundraise full engine that we did recently in the quality of the investors that we got that I think is testament to the way that that business has a few.

It should grow to traject tray as well, but all around the world, where we're seeing the rail stuff hooked in omnichannel.

Similar again.

U S trends and you saw that we were approached to 41% growth for the court said that business continues to build.

Mexico will Max at the woman that building out an ecosystem.

Intuit digital transformation for the entire business to work in a much more agile way and looking at the way that connecting the customer with a digital offering so whilst you have got.

<unk> online business, which is marketplace.

E channel business that are also expanding into areas such as telephone and internet provision of services to customers, which is absolutely critical because so many people in Mexico.

Zach to Internet services. So this is a way of bringing people in to the top of the funnel. So yes, we're really pleased to see the level of online penetration and the scale of the business that we're building in international the only other thing that came to mind was the difference between input metrics and output metrics the $75 billion number on its way to 100 is an output.

Eric.

We're focused on how do you do a better job with all of the inputs related to omni and Thats hard work in building digital products that Mary E. Commerce with stores takes more work than just building an E. Commerce solution takes more time takes more complexity, but that's where the secret sauces and if we can continue to blur the lines so that customers in <unk>.

Members can shop, however, they want to shop whenever they want to shop, the output metrics that we sometimes measure of E com versus store growth for example, there'll be what they are but this quarter is kind of a good example of the fact that we can be somewhat indifferent. We're trying to build a model, where we are completely indifferent top and bottom line.

As it relates to how people shop and <unk>.

And so I think we've started that and still have a lot to do to deliver on that goal.

The next question.

Line of Edward Kelly with Wells Fargo. Please proceed with your questions.

Yeah, Hi, guys good morning.

Two part question.

Gross margin in the U S could you just talk about your expectation.

As we think about the back half of the year you were up on a two year stack basis about 30 basis points in Q1 that accelerated in Q.

Two is that difference really that keen and then over the next couple of quarters. How are you thinking about that dynamic given that it does seem like some of the inflationary pressures some product cost probably accelerate.

And then the second thing I just wanted to ask about is Sam's club.

Grocery really seemed to accelerate sequentially unless I did the numbers wrong here.

Can you just provide us a bit a bit more color in terms of what you saw there. Thank you.

Hey, Brian It's John Let me, let me take the first question and then hand, it over to Kathy to talk about the momentum at Sam's.

As far as the margin rates that we reported in previous quarters. The way. We're thinking about this is it's all about positioning value with our customers and then the mix of what we're selling and let me talk about value for a second first.

We're really proud of the price gaps that we're seeing at this time, which are at pre pandemic levels and beyond.

As I said earlier, it's really positive to see that the unit growth in big categories like our food department are higher than the share gains that we see in dollars. So relative value is something we think about a lot as far as then the results that you've seen it's a function of mix and then a strong performance by our U S supply chain the team.

Just a number of things to ensure that flow is strong and that would include everything from offshore to onshore properties like our distribution network and in particular, our food distribution team has done an amazing job keeping products moving and then ending the quarter I feel really good about our inventory position star.

Starting with this very strong back to school season that we're seeing which would include our apparel business, our stationary business and other businesses like lunch boxes, and backpacks and all the things that you would expect for kids to return to school has been off to a good start and then the mix of inventory going into the quarter, we're up about 20% from where we were a year ago.

And I think that as a result, the result of that has been the stronger comps that were seeing each month of the quarter as the quarter progressed, but I'll turn it over to Kathy to talk about the.

It really strong momentum at Sam's yeah. Thanks for the question.

I think we are proud of that comp of 10 six this quarter nice proud also of it the T stack of 27, eight and strength is coming through grocery you're right. We're seeing that grow and that may change, but I'd also call your attention to the GM side of it as well too because we are really proud to say that home and apparel business.

It's growing at the rate that's grown over the last few quarters as well so it isn't real strength coming through across the box.

Thank you. Our next question comes from the line of Ravi homes with Banc of America Securities. Please proceed with your questions.

Hi, good morning.

Just a follow up actually on the U S E Commerce business decelerated too.

Yes, 6% against really tough comparisons, but maybe could we get some more color on sort of the.

How pickup versus delivery and spark and maybe versus ship to home.

Played out and what.

The expectations might be for built in for e-commerce for the back half and how we should think about it and then maybe.

Also to that is if there is this.

Shift moving back to in store can you remind us if that's supporting or will be supporting gross margins for the U S business in the back half as well.

Yes, looking at the at the business first thing that I would.

Just to remind everyone that we've been talking about for a while that we're positioned this business to serve the customer. However, the customer wishes to be served and that would include pick up delivery to home and shopping in store and so late late in the first quarter, we definitely saw a traffic shift back into store from from ecommerce and pick up in that.

Continued early in the quarter and just as a reminder, as you said we were up against strong comparisons, particularly early in the quarter and so that resulted in the total business running about 103% for the two year stack. So we doubled the business over the last few years and we feel great about that.

We also feel great about the capacity that we've put down last year, our pickup business was quite strained early in the pandemic as well as inventory availability and over the last 18 months. The team have done a great job building more capacity and to pick up and also finding new ways that they can ship customers. So when a customer orders from Walmart Dot com at times, we built.

From fulfillment centers other times, it's from stores and sometimes it's a combination of the two wherever the inventory is when we try to keep the customer promise in mind ensure that we're fulfilling and the best way possible and so the mix of the business.

<unk> shifted in the quarter I think what.

What we're seeing early in the third quarter as I said again, a strong back to school season, which would include apparel and brands that we've launched online we've launched about 1000 brands in the last year.

On the online and feel very great about the potential of those have so we'll be positioned and ready depending on where the customer shifts certainly we are monitoring changes geographically around the country as it relates to the pandemic and the Delta variant, which are some of the things that caused the changes that happened last year in the first and second quarter.

Our next question comes from the line of Kate Mcshane with Goldman Sachs. Please proceed with your question.

Hi, Thanks, Good morning, Thanks for taking my question.

I was curious with regards to Walmart connect just with regards to the advertisers you are signing up is it is it really across the board in terms of your vendor base or is it mostly in grocery and is there a way to quantify how much this contributed to the margin.

Well, let me talk about just general mix some business, Doug mentioned earlier that we're focused on changing the way of working all across the business.

Really proud of the work that our product team and our tech teams have done in the last few quarters to ensure that we are ready for the customer. However, they wish to be serve in and over time, what we've seen and what we will continue to see as a really positive change in mix to the overall structure of the way, we think about the business our input metrics are out pitching metrics.

P&L and and those mix improvements are coming from things like advertising or marketplace affiliate services rental incomes are stronger and the physical environment our membership income.

And then as we said earlier.

Things like having software licenses and using software as a service to others. So all of those are strong and we did say that.

Advertising just about doubled for the quarter were up 90%, 95% and that our active advertisers was up even more than that so there is strength amongst the advertisers across the board and an expansion of our marketplace and fulfillment services will enable future growth of the advertising business.

Thank you. Our next question is from the line of.

<unk> with Oppenheimer.

Good morning, Thanks for taking my question I wanted to dig deeper into the drivers of the grocery acceleration you saw during the quarter.

Curious if you can comment more on some of the internal factors supporting the acceleration and then also some of the external factors, whether child tax credit or Covid cases, making thank you.

Yes grocery was strong throughout the quarter and as Brad mentioned earlier, certainly there have been some benefits of stimulus and other programs that would have helped.

What I think is most encouraging that I'm seeing inside the business has the capacity and abilities that had been built in the quarter by the supply chain network here at Walmart, along with our supply base and our suppliers I'd like to say, thank you to them as well because without them, we wouldn't be able to do the things that we're doing in food right now but.

The business, they're running record volumes through our supply chain network, each and every week, we've seen extremely high volumes in stores, we've seen growth.

With our pickup business and with our E com business in food so all across the board.

We're just excited about some of the progress of some of the product improvements that we've seen in categories like produce and meat and the momentum is very helpful. So the shared numbers.

Were also positive and I've said this probably three times, but it's an important and I'll just say it again, we are very encouraged that units are growing faster than dollar share in grocery there is a lot of tonnage going through and just underlying fresh John mentioned produce and meet the team back before the pandemic started had a rollout of something we call produce too.

<unk>, which improved the presentation of fresh produce but also capacity. So it was really well timed given what happened during the pandemic and as that go into stores produce are standing tall and has throughout from an in stock point of view, it's been one of the bright spots in terms of us being able to get product and display it well and then Sam's fresh performance.

It's been really strong too. It's it's one thing to stay in stock on corn flakes, it's another to merchandise fresh and the teams have done a nice job. During this period and I think we've started re modeling off of that flake and in what we call bolt on blue and it really makes some merchandise.

Stand tall, and so I think taking away some of the clutter in the clubs and making the merchandise to the heat rate as an enabler for SaaS to kind of continue to grow as well.

Okay.

Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Good morning, Thanks, a lot for taking my question on this subject.

<unk> market share it has done a sharp reversal from the last year, how much would you attribute to your initiatives, whether its French presentation pricing greenstock.

Versus just the macro where the consumer might have got extra money from the child tax credit or the stimulus checks went to the store to buy merchandise and wall here. She was there stocked up on groceries. My follow up is on on Walmart connect really good advertising businesses.

E Commerce space represents 5% to 10% of GMB is it fair to think that you're still in the nascent stages, maybe 1% to 2% and where can your penetration go and are you seeing that as incremental to your relationship with your vendors or is it coming at the expense of the other forms of payment.

Might be making to you. Thank you.

Hey, good morning, Michael Thanks for the question, let me talk about food.

I think everything you said would be on the list of things that are helping in that would be better pricing better availability in stores quality of product.

It is the supply chain again.

My hats off to them for all the work that they've done in the last 18 months.

In particular, the last quarter. They have performed very well also just a reminder, that last year, we had shorter operating hours in stores across the country. In many cases some of our entrances and exits had been closed some of our peripheral services like optical in the auto care centers were closed.

To free up staffing to run the core pieces of the business. So I think in general the entire business is positioned better than it was a year ago now certainly will react geographically and assure that associate safety and customer safety are prioritized throughout this wave of the pandemic, but our team is well equipped to make the best decisions to be able to do that.

As far as the connect business.

It's growing.

Certainly wouldn't say that we're in.

In a good position for growth now, but continued growth in the future and been able to double in the most recent quarter is exciting and then the strength of the e-commerce business, including the marketplace is what enables that growth over the long term, we rebranded the business from Walmart Media group to Walmart connect last year and that was just to make sure that it was very clear.

That this opportunity is going to help us connect buyer seller suppliers and customers all together in a way that's accretive to the customer experience and as long as we do that I will remain very very bullish on the growth potential of this business.

Thank you. The next question is coming from the line of Oliver Chen with Cowen. Please proceed with your question.

Alright. Thank you very much Doug as you think about Walmart as an ecosystem. What's ahead for healthcare you've had a lot of innovation that rely on products as well as urgent care centers would love your thoughts on <unk>.

Our relevance to the customer in the context of that in the pharmacy as well as Walmart plus and what stage you are in there as you test read and react and refine that membership program.

Would also love your view John on micro fulfillment centers.

And what's ahead for the degree of automation.

You'll see in the future and the capabilities that you want to build as you continue to innovate and curbside and delivery. Thank you.

Oliver the way that things get stitched together is important and being a large silver food.

Paul as it relates to the role that that data and the relationship we could ultimately build with the customer.

Relate to health care and so it's exciting in the U S and I hope ultimately around the world to play a role in health care that helps people get high quality care at a really good value and accessible way, enabling them to take more control over their own health and their situation.

John will comment more on this in just a second but the work we did to build some clinics has been helpful and I think we'll have more clinics in the future, but the clinics aren't aren't.

The thing and it's and it's on its own it's how we stick to this whole thing together from telehealth and the role that health care plays in the home on mobile devices, how you triage a customer when they start to interact with you to direct them to the place to get the right care at the right time and sometimes that will include.

A trip to the store in the clinic, sometimes it'll be a tele health experience that they have.

Have in their home or somewhere else and so we're putting building blocks in place that feels John like we've got a lot of ingredients on the table, including the addition of Dr. Sheryl <unk>, who is now leading that business.

This strategy is increasingly clear to us the pieces are on the table, we're going to need some time to execute it because healthcare so local and.

We've learned a lot about that in the last couple of years with these clinics and so I continue to be really excited about the role we can play and I am pleased with the steps. We're taking forward I feel exactly the same way I think the combination of a digital relationship in addition to being local between Walmart and Sam's and our pharmacy network.

Over 5000 communities is a big piece of the answer and that could include <unk>.

Your entire session online. It could include what you buy in terms of your food and how you can assume it could include go into clinic. It also includes the pharmacists that we have across the network, who have just done such an amazing job. This year, helping the country with vaccinations and it's great to see them practicing at the top end of their license and they've made.

Such a different so I'm really excited about what's coming in health care I think we can make a big difference for our customers from Walmart plus can play a role in how food and health care come together, there's just so much opportunity and you can imagine what happens with data there with all the appropriate privacy protections in place.

I think the future of Walmart plus just kind of like this continuous burn for us where we add things to it it becomes even more unique to Walmart of course delivery is a big part of it but there'll be other components too that's right. That's right and so much of health is really determined by social determinants of health, which a large part of that is what you consume.

Able to have access at your home your fresh foods as part of the program is really important.

Oliver to your second question on markets with all the centers.

Another area that I'm really excited about.

The big headline I think is important is that we are learning very quickly how to use our supply chain assets, including local assets upstream assets distributions assets very dynamically to be able to move product and assemble orders in a way that is most efficient to meet the customer promise and so these.

Market fulfillment centers will help us not only with local capacity, but they'll help us keep orders consolidated all the way to the point that they move into our last mile network, which is the spark network that we mentioned earlier and the team led by Tom Ward or just doing a fantastic job building capacity capability.

Just the other day I ordered something on Walmart Dot Com at 10 in the morning at 10 or 11.45. It was it was sitting on the front porch and had been delivered so the stories in the ways that they are learning to delight customers ahead of expectations is really unique and it is an advantage of having so many locations locally around the country.

And the ability to scale. This I'm excited about the automation is going to help and next time that we're able to host you here, we should be able to show you a facility here locally that will be quite interesting.

Thank you.

We've reached in the question and answer session I'll turn the call over to Doug Mcmillon for closing remarks.

I want to thank you again for your interest in the company and I want to thank this leadership team and of course, our associates. This team is building for the mid to long term and they're doing a great job of managing and performing in the short term navigating a pandemic keeping the stores in stock serving customers and members.

While we change the business to be more digital as I mentioned earlier to get faster more innovative more productive as we build it and it's actually a lot of fun. It's challenging. This is continues to be a challenging year.

Our focus on the frontline are doing a great job, but just want to express my gratitude. Thank you all.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and we thank you for your participation.

[noise].

At Walmart.

Everything we do is for people.

We're using our strengths to help people live better and preserve the planet.

We believe all people should have access to sustainable products they can afford.

That's why we're committed to improving the sustainability of key commodities by 2025.

We believe businesses should respect human rights and people should have the opportunity to fulfill their potential.

That's why we're committed to sourcing responsibly.

Helping prevent forced labor promoting the dignity of women and creating inclusive economic opportunities.

We believe climate change is one of the greatest challenges of our time, that's why we're targeting zero emissions at our own operations by 2040, and engaging our suppliers to avoid a ton of emissions from our supply chain by 2030.

We believe all people should live in a cleaner world. That's why we're committed to eliminating waste in our own operations and working with our suppliers to recycle more and use less plastic.

Plastic.

We believe healthy natural resources support healthy communities.

That's why we along with the Walmart Foundation are committed to helping protect manage or restore at least 50 million acres of land.

And 1 million square miles of Ocean by 2030.

By doing all of that.

People for our community and for future generations, we're committed to becoming a regenerative company dedicated to placing nature and humanity at the core of our business.

[music] Sam.

Sam Walton started Walmart on July 2nd of $19.62, So we're 58 years old now.

We've learned that as companies grow and mature just like most human beings are mindset in perspective changes one.

One window of time, when the company's mindset broadened was about 15 years ago, when we made a significant commitment to sustainability.

It came at an inflection point in our company's history.

We were a large company, but had not fully understood what that meant or what was required of us socially and environmentally.

We were very focused as younger companies are on customers and associates, we were doing some charitable giving and generally felt like we were doing good best serving others, we were succeeding financially but since the disconnect with how we saw ourselves in house some others viewed us.

At first we thought it was a communication problem.

What we came to understand was it was that.

We needed to change.

It wasn't as much about what we were doing as it was about what we weren't doing.

The world had been expecting us to serve people all people more broadly.

Because we hadn't been society was pushing back on the idea of our continued growth.

After going through a period of listening to critics learning from thought leaders and experiencing the emotional and inspirational impact of our actions to serve other right. After Hurricane Katrina hit New Orleans.

We decided to step up.

We committed our company to achieving 100% renewable energy and zero waste strategy, a more sustainable supply chain and an increase in the minimum wage.

Many people inside and outside the company thought those goals were unrealistic financially questionable and not operationally possible the skeptics out a point.

At that time, no large corporation had made a pledge quite like this one.

They were ambitious objectives, and we did not know exactly how to achieve them and said, though.

All we knew for sure is that they were the right things to do if Walmart was going to be the company, we aspire to be.

As these commitments were absorbed by different facets of the company. They generated inquiry inquire regenerated innovation innovation generated implementation and the implementation generated knowledge savings and profitability.

As a few leaders in the company leaned in and showed that we could become more sustainable and deliver our other objectives, including our financial performance a broad based momentum kicked in inside and outside the company.

Walmart began to generate a wide wake of good work like a ship cutting through the ocean.

To date, we're powering our global operations with about 29% renewable energy diverting 80% of our waste from landfill and incineration globally and over the past five years alone we raised our own minimum wage by over 50%.

We've achieved a large number of successes toward our goal of selling more sustainable items and more sustainable packaging.

Our suppliers deserve a lot of credit for what has been done so far and for what we're going to do together next.

We're experiencing firsthand the strength of shared value or a multi stakeholder approach to business.

We become convinced that if a company takes the long term view addressing needs of customers associates suppliers communities and the planet the more value is created for everyone including shareholders.

And approach.

Yes, we've experienced short term trade offs when taking this approach like a few years ago when our wage increases resulted in a considerable one day drop in market cap, but we earned that back and bounded those short term trade offs fade away over the longer term when our decision to build a stronger business for all our stakeholders.

Since 2005, we've made progress on sustainability and so have many other companies, but collectively it hasn't been enough.

More must be done urgently lots of warning signs exist in many have intensified.

We're now facing a global pandemic the additional economic challenges that go with it and especially in the U S, but not limited to the U S. The clear lack of racial equity that is a necessary ingredient for the peace and prosperity of everyone.

The events before and after the murder of George Boyd have renewed and deepened our resolve to use our business capabilities to address systemic drivers of racism and be part of collective action to advance equity in this country and beyond.

We're determined to make progress on this and our ongoing efforts to make Walmart a place of inclusive economic opportunity and advancement for all associates.

Through our job and career paths, our culture, our compensation and benefits and our training and education like Walmart Academy and live better you.

But today I want to focus on our response to another crisis.

One that's been building in the background.

A crisis that may be less obvious to us day to day.

But which if left unaddressed will have disastrous consequences for all of US. The crisis is this we've exceeded the planetary boundaries that sustain our natural environment.

Worldwide environmental losses are cascading what was once called climate change is now a climate crisis I seats are collapsing extreme weather events are increasing catastrophic fires are occurring oceans are acidifying and biodiversity is decreasing.

Our natural systems are changing and what they're telling US is we're not doing enough, we're actually doing irreversible damage to our planet.

Nature sustained life, let alone the products our customers rely on we must reverse nature loss before we reach a tipping point from which ecosystems will not recover.

So what do we need to do.

Science is clearly pointing to fossil fuel combustion is the primary cause of warming and that we need to be even more aggressive in moving toward renewable forms of energy.

Many will say that it's not currently possible to discontinue our use of fossil fuels and sustained economic growth, but experience suggests we can grow renewable energy create jobs and expand economic opportunity.

Facing a reality that says we need everyone, including those who passionately defend fossil fuels to have at least as much passion to aggressively fund and support sustainable alternatives with urgency.

Let's stop debating the ore and get on with an urgent and strategy until we've innovated our way out of fossil fuels.

And in order to truly stabilize the climate, we need to do more than just reduce emissions, we actually need to draw carbon dioxide out of the atmosphere and bring it back home.

For the past 40 years, one of the most powerful ways to reverse global warming has been largely overlooked.

Scientists tell us that protecting restoring and better managing the forests oceans and grasslands could provide a third of the solution to climate change too.

Too often people see the need the people and living systems as conflicting priorities climate action versus economic growth or forest versus hunger when in fact, the future of communities and the natural world are intertwined.

Social equity and economic prosperity depend on the planet's natural systems.

Our goal must be to restore the complex network of relationships between nature and humanity that are central for people to thrive and achieve equity and prosperity.

We must go beyond sustainability as it is understood and practiced today.

Walmart is a company that cares deeply about our purpose service and legacy <unk>.

Every day and at all levels of the company, we ask ourselves how can we use our influence to make this a better world.

Today, I am committing Walmart to become a regenerative company, one dedicated to placing nature and humanity at the center of our business practices Regeneron.

Regenerating means restoring renewing and replenishing in addition to conserving.

It means decarbonising operations, and eliminating waste along the product chain. It means adopting regenerative practices in agriculture Forest management and fisheries, while advancing prosperity in equity for customers associates and people who participate in our product supply chain.

And working with our suppliers customers N G OS and others, we hope to play a part in transforming the world supply chains to be regenerative. Let me explain what this means for four critical areas climate nature waste and people and product supply chain first climate.

For the past 15 years, we've been working to reduce and sequester greenhouse gas emissions that are responsible for the worst damage to the climate.

As part of our new commitments were raising our ambition to achieve zero emissions in our global operations by 2040.

We're going to pull a number of levers to do this including harvesting in the wind solar and other renewable energy sources to power our global operations by 2035.

We also think we can get to zero emissions from our vehicles, including our long haul fleet by 2040, and we can switch over to low impact refrigerants for keeping products cool in our stores and move to electrified equipment like water heating in our facilities.

We're shooting to have these in place by 2040 and plan to get there without relying on carbon offsets second nature.

When we talk about nature, we mean, the places where our food comes from and the services. Our planet provides like a stable climate clean water and air biodiversity and fertile soil.

We plan to help transition consumer product sourcing to our regenerative approach to help reverse nature laws and reverse global warming. That's why we along with the Walmart Foundation are committing to help protect manage and or restore at least 50 million acres of land and 1 million square miles of ocean by 2030 related to equal.

Systems that produce food and other consumer products.

Throughout product supply chain will encourage adoption of regenerative practices in agriculture Fisheries and Forest management will also invest and work with our suppliers to source from place based efforts that involve companies collaborating with local governments Ngos and communities to help preserve natural ecosystems and improve the lives of those.

Who depend on them.

As we do these things will continue to support efforts to preserve at least one acre of natural habitat for every acre developed by the company in the U S third waste.

We aim to break the link between consumption and waste moving toward a circular economy, where materials stay in use instead of being thrown out at the end of their purpose.

Our commitments include achieving zero waste in our own operations in the U S U K, Japan, and Canada by 2025.

Last year, we diverted more than 80% of our waste from landfills and incineration globally, including 585 million pounds of food for charitable meals and the conversion of inedible food and animal feed compost or energy.

We've joined the 10 by 20 by 30 initiative, where 10 of the largest food retailers are working with 20 priority suppliers to have food loss and waste by 2030.

When it comes to packaging Walmart works with suppliers to reduce packaging and make it recyclable reusable or industrially composed tubal, including committing to achieve 100% recyclable reusable or industrial composed of all private brand packaging by 2025 in the U S and other markets finally people and supply chain.

Yeah.

Respect for human rights is embedded in Walmart's core values.

Given walmart's international footprint and relationships with suppliers and Ngos, we have an opportunity to improve conditions for workers in product supply chain and bring about positive change our sustainability efforts focus on sourcing responsibly, helping prevent forced labor promoting the dignity of women and creating inclusive economic opportunities through <unk>.

<unk> and philanthropy.

For example, in Mexico, and India, we source from small holder farmers connect into markets and help make their farms more resilient.

And southeast Asia, we've worked with others to combat horse labor, including supporting Ngos to make responsible recruitment that norm and bring traffickers to justice the.

The challenges we face as a society are significant.

The world will not return to normal.

But disruption gives us an opening an opportunity to analyze review and to reset everything we do.

The pandemic has taught us an important lesson.

When each of US takes action together, we can bend the curve.

But it takes each of US no matter, who you are the role you play matters what will you do this.

This is a watershed moment in history, where all of humanity is coming together, whether we realize it or not.

The work ahead requires learning and commitment from each of us.

It doesn't mean being right in a way that makes others wrong. It means listening intently and respectfully.

Team together differences that separate us from each other.

It doesn't mean either whole bird is bear its action that is courageous and fearless.

We've created an astonishing moment of truth.

Crises, we face are not a science problem there are human problem.

Technologies are important but the ultimate power to change the world does not reside in them alone.

<unk> first and foremost on reverence respect and compassion for ourselves all people in the natural environment that sustains us all.

This is regeneration.

And this is what I commit Walmart to do.

Thank you Doug for that compelling call to action and the powerful reminder, that each of us through our personal choices.

And professional decisions can make a difference together.

Why I am so proud to work for a company that is doing good and enabling others to do good too and.

And I'm excited to welcome everyone to Walmart's 2020 sustainability milestone stomach aldi.

No the way that we're together today, it's changed the purpose of this event remains the same advancing sustainability to help people live better and preserve the planet.

Today, we'll address urgent issues related to climate nature way and people and hear more about commitments and progress in these areas.

If you're here with us I hope it means that you have an interest in raising your sustainability ambition and realized you to have an important role to play in making the world better.

We will spend this hour together reminding ourselves that our actions matter and there is no time to delay.

Through a series of inspiring videos and discussion among global leaders.

We hope you'll leave with a renewed sense of purpose and excitement for the task ahead.

What is the task.

For Walmart as you heard from Doug It means raising our ambition on sustainability across the board.

Let's take a look at how we aim to do just that and our efforts to address climate change.

As part of our commitment to addressing climate change, we've been working hard to reduce emissions from our operations for over a decade, while we've made strong progress the urgency around climate change has prompted us to set an even more ambitious path. That's why Walmart is targeting zero emissions across our global operations by 2040.

This is how we plan to get there Morris <unk>.

<unk> efficiency, we've already transitioned nearly all of our international stores clubs, Dcs and parking lots to LCD technology.

And we will continue to find new ways to use less energy.

Second renewable energy.

We aim to harvest enough wind solar and other energy sources to power our facilities with 100% renewable energy by 2035.

Third equipment will transition to cooling equipment that uses low impact refrigerants and convert our heating system electric allowing them to run on renewable sources.

Finally, the transportation, we plan to zero emissions of all of our vehicles, including long haul travel will do this by transitioning to electric and hydrogen fuel vehicles scaling.

Scaling charging stations at all of activities and more.

Zero emission by 2020 every day count. This is our path forward guided by what is good for our business our people and our planet.

Climate change is one of the greatest challenges of our time to avoid the worst effects. We all need to act now to sharply reduce greenhouse gas emissions.

When each of US Act together, we can bend the curve.

And to bend the curve on climate change as Doug mentioned, we're committing at Walmart to achieve zero emissions across our company by 2040.

We've also upgraded our science based target to align with the one five degree trajectory and the highest level of ambition in that program.

Launched a new Gigaton PPA.

Program of Schneider electric to help accelerate adoption of renewable energy across our Walmart supplier base, you combined power purchase agreements.

I'm excited to be joined here today by two people, who have demonstrated tremendous leadership as individuals and through their organizations in the climate.

Brad crop President of Environmental Defense Fund and Alan Jones CEO of Unilever.

Let's start with a question for Fred Fred why is this such an important decade for climate action.

Thanks, Kathleen well you know with every passing year, we lose options. This science demands action now.

As leaders should lead for really two reasons, one climate change is posing immense immediate risks to businesses and financial markets as a federal report this month made clear.

This is melting everywhere in the U S wildfires are raging.

Hurricanes or destroying homes <unk>.

<unk> among communities of color and low income in low lying areas.

Second reason is that stakeholders are demanding action there.

They are more engaged than ever the pandemic caused through ratio of justice.

Have changed the sentiment around businesses role in society investors.

Investors employees customers are holding brands accountable for climate action and for rebuilding a more inclusive sustainable and resilient future for all of society.

With political inaction in key countries, such as the U S and Brazil, it's critical that businesses, including all of you.

Help fill the leadership void and cut climate pollution substantially this decade.

Putting us on schedule to achieve net zero climate pollution before mid century.

Thank you Fred.

No question.

Need is urgent.

And we need action from all of Us Alan.

Alan as a leader in sustainability can you tell us more about unilever's climate commitments.

Thanks, Kathleen I think fragrance made the case for change is very obvious that no business can be sustainable on an unsustainable planet.

Whoever wants to play our part so earlier this year, we did make a bunch of new climate and nature commitments.

We said, we would be net zero for all of our products by 2039.

Our new quite innovative regenerative agriculture code.

We said, we would have a deforestation free supply chain by 2020. This regenerative agriculture code takes and expect where initially encouraging our suppliers, but truthfully, who will require them to protect and regenerate the national environment, where we passed the point of.

Stopping further deforestation being enough for the world. We've also undertaken a.

100 water stewardship programs in various water stressed areas by.

By 2030, and we've committed a 1 billion euro.

Fund.

And climate and nature science running up we need strong leadership by more unfortunately, we need bold action across sectors and across geographies.

Thank you Alan that climate needs your connection exited part of today and also that need for cross sector collaboration Fred can you talk a bit about from your view what needs to happen to bend the curve on climate change one of the things we need is more companies to follow in the footsteps of of companies like <unk>.

Walmart and Unilever, taking aggressive action to reduce climate pollution.

We also need teamwork across industry sectors that supply chains to accelerate the pace of change we need to scale, the best practices and fast.

Further business leaders need to invest in technologies that will move the needle on climate change, while providing inclusive fair job opportunities and finally, Kathleen the most important to the most powerful tool companies have to fight climate change is.

Is there political influence Corp.

Corporate America has immense power to advance climate policies that are effective.

<unk> and equitable.

Thanks, Brad.

Policy reflects that relate to the people so let's talk about the customer Alan how did customers fit in and how can we engage them more in this journey.

It is happening everywhere we.

Look consumers are demanding change the majority of people nice JV would change their consumption habits to reduce their environmental impact through the Brian choices.

81% of all the people we speak to feel strongly that companies have a role to play in improving the environment and we see that as a big responsible growth opportunity.

But the biggest impact that we can make is to help shoppers to make informed choices as it support environmental progress frankly, we would ask you to disproportionately support brands the promote sustainable lifestyles, where the packaging is a 100% recycled in a 100% recyclable ware.

<unk> are sustainable design with Lou impact sourcing and low impact use instructions, where the brands are promoting responsible consumption through their purpose and their partnerships. One of the next steps on our journey on Decarbonizing, our value chain will be to communicate our brand carbon footprint on pack, we will label with carbon.

Cooper in the same way that they really want nutritional and calories information.

Alan that is so powerful can you make it easier for consumers can make choices that our climate smart and product design and packaging are two of the arenas for action in our program project Gigaton everybody. Thank you guys. Your leadership in that that's our program to engage suppliers.

Jean Jacques the way that projects get produced.

And packaged and sold for customers to lower emissions all along the value chain. So we've got now 2300 suppliers engaged in project Gigaton, we need more suppliers to engage in this program.

Hey, if you are listening right now and you're a supplier. Please engage if you haven't joined the 'twenty 300 suppliers that have and if you are engaged continue to deepen and expand the actions that you're taking.

2020, really does mark the beginning of the decade that matters, we need to start now.

So please join us in the fight for our climate. This is our moment. This is the moment that each of you tuning in and act together to make a difference and when we work together, we can bend the curve.

I would be a trade off with system would not survive common sense.

Instead of fighting against nature, we need to align with nature. This is why we have created one thing that business for biodiversity, a global coalition of companies, including Walmart that have pledged support regenerative agriculture soil health.

The diversification of ingredients of animal species that we're growing.

Going against deforestation.

For your leadership because of the time is now.

This is a moment for the world.

How we emerge from this crisis.

Only be a defining its defining choices.

Our customers want to feel good about shopping at Walmart and they expect us to deliver access to products that are good for them their children and also of the planet.

Landing on our existing Golar source key commodities like cotton and beef more sustainably by 2025, our new nature commitments and we've evolved from a mindset or do less harm to want to do more good not only is this the right thing to do it's also good for business from reducing true cost along the value chain and increasing supply chain resilience to building transparency and trust.

Don't Act now our supply chains could be impacted I mean and over the long term groceries clothing personal care products and others would become more expensive.

We're committed to empowering our suppliers on this journey of rewiring, the supply chain sourcing could be a forsberg regenerating force oceans and land and our teams are more focused than ever on critical sourcing locations like the western and central Pacific and so Bob Malaysia, where suppliers work with local governments Ngos and communities to help preserve natural ecosystems.

Prove people's livelihoods as we continue to rewire big things were happening great value canned tuna source for Walmart U S stores is now certified sustainable or from a fishery improvement project, just like our fresh and frozen seafood.

We're collaborating with our Walmart and Sam's club USB supplier to improve green sourcing engraving management practices across a total of 12 million acres.

And later this fall we plan to release a position on Pollinator health aimed at working with our suppliers to road industry best practices and to help protect critical pollinator habitats.

Today I had the pleasure of introducing the leaders of two organizations. We've learned a lot from and we're very grateful to be on this journey with Dr. Amazon Jain CEO of Conservation International and David Taylor CEO of Procter <unk> Gamble.

Let's start with you why is this such an important decade for nature.

John Thanks for having me here.

Look we're basically out of time.

Not just important decade nature reporting year.

Hey for nature, we are out of time, we got to act now everything that we rely on food or water productivity soil within the climate change.

Pollinators all of that comes ultimately from nature, if you ever needed. A reminder of the importance of nature of 2020. Unfortunately, you've provided it with examples catastrophic examples by the by the Spade ball from the fires in the West coast to the Amazon to global pandemic, which like all pandemic ultimately came from the.

Destruction of nature, our scientists palace need to protect about 30% of the plant we're nowhere near that so we need to redouble our efforts to get.

The good news the good news is that it's really cost effective as a great new study of Walgreens. The key author on it hundreds of scientists and economists participated in the study. It showed that for every dollar you spend with protecting nature, you get $5 benefit back so.

So it's great return on investment.

That's why Walmart and P&G and others are partnering with conservation International another great conservation groups to jointly protect nature ultimately creates jobs it protects our supply chain and it honestly it keeps us all safe fantastic now David as a leader in this space can you tell us a little bit more about P&G is new.

Nature commitments.

Our new nature commitments are a key part of our broader efforts on climate. When it comes to climate change job number one is to reduce emissions and we already have in place our goal to reduce our greenhouse gas emissions by 50% by 2030. This applies to our manufacturing emissions and is a science based target.

We also know that as a society, we're falling short of the greenhouse gas emission reductions we need in the next decade represents a critical window for all of us to accelerate our efforts on climate change.

So our new commitment is to advance the portfolio of natural climate solutions that would generate a carbon benefit equal to our cumulative emissions through 'twenty 30. This.

Effectively make our manufacturing operations carbon neutral for the decade and deliver an estimated carbon benefit of 30 million tons importantly, the projects that will advance will help to protect and improve and restore critical landscapes around the world we.

We will work with partners like conservation International to ensure the projects. We advance will also deliver important co benefits like protecting biodiversity and improving the livelihoods of local communities. It is exciting very.

And I'll tell you what.

Jane can you tell us a little bit more about place based projects and why they're so important to reversing nature loss.

Yes, so Jonathan this is something I'm really excited about sort of the place based on jurisdictional approach to sustainability.

Look at the end of the day, we cant really achieve sustainability, nor can we protect nature unless we address these underlying incentives that drive the destocking the nature that drive E Sports station for.

For a long time once we can organize it in including conservation International focus entirely on specific commodities. So in a place we would work on coffee and we'd be like great coffee is now sustainable, but then you'd have rubber company like okay. Let's work on rubber the rubber would be sustainable cocoa would come in and then you deal with that and then Tom will comment you've made whack a mole and Meanwhile.

The underlying incentives are still that people are not getting any richard there still.

Our working the land hard and before considering any so one of the most exciting things that we're working on right now is actually with Walmart, we're partnering with Walmart to look at about 15 key commodities and at what is the impact of these commodity and reappraised. It around the world and then how do we ensure protection conservation.

Happens at the landscape level, so that all of these commodities ultimately are considered sustainable through a support from the foundation of the Walmart Foundation, we have created a coalition what's sustainable landscape in North Sumatra, whereby we bring all of these partners together.

Shared understanding of sustainability and everything that comes from North Sumatra, ultimately would be on the sustainable Keybanc.

Fantastic that's very helpful and thank you for that and so David last question.

We've talked about how your company is working to protect nature, but how is procter and gamble working to engage your customers on this topic and the greatest impact. We can have really is helping consumers with the small choices. They make when they use our products and that can lead to big positive effects. Some of those changes happen when customers simply choose our products such as secret.

Old Spice with packaging that eliminates Virgin plastic, which we launched in partnership with Walmart, 100% of the fiber in our people products as third party certified is sustainably sourced by partners such as Forest Stewardship Council.

We want to ensure the preservation of forests, now and into the future and ensure none of us has to choose between using the products, we enjoy today and what we all need to preserve our tomorrow.

So many opportunities inspiring stories, so I want to thank you both for sharing all those things.

Now as I said before big things are happening and it's going to take every one of us digging in to make them happen to better protect manage and restore natural ecosystems, we need to strengthen our relationships and work more closely together.

During the next session cast is going to lead us through some exciting land and forest focused initiatives as you hear about these project I'd ask each of you to consider deepen your engagement project Gigaton is agriculture, and forest pillars, and committed to robust climate and nature goals with emphasis on critical places and products, we bring to our customers because we know were stronger.

Together and the time to act is now.

Thank you Charles our complex World requires equally complex solution for a modern problem place based projects help us to understand how localized approach done right can make a meaningful impact on nature.

As you've heard today, we have a lot of work in front of us.

But I'm motivated by the commitment to sustainability, we see from Sam's club and Walmart associate members customers and suppliers.

Studies show nature provides us with services and resources with around 125 trillion.

Yeah, you had around 30% of agricultural land worldwide is degraded.

The world. So the devastation caused as wildfires intensified by climate change ravaged my Native Australia earlier, this year and now California.

As a founding member of the Midwest row crop collaborative Walmart is working to expand solutions that protect water quality and enhanced soil health.

Over the past four years. This if that has accelerated sustainable agricultural practices on over caught a million acres in the upper Mississippi River Basin, we look to philanthropy to complement our work on nature by supporting innovation research adoption of best practices and local collaboration through place based projects.

I'm thrilled to be joined today by a distinguished group of leaders, who along with the Walmart Foundation have teamed up to focus the efforts on our critical landscape here in the United States.

Cotter can you please get us started.

At WWF, we we've always known the climate solutions and conservation.

Have to be rooted in community engagement benefits that's true in the Amazon It's true in the Congo, It's true in the northern Great Plains here at home.

We work in the northern Great Plains, because it's one of the Richard Graff lands in the World. It's one of the most iconic landscape in the United States. It is full of native nations.

Astonishing array of species, including the envelopes and bison.

And it has been connected for centuries to ranching families who are desperate to pass on these lands to the next generation <unk>.

Protecting these grasslands keep ecosystems intact it protects water viability it keeps carbon in the ground.

And.

Maintains all these species with whom tribal nations.

And it keeps all these species in fact through native nations and ranchers.

Have coexisted for many many many years ranchers are finding it hard to pass on to your plans for generations because of economic pressures and financial incentives to turn those branches into crops.

And we are working with those ranchers to keep their lands in fact with all the benefits I've already described.

Which is why today I am so excited to announce an initiative with the Walmart Foundation.

Donald and with Cargill.

And initiative called be ramped systems, and viability planning initiative, a 6 million dollar project that aims to improve the quality of over a million acres of graph lands in the first five years alone now here's a video.

Through the magic of the place and the faces from the people who are so much a part of making it work.

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Ruth can you talk about why supporting farmers and their efforts to improve grasslands engraving management is so important and what cargill is doing to elevate the role absolutely Carter. Thanks for the question farmers.

Farmers and ranchers can teach us a lot about how to be good stewards of the land in many ways. They are the original environmentalist generations of growers have shown us that cattle can play an important role in protecting wild spaces in fact sometime cattle at the best use of the land.

As part of Cargill beef up sustainability program, we're excited to partner with ranchers, who can be the solution to climate change and biodiversity loss by.

By leaning into sustainable management practices that improve soil health absorb carbon and reduce water consumption, both ranchers and the environment can thrive every producers most valuable asset is the land. They farmer ranch, it's the key to their livelihood and their long term productivity. That's why in addition to.

Through our efforts in the northern Great Plains, we're working to restore craft land across North America with good soil health practices. It's part of our action plan to deliver our long term climate and water ambition.

And we deeply believe that agriculture is how we will achieve these goals.

Francesca out of Mcdonald's work with key stakeholders.

With scale solutions like wrestling and management and why is collaboration and so important.

Further our collaboration is absolutely critical given the size and scale of Mcdonald's, we have the ability and quite frankly their responsibility to have an impact on our own but what really excites me is using our scale we can redeem.

Are there.

Working together, we can have different strategies around the world and use these learnings to scale much faster a good example in humans and grants management, we've been working with the foundation for food and agricultural research and universities in the U S to review regenerative grazing.

And two increased heart.

Carbon capture and biodiversity.

The filing new practices around the world and collecting important local insight.

We get to learn directly from fiduciary for making a positive environmental impact while there.

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I am personally passionate about joining alliances like the ramp system in viability planning network, because it makes more tools and training available to farmers and ranchers.

And of course, the biggest challenge is finding ways to handle all of that and one of the tools I think we can all use is around people.

E. I know all of the theater co founded that organization and we brought many groups to the table.

Key for me it will be to find more ways to intensify to write backs and I do think that over the next decade partnerships will be critical to slowing climate change the.

The big picture of the alarm bells of nature or ringing, we see the diminished power of ecosystems to sustain food and water supplies for people.

Not to mention wildfires around the planet in places like Australia, and Amazon and in California anymore.

We also see events like Covid, 19, where fragmented ecosystems bring wild animals in contact with people and increase the likelihood of more pandemic some spillovers in the future as.

As we focus on climate change it is becoming more obvious.

Climate change.

Nature and the future of humanity are intertwined.

And without addressing those interconnections, we will not succeed over the long term.

As we repair our relationship with nature, we have the power to address climate change as well, we urge all of walmart's suppliers watching those today.

To take the opportunity to launch these kind of nature based solutions targets as part of your efforts as Cotter mentioned healthy forests sustained by diversity. They also support livelihoods and absorb carbon playing an integral role in combating climate change.

But deforestation continues to occur at an alarming rate.

Recent reports show, we lost the equivalent of a soccer field of primary rainforest every six seconds last year.

That's why Walmart is taking a holistic approach to addressing deforestation and we're on track to achieve a zero net deforestation Gulf to sell certified sustainable palm oil pulp and paper and our global private brands by the end of this year.

We and others are also stepping up actions to build a forest positive feature.

Just this morning, the consumer goods Forum launched the forest positive coalition of action led by 17 companies to eliminate deforestation.

Walmart is one of the companies involved and so is this like a supply using new project Gigaton guidance and results.

The place based approaches and forest restoration I'd like to turn it over to the company's CEO Mark Schneider to hear more about a new place based project that supports neste flight sustainability commitment achieving net zero is mission critical who initially and it's quite important to me personally.

S. Nistler, we focus our energy and our resources were unlocking the power of food and our continuous engagement with local communities can make the greatest difference to People's lives.

We are convinced that companies can only be successful in the long term if they also contribute to the well being of society into a healthy environment.

Our net zero ambition is key to the strategy and we are approaching it in three ways.

We're transforming our portfolio to introduce more products that are better for you and better for the plans.

We are working towards powering our operations with 100% renewable electricity.

And we're scaling up nature based solutions that remove carbon within our supply chain.

Restoring and protecting forests is one of the ways, we are harnessing nature to fight climate change.

We have been working steadily to eliminate deforestation promos supply chain and we expect 90% of our key agricultural commodities to be verified deforestation free by the end of 2020.

Two years ago, we became the first global food company to implement the satellite based starting service to monitor 100% about global Palm oil supply chains.

Earlier this year, we announced the reforestation efforts in the Americas.

And no library coast.

Just yesterday, we announced project relief our program to planned 3 million trees in Malaysia.

This program builds on nearly a decade of experience working with local partners and farmers to restore forests and proximity to our palm oil supply chain.

I'm proud of the way our team has built this program and would love to share similar experience with you.

We were Reforesting area, along that can have I think I agree that it will have planted 1 million trees in the last thing we decided that the scale of them Lucerne and go forward I know that at 3 million three all of that in the next three years.

Conducting appointments at Morris.

We think human animal Corporately, we would be working alongside very credible organization uniquely segregate the empowered throughout a community and they obtain gong and improve their livelihoods convert.

This is just one example of what we're doing at Nestle.

I can tell you that we're working hard across all areas to achieve net zero and we will release much more detail on our road map later this year. Thank you Marc it's inspiring to hear from people on the ground, making this important work possible.

As you can see degradation of natural habitat and forest is very real and while we've made progress in key areas, we recognize the need to raise our ambition.

And that's why we're expanding our forest gal's by aspiring to sell its palm oil beef soy pulp and paper, 100% deforestation free by 2025.

These efforts can support sustainable economies biodiversity and livelihoods, while helping meet our customers and members growing needs for sustainable food and products.

This isn't going to be easy, but we can do it.

Like Charles I challenge, everyone to find ways to help protect manage and restore nature.

Suppliers can start right now by deepening their engagement with the agriculture and forest pillars of project Gigaton, using Youtube guidance and progress calculated on a sustainability hub.

But don't stop there we.

We need bold creative action across the board in all four.

Together, we can do this.

And we will.

Thank you Kat, while we strive to become a more regenerative company Walmart is committed to eliminating waste in our own operations and making strides towards a circular economy around the globe.

Imagine a world without waste would not.

And everything continues to serve a meaningful.

That's a circular economy.

How.

And Walmart Mexico, we are phasing out the use of plastic bags by January.

We are pleased that the Central America removes investigated by 39% last year alone.

On the growth Walmart associates are working across all parts of the.

To drive us over six months in India slipped card has begun their transition to recyclable paper bags or delivery mass smart introduced on top recycling.

To educate customers and encourage recycling China's dedication to recycling hardboard saved 100000 tons of material from the waste stream as that is opening a test and learn sustainability story to reduce plastic and encourage customers to reuse and refill Walmart, Canada to reduce food waste to landfill.

<unk> by 35% versus the baseline Walmart, Chile recently expanded the promotion program to 129th supermarket.

Or say new business in Japan invite their suppliers to donate on marketable vegetable through donations.

Walmart, Argentina, offering discounts on food nearing expiration to save customers money and prevent rate.

These are just a few examples of how we're helping them do that.

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Waste and Palladium also decline.

It's not enough.

Months.

And there is good as well.

I am delighted to behave with you today, we have already learned a lot and with me today, Doug Col for the importance of getting to zero emission how to eliminate waste rights along the value chain and understanding how that spreads regeneration is inspirational.

But really what we want to talk about in this section is about how we can think about secular economy of the 27 countries in which we operate our associates have always cared about that we care about the issues that matter, most like waste executive packaging, recyclability and helping customers understand how they can help the question we get all the time.

But as you know the world has changed and is ever changing and so is the issue around that.

Nation's response to the global pandemic, we seeing customer behavior around the world changed as well.

<unk> projects are on the rise and it's understandable for hygiene and safety perspective, but in some countries recycling programs have been put on hold.

So now more than ever we need to create solutions that can benefit our actually make life easier for customers.

We have to innovate to make sure that this happened and we have to engage rights across the supply chain and our partners to help us. It is a truly end to end.

Now to help us talk through and people, who really understand what the secular economy is all about is the Ellen Macarthur Foundation and Andrew Miller is that chief executive and I'm delighted that he is joining me today.

Andre Your organization has been very vocal about the pandemic recovery and how secular economy is more important than ever tell us about why you and the foundation believes this is so important.

Thank you Jay and thank you for having me here Plaza we.

We are delighted to be working with Walmart.

As a partner.

As you say.

Very.

Vocal about the fact that we think the service economy is more relevant than ever following the pandemic.

Perhaps the three reasons one is that.

It's really a bigger idea of and just better recycling. The circular economy is really about solutions that give people better choices.

And also key materials.

<unk> for longer as you said used more often and that can be by design really way upstream. It's not just thinking about what do we do with stuff. Once it ends up going away system or in a recycling system, how do we design products to be used.

Differently thought about differently.

Other real interesting thing about the circular economy is it really represents an opportunity for better growth. There is an enormous economic possibility here as we rethink how we can provide products services systems and solutions for people that take into account the material in the economy.

We keep them in Houston in flow.

And I think the third thing is that this is really an interesting idea because there is profit to be had in applying this thinking and because it's an idea that really speaks about economic opportunity.

The scalability of it is really.

Of interest as well, we can actually scale solutions here through organizations like warm out in many of the other you have obviously been working in this field for quite a while and have a real interest I became do understand what you're most excited about from a sick economy perspective, you just touched on something that probably excites me that.

They buy our role in that and that is our ability to scale by testing locally and then scaling globally and what does that really mean in practice is that you know you're trying to everything everywhere at once then there's more risk that it will fail or it won't get adopted by re.

Really testing and learning and then scaling rapidly it's something we can actually make a difference on N. Yeah, probably the thing that I've been looking at the most it is the end product packaging and that's something that customers really care about and I understand that it, albeit but sometimes the obvious I think hunter with codes, we think collaborator.

Packaging expert.

The team was shutting knows that they've developed a recycling playbook in the U S that gave us resources to supply is to how to create more sustainable packaging encouraging education unpack labeling all of those things and it's so good to all of our international market through adopting it as while they've been translating it and adjusting it.

To what fits that local needs and we're seeing great adoption, which gave us the courage to set an ambitious goal to make 100% of our private label packaging recyclable reusable or compostable by 2025.

What I'm really pleased about is already at 55% and that progress just wouldn't be possible without being able to share across our market pains, and then scaling as I've talked about it and the other piece, though is our ability to work with people you referenced that you guys do an amazing job of joining everybody together, but how we bring global stakeholder.

Together, so Andrew I guess you know.

What is it for you that people like way at Walmart and others can be doing more off here.

I think.

Many of the things you've you covered.

Spot on and we need to do more with US there obviously the thing that's really interesting, though that we know that with navigant to recycle our way out of this challenge so.

So we also have to look at the upstream innovation and the experimentation and see how we can eliminate the plastics that we don't need to really look really carefully of what we are using plastic pool and take elimination on as an agenda that we need to we know that we need to radically reduce.

The amount of the volume of plastics that go on market over the next few years, a big part of that is to start to innovate in the way in which we deliver product.

Products and solutions to people and to look at reuse opportunities.

Getting back to some of the ideas of refillable and ways in which we can.

With people to make the solutions easier. So can we use concentrates and they can go home and reuse the bottle and not have to carry the water home.

As like the many of the things you've talked about kind of the business fundamentals they've got to become core to the way we do business.

And as an industry, we need to quickly transition off okay.

Entities kind of area because it's critical work, but I truly believe I mean, you and I did talk about day one.

We were together last that this will only work if we keep the customer in mind, but what I get really excited about is that we'll not have 240 million customers around the world. That's 240 million tons to get this right Andre to move the needle just a little bit person by person towards a more sustainable and healthy.

Future I'm really takes it we can change the world together, if we laid into the Andrew. Thank you. So much for joining us today, I hope everybody and something a little bit today from this conversation and do you have a commitment personally to help us with the circular economy. Thank you enjoy the rest of the meeting.

Judith.

Here in the U S. Our associates are stepping up to do their part and John Furner, President and CEO of Walmart U S would like for you to meet some of those making a difference.

At Walmart, we say the customers number one and we want to provide the customers. The things that are important to them every time, they shop with us and a fast growing group of customers are passionate about sustainability. They expect us to do the right thing and that's one of the greatest benefits to having sustainability ingrained in all of our businesses here at Walmart.

It makes us a better company and it helps us deliver for our customers now when I was a merchant at Sam's club, we had our seafood suppliers provide detailed information about the product they were selling us the place of origin. The catch method and the scientific name and then we had the sustainable Fisheries partnership review the data then we put it.

Directly on our member's Mark packaging, where our members could see exactly what it was they were purchasing today <unk> kinard and the Samsung merchants continue to drive transparency and seafood category and many others.

All across the business our associates are doing things our customers can be proud of.

Haley Mccurry, Fred Alema, Haler and CJ Neff worked with our supplier to take our used plant containers and buckets at Walmart and turn them into products like pit Bulls that are now sold in our stores.

Melody van Rich and team have used more sustainable packaging for candy canes, and that's going to cut over 300 tons of waste from landfills. This year nationwide, our stores and clubs work with food banks and charities to get unsold items to people in need and thats been especially important this year during the pandemic Mark Vander Helms team has been able to install <unk>.

380, onsite solar energy projects at our U S stores clubs and distribution centers because of the work of associates like Ryan Isabelle and Jessica Baldini, great value coffee and canned tuna source for our U S stores is now certified sustainable or from a fishery improvement project and at Sam's Club.

For Cal and others worked to make member's mark single serve pods and whole bean coffee fair trade certified.

Bachmann and other product developers have incorporated recycled polyester fibers into many private brand clothing items, including timing through ladies denim and Michael Mccarthy, Dana Pons deck, and Richie Chen and worked with our suppliers to make our equate reading glasses from plastic recovered from erosion that's incredible.

Together, we are helping people and the planet at the same time, we operate our core business and serve customers.

I'm so proud of this company and the difference, we're making and I'm excited to do even more.

Thanks to you and your team's incredible work, John and to all of our speakers so such a powerful session.

Today, you've heard from global leaders about ambitious efforts to confront climate change eliminate waste protect and restore natural resources and improve livelihoods.

This important work is reflective of our associates' passion and dedication to helping people live better and preserve the planet and we simply could not do it without them.

We have a long history in sustainability, but we're always working to raise our ambition to do more and to work faster and that's why today, you witnessed Walmart committing to becoming a regenerative company dedicated to placing nature and humanity at the core of our business.

We must dramatically changed the feature and this is the decade that matters. It will take each of us individually and collectively taking courageous action now to create a more regenerative feature and we are honored to be on this journey with all of you. Thank you.

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Good morning, and welcome to Walmart's 2021 investment community meeting.

You all for joining us on the webcast. We appreciate your interest in Walmart I know the executive team looks forward to sharing their strategies with you and answering your questions.

Now, let me get a few of our usual statements out of the way.

The information presented at today's meeting should be viewed in conjunction with our press release and earnings materials that can be found on our website stock dot Walmart dot com.

The presentations will also be posted on our website as they are completed.

Today's presentations include forward looking statements that are subject to future events, and uncertainties, which could cause actual results to differ materially from these statements.

Please reference our entire safe Harbor statement and non-GAAP reconciliations, which are included with our earnings materials on our website stock got Walmart Dot com.

Hopefully you've had a chance to review our earnings materials and guidance issued this morning.

You can see today's agenda on your screen and in a moment, Doug Mcmillon, Walmart's, President and CEO will share. Some initial thoughts with you about our culture, our people and our opportunities.

And then he'll be back to discuss Walmart strategic objectives. After you hear from our CFO Brett Biggs.

Brett will discuss Q4 results in fiscal year 'twenty two guidance and then we will conduct our first of two Q&A sessions today.

We will have a brief 10 minute break following the Q&A session and then you'll hear from several other leaders, who will discuss our priorities and strategies across the business.

Following these presentations we will have another brief break and then we will conduct our second Q&A session.

And at the end of that session. Our formal meeting will conclude.

With that let's get things started.

Hello, everyone and thank you for joining us for our 2021 investment community meeting we're grateful for your interest in our company and for the confidence. So many of you have in our future we've.

Leave that confidence is well founded and were excited to give you an update on the opportunities we see ahead.

I've been a part of Walmart for more than 30 years, now and I can't remember a time when there was so much exciting change happening inside our company in.

The world around us is changing and big and important ways and I'm. So encouraged by how our associates are leading and embracing change.

We have a blend of experience and new thinking that are coming together to allow us to execute with more creativity and speed.

We arent the business, we were just a few years ago and we arent the business you'll see in the years ahead, we're moving.

David Glass was a CEO that followed Sam Walton he led us into the food business and got US started outside the United States.

And the 19 nineties I remember him telling us repeatedly that the company was just getting started.

Every time I hear them say it I would think.

Really.

We were already large by then and so much had already happened but.

But today I can tell our associates the same thing.

There is so much opportunity still in front of us.

We have the talent the culture and the assets to thrive in the next generation of retail to invent it.

We've been building for this moment and the moment is here.

Is up to us.

We can make it true that in 'twenty 'twenty. One this company was just getting started.

I know many of you have been investing in and following Walmart for a long time and you know a lot about our company.

This is a different business today and we're just getting started.

We're moving.

Looking back at 2020, I'm, so proud of how our big team has responded to the challenges.

They just keep stepping up.

It feels like our customers and society have come to appreciate our associates more than usual and that's well deserved.

So many have been selfless and courageous we've tried to show our frontline associates in our stores clubs and supply chain, our respect and gratitude with our words and our actions.

They along with our customers our shareholders, our suppliers and partners the communities, we serve and the planet, we seek to strengthen shape our decisions.

We take a multi stakeholder view, because we know that mindset and approach deliver the most valuable sustainable business over time.

As for today, Brent will join us in a moment to talk about our results for the fourth quarter as well as to provide an outlook on our expectations for the next few years.

I'll come back after his remarks to talk through the acceleration of our strategy and how we will deliver sustainable long term growth.

And then you'll hear from several several of our leaders about the specifics of our plan.

I'm confident you'll leave this session with a clear understanding of a few key points.

First innovation and speed.

It's time for us to dial up our aggressiveness, even more and go faster.

Walmart is in a position of strength and we have momentum.

Our confidence in our plan motivates us to accelerate and we'll walk you through why we feel that way.

Second we're building a new customer centric business model, our customers welcome our serving them in new ways and our assets and capabilities are being monetized in ways, we havent tapped into before.

We have assets to leverage like our stores and supply chain strengths like our store traffic and a brand trusted for value.

We have foundational cornerstones like E D. L. P E D L C.

We can stay true to who we are and build on our strengths while building a mutually reinforcing flywheel.

We're starting to drive the top and bottom line and more expansive ways.

Bottom line is becoming more diversified which will enable us more operating income growth over time.

We're repositioning to be in different businesses and exiting some geographies. So resources are shifted to our priorities. We're building a better model and its uniquely Walmart.

Third we will continue designing this business to create shared value for all our stakeholders. We're out to demonstrate that our company can do even more good for people as we grow communities are strengthened customers associates shareholders and suppliers benefit ever.

Everyone wins.

I'll be back to share more specifics on this strategy in a few minutes now I'd like to welcome Brett to add his view on the quarter and the future Brett.

Good morning, and thanks, Doug.

I've been with Walmart for more than two decades, and this is one of the most challenging and unique times. We've all faced however, it's also a time that presents great opportunities and I'm looking forward to highlighting some of those for you. This morning I am so proud of how our associates have responded to serving customers while accelerating our strategy the.

The recent progress in transforming Walmart into a truly omnichannel business prepared us for this period and it helps shape our future.

This is an important moment for Walmart and we are ready.

There are several things I want you to take away from this morning first we have great momentum, we just completed a year with record sales of $560 billion in constant currency, including record fourth quarter sales of more than $150 billion and record operating cash flow of $36 billion.

Profit growth was also strong thanks to a number of things strong sales in particular, improving general merchandize sales, improving ecommerce margins and improved margin mix overall.

Now certainly we had tailwind during the year, but we're performing extraordinarily well this.

This strong performance has allowed us to invest in the future of the business invest in our associates and give good returns to shareholders from.

From a position of great strength, we're now going to accelerate investments in supply chain technology automation, and our associates, allowing us to stay ahead of shifts in customer behavior.

We strongly believe these investments will accelerate the company's top line and profit growth in the mid to long term.

Active portfolio management is also strengthening the model and focusing resources and we remain laser focused on operating efficiency and delivering sustainable expense leverage.

So, let's turn to highlights of the fourth quarter and the year.

During the year, we saw elevated sales levels related to customer stocking up eating at home entertaining and educating at home and investing in home decor and their yards and of course, those things were supported by stimulus spending in parallel we had incremental COVID-19 costs, some of which will continue.

We had a strong holiday season, followed by an acceleration in January total constant currency revenue was strong increasing more than $10 billion for the quarter and $40 billion for the year.

Walmart U S comp sales, excluding fuel grew eight 6% in both Q4 and for the year, including 79% annual growth in ecommerce.

Walmart U S grew net sales by $29 billion for the year now for context.

That is similar to the annual revenue of dollar general and Starbucks.

Sams club wrapped up a terrific year with full year comp sales growth of 15, 8%, excluding fuel and tobacco and membership income increased more than 9% on its own Sam's club would rank near the top 50 in the Fortune 500.

Outside the U S sales increased six 3% in constant currency for the quarter, including 60% ecommerce growth with strength in India, Mexico, and Canada seven of nine markets posted positive comp sales and for the year International net sales grew more than $6 billion in constant currency.

Adjusted operating income on a constant currency basis declined about 3% in the quarter. It was pressured by more than $1 billion of incremental COVID-19 expenses, including associate bonuses as well as a charge of around $220 million related to a decision to repay U K property tax relief granted earlier in the year.

The fourth quarter also included some increased tech expenses and increased wage pressure related to recently announced structure changes and Walmart U S as well as additional head count to ensure our holiday season was a success, which it was <unk>.

Excluding the UK charge total company adjusted operating income would have increased.

Despite various headwinds Walmart U S. Adjusted operating income increased six 5% on solid gross margin improvement and continued reduction in ecommerce losses as well as some benefit related to timing of allocations.

For the year adjusted operating income increased over 9% in constant currency with each segment growing significantly despite more than $4 billion of incremental COVID-19 costs.

Q4, adjusted EPS was $1.39, but would have been about 37 cents higher if not for COVID-19 costs and the U K property tax repayment.

GAAP EPS was <unk> 74 cent loss significantly impacted by the loss on businesses in the U K and Japan as both are classified as assets held for sale, that's partially offset by an unrealized gain in our investment in J D. Dot com the value of which has increased by $9 billion since our initial investment operating cash.

For the year was exceptionally strong at $36 billion and the company returned $8.7 billion to shareholders through dividends and share repurchase so.

So in summary, it was a great year financially and on an underlying basis. It was a strong finish.

Let's now talk about how we plan to continue the strong momentum because of our financial strength competitive position and ability to execute we're in a unique position to continue innovating and serving customers in multiple ways over the past several years, we've made great progress building, an ecosystem of synergistic assets and we've made strategic choices like reducing exposure.

The lower growth international markets, while focusing on higher growth opportunities in the U S, Mexico and India.

Now is the time to play even more aggressive offense, we're winning and we intend to keep pushing the ball aggressively down the field.

Over the next few years, we're going to step up capital investment primarily in the U S to improve the customer experience support growth and drive efficiencies I'll give you some highlights and you'll hear more as the morning progresses.

As I mentioned earlier, our revenue grew $40 billion last year, putting us at least a year ahead of where we thought we might be so we need to lean in more aggressively in key markets with increased capital and fulfillment capacity supply chain automation and technology.

This new infrastructure will allow us to expand e-commerce assortment, enabling us to reduce both shipping time and cost will.

We will step up automation in D. C has to deliver island department ready pallets stores will continue to refresh our existing stores by enhancing pickup and delivery capacity merchandising programs and efficiency initiatives.

In India, we see significant growth opportunities for flip cart and phone pay it's exciting to see the emerging middle class rapidly adopting e-commerce and using their mobile phones to use money transfer insurance and other services.

Meanwhile, we will step up technology investments to continue upgrading legacy enterprise systems and customer facing technology. We're in a multiyear journey of modernizing our tech stack and capabilities to increase the efficient use of the cloud and simplify customer and associate experiences.

As we accelerate investment Capex is expected to be around $14 billion. This year with most of the increase versus last year in the U S.

Over the next few years, we expect capex to be around 2.5% to 3% of sales. While this is higher than the past few years. It is far below the capex peak of 4% to 5% of sales during the period of heavy supercenter growth.

This spend will allow us to fully optimize our strategy and in turn accelerate the company's top line and profit growth rates in the mid to long term.

After a year or so of transition these investments should put us in position for four plus percent sales growth and operating income growth rates higher than sales.

4% top line growth with basically be the equivalent of adding a fortune 100 company every year.

Our unique financial strength allows us to continue to deliver strong returns to shareholders, while growing the business and as you saw this morning, we increased our dividend for the 48th consecutive year and we authorized a new $20 billion share repurchase program, which we plan to execute over the next three years or so.

There are so many initiatives underway to give us confidence that these are the right investments at the right time.

We're already seeing proof points and you'll hear more about these later on.

We expect continued strong growth in the U S businesses and expect even higher international growth rates as we focus on key markets and making money in new ways will continue improving margin mix through an enhanced general merchandise offering new brands and marketplace growth with a greater push towards expanding fulfillment and other services for sellers.

We'll drive existing and new customer growth through initiatives like Walmart plus will grow sales and profit increasingly with growing higher margin businesses and advertising financial services marketplace health care services and alike.

Our operating discipline will continue to sharpen.

After a pause in FY 'twenty, two primarily because of additional wage investments I expect expense leverage to continue at or above 20 basis points a year.

Let me turn now specifically to our expectations for this current year, we feel very good about the underlying business and ability to compete from a position of strength. However, we're still facing similar COVID-19 related challenges because we have over the past several quarters, which caused us to suspend guidance and continues to make short term guidance very challenging.

Despite that we want to give you the best view, we can at this time, given what we know and what we see right now we.

We know we will have both headwinds and <unk> this year, the balance and degree of which isn't clear.

As the year progresses, we hope to get more clarity around COVID-19 impacts vaccine efficacy and availability the scale and duration of economic stimulus and the midterm economic climate globally.

Even if conditions stay generally similar to now for any length of time this year and with limited additional stimulus. We would expect continued solid underlying performance from Walmart U S with low single digit comps and continued solid ecommerce sales growth.

Low single digit comps would result in around a 10% comp growth on a two year stacked basis, so very healthy growth.

We would expect the level of comp growth to be more heavily weighted toward the middle of the year as a result of the timing of COVID-19 related demand and stimulus in FY 'twenty. One now of course that could look different depending on future stimulus and our significant changes in customer spending patterns as the COVID-19 crisis, hopefully moderates at some point.

The comparisons against last year unique there were stretches that were really strong and others less so driven by how people responded to the virus how they stocked up how they responded to being at home more and of course stimulus actions.

And international excluding divestitures, we expect to see higher level of sales growth versus the U S with strength in India, Mexico, and China and as Sands, we expect low single digit comps, excluding fuel and tobacco.

Total company sales are expected to decline due primarily to the divestiture of our anticipated divestitures of businesses in the U K, Japan and Argentina.

Excluding that we would expect total company sales to grow in the low single digits from a profitability standpoint, given the assumptions mentioned earlier, excluding the impact of divestitures, we would expect operating income and EPS to be flat to up slightly versus a very strong profit year in FY 'twenty one.

In regards to the UK transaction, when we announced it we said we expected EPS dilution of approximately 25.

And the first full year, assuming we helped proceeds in cash we expect to hold more cash than normal. During this time due to strong cash flow, but plan to reallocate that cash in a thoughtful way in the coming quarters into new projects as well as share repurchase.

We still expect to make up for the EPS hit in the midterm, but there will be timing impacts that negatively affect FY 'twenty two EPS by about 20 cents. However.

However, this should provide a tailwind to EPS growth in future years, as we reallocate more of that cash.

Due in large part to the international transactions, we expect operating income dollars in EPS to decline slightly in FY 'twenty two on a consolidated basis, but we expect Walmart U S. Operating income to increase in spite of some continued COVID-19 costs accelerated technology costs and increased wages.

Alternative revenue streams like advertising and Walmart fulfillment services are gaining traction and are expected to become a larger portion of profit growth in the future, including FY 'twenty, two along with a fairly steady gross margin rate.

Due to the international transactions in FY 'twenty, one COVID-19 related expense and profit timing, we expect the FY 'twenty two quarterly profit growth cadence versus last year to be quite variable. We expect Q1 operating income to be relatively flat to last year and EPS to be flat to slightly up reflecting the presence of as done our financials for about half the <unk>.

Order and some tax rate fluctuations.

Due to the timing of FY 'twenty, one cost and divestitures Q2, and Q3 operating income and EPS may be down mid to even high single digits with Q4 operating income and EPS potentially up mid to high single digits.

Again, and I, probably cant stress this enough we're in a very unusual time, causing projections even in the short term to be very challenging and opened a significant fluctuation. Many times I get asked by analysts investors and others are we missing anything about Walmart and.

And I've thought a lot about this question lately and even for someone like me that's been here for over 20 years I have to step back and see the evolution through a different lens.

Walmart is different than it was last year three years ago, and certainly five years ago.

It's faster, it's more creative and it's less risk averse is actively creating as future by building on a set of unique strengths and capabilities.

Let me describe the Walmart I want you to see.

We have more customer store traffic than anyone in the world.

We have one of if not the largest pickup businesses in the world and we're scaling delivery.

We're one of the largest e-commerce companies in the world approaching $100 billion in revenue in the next couple of years and we believe 200 billion a few years after that.

We have one of the largest marketplace businesses in the world and now we're scaling of marketplace fulfillment services business to grow even faster.

We are a majority owner of one of the most successful retailers in the world wall, Max with over $50 billion market cap with great growth opportunities.

In India, where majority owner of one of the largest ecommerce and payment businesses and one of the largest and fastest growing economies in the world.

We have a 75 billion dollar club business globally, one of the fastest growing segments in the retail industry.

And it's a winter in three key markets in the U S, Mexico and China.

We have a rapidly growing advertising platform, which should be a multibillion dollar business in the very near future.

We're a global leader in supply chain innovation with exciting initiatives on the table.

We're a global leader in sustainability with a clear aspirational goal to become regenerative.

We have both growth and scale.

We reduced our exposures in Brazil, Argentina, the U K, Japan, and we'll still have a topline that's over half a trillion dollars.

That's the Walmart I want to make sure you see.

This is the time for us to accelerate and we are ready.

And as always I. Thank you for your interest in Walmart and I'll turn it over to Doug.

Yeah.

Okay.

Thank you Brett. Thank you for your leadership and partnership we're pleased with our results for the fourth quarter and the year growth was strong across the company innovation and speed picked up we moved quickly to add new capabilities to <unk>.

Protect the health of our associates serve customers and members safely in our stores and clubs and serve them with more capacity for pickup and delivery.

We found ways to support the explosive growth in e-commerce and learned how to hire people in hours rather than days, which enabled hundreds of thousands of people to get work when they really needed it and when we really needed them.

We managed our business well in an unpredictable environment, but we certainly didn't get everything right given supply constraints are in stock suffered significantly during portions of the year store standards were impacted.

We would reduce store hours and limit customer density all over again, but that did impact our sales.

Those reality should provide some upside in 2020, one as we lap the extraordinarily strong results of last year.

I want to thank our associates around the world. They have been courageous they are adapting to change.

They worked really hard to overcome the hurdles presented by one of the most difficult periods in history and I know they'll continue to do so.

The challenges of the past year came in different forms and Werent limited to the health crisis.

We're all aware of the difficult social political and economic realities that we face. These are deep rooted problems that we all have to tackle.

As for Walmart, we will continue to be part of the solutions.

As it relates to the health crisis, we help with PPE for health care workers and stood up Covid testing sites, we donated more than 625 million pounds of food in over $55 million in grants for hunger relief in 2020 now.

Now, we're supporting the country and the vaccination effort.

As it relates to the financial crisis will help with employment and will help small businesses by buying their goods building an expanded marketplace for sellers and as Sam's club serves family owned restaurants, and other small businesses small businesses are vital to our economy.

When it comes to the social and political challenges, we all face we will engage in public conversations in ways that are thoughtful constructive and in line with our values. We are committed to racial equity.

We will keep changing inside our company and find ways to leverage our business and influence to shape systems extending beyond our company.

This work is important to me and it's important to our associates, including our leadership and we know its strategic being diverse and inclusive of smart business.

2020, not only confirmed our strategy it accelerated by fast forwarding many of the customer trends we've been building towards.

We feel emboldened and are now moving with even more speed and aggressiveness.

We're scaling new capabilities and businesses and designing them to work together in a mutually reinforcing way as.

As we imagine the future. We believe people are customers families will want an even better value for their money.

<unk> assortment that is relevant to their life and seems limitless.

Services that help them save time, save money and get or stay healthy and experience that is easy and enjoyable and the knowledge that the company. They do business with can be trusted to treat everyone in their supply chain, well and take actions that strengthen our planet.

And the future people will still want to shop, and compelling stores, but more and more there'll be occasions, where they prefer to pick up an order or have it delivered.

Some customers will eventually allow us and pay us to keep them replenished in their homes on the items. They routinely purchase for an increasing number of customers Walmart will be seen more like a service customers will think of us as the merchant that serve their wants and needs, but in ways to take less time and effort.

We won't just be utilitarian for them we.

We will serve up items and ideas that are relevant and exciting will reach them directly and through other platforms.

Our customer relationships will continue to broaden and deepen and health and wellness in financial services.

Our customers view these as natural and expected components of their Walmart experience well, we have all of these things together in a seamless way.

So we're in an early stage of building a new business model that will enable us to serve people how they want to be served in any particular moment and thrive in the next generation of retail as a business.

Over time, we believe the big winners in retail will be those that deliver a unique interrelated ecosystem.

Many of you will remember the original Walmart productivity loop.

We lowered prices grew sales and leveraged expenses.

Some of you will remember the ecosystem chart, we shared in 2018 well.

Well, we continue to learn our thinking moves on and so we'd like to share today's version as a way to describe our emerging business model.

It should help you better understand how will serve customers and drive sustainable diversified operating income growth over time.

As I describe it some of my comments are specific to the U S. But you should think of this as applying and all of our priority markets around the world.

About it as a flywheel is spinning powered by a mutually reinforcing set of assets.

We start with the customer in the center.

We're designing for them.

Our relationship with them is founded on our ability to provide them the lowest prices on the items they buy all the time.

They come to our stores and our app to get the things they want or need.

Our first priority is to continue to earn their business when it's time to buy the big basket the stock up trip to be the best in first place. They shop, we do that well with the supercenter format, having a broad assortment. So close to 90% of America is an advantage.

As we've added pickup and delivery capabilities, we've experienced a lot of growth, but too often we aren't able to meet the demand.

This is a good problem to have but we need to solve it quickly given how trends accelerated as a result of the pandemic.

So we're going to invest more aggressively in capacity and automation to position ourselves to earn the primary destination position with customers. We are absolutely playing offense here.

Customers can choose to visit a store pick up their order and have it delivered habit delivered into a secure box on their front step into a garage refrigerator or all the way into their kitchen, even when they're not at home.

When you hear us say delivery define that as the combination of delivery from our stores clubs and ecommerce fulfillment centers, our customers and members are indifferent as to whether theyre delivered items come from a store or an F T.

So we can optimize for speed and costs behind the scenes as we meet or exceed customer expectations.

Over time, more and more of our customers will want Walmart plus because it makes life better.

That relationship will drive repeat business and provide data that enables us to serve them, even better and be more personalized it's an important piece of our strategy.

For now we're focused on continuing a high quality experience for Walmart plus members as we add capacity over time, we'll add more benefits to the membership to broaden its appeal.

Moving to three o'clock on the wheel the demand we've been experiencing in general merchandise is amazing.

Beyond the pandemic, our ecommerce business will continue to grow at a fast pace, we expect our ecommerce sales globally to be over $100 billion in the next couple of years.

We continue to add assortment of brands.

Our emphasis here is on general merchandise, we've got a lot of upside in apparel home and hard lines.

To capture that upside, we're going to pull forward investments in space and automation.

As our fulfillment capacity grows we will use it to improve the customer experience expand our first party assortment grow our marketplace and build our fulfillment services business, which is scaling nicely.

Beyond selling merchandise, we can do more to serve the healthcare needs of families. They want and need high quality preventative accessible and affordable health care.

As you evaluate our opportunity in health care consider not only our pharmacy optical hearing in OTC businesses.

But also consider our position as the country's largest seller of food and how that relates to health our locations, which enable access our large stores and large parking lots, which give us room to expand our experience with the social benefits, where we cover a lot of lives and our growing digital capabilities together.

They create the opportunity for a differentiated omnichannel health care business that helps a lot of people we aren't starting from scratch.

We're convinced our customers want this and they trust us to provide it.

Financial services are also a way we can help make daily life better for customers.

Last month, we announced the formation of a new fintech startup designed to develop and offer innovative and affordable financial solutions.

Our customers have been clear that they want more from us in terms of financial services and this new approach will help us deliver for them in a differentiated way more quickly.

For our Fintech startup customer acquisition costs are high and our platform lowers those costs, we have a head start.

Moving to six o'clock on the wheel.

Our purpose is to save money and help people live better. So we must operate at a lower cost and do it in a way that's sustainable.

As you know we've had several automation tests going on I'm very pleased to share a few of the most important forms are now ready to scale.

These investments will enable us to improve the customer experience and increased productivity our digital transformation continues.

Our way of working our use of data and the modernization of our tech stack continue.

Earlier, I mentioned diversifying our profit base.

Scaling new profit pools is a priority.

Marketplace, and fulfillment services advertising financial services data monetization and last mile delivery.

These are all early stage businesses that are scaling or are positioned to scale.

The resulting more diversified model will allow us to sustainably reinvest back into the customer value proposition and choose how much flows through into profit.

As I walked through the flywheel I mentioned several investments.

Based on everything I've learned over the years and the opportunity I see looking ahead. This is the right time to make these investments.

The strategy team and capabilities are in place.

We know where the customer's going we have momentum in our balance sheet is strong here's what we see.

First the combination of stores and E Commerce is a winner.

Last year's step changed our ecommerce business and our stores are an asset.

We have demand and need more space earlier earlier than we had planned a year ago.

Given the delivery is a key driver of Walmart plus we need more capacity to grow Walmart plus with a high net promoter score.

Second.

Our automation plan is now ready to scale.

We will be investing in our distribution centers, our ecommerce fulfillment centers and in market fulfillment centers, which will in many cases be inside of or built beside our stores. John will tell you more about what this means for our U S business.

Those investments will enable productivity improvements for years to come they have a nice IRR.

Big picture I think of our U S supply chain with hundreds of distribution and fulfillment centers thousands of stores and clubs. So close to so many people functioning in a hybrid fashion automated where they should be based on volumes and complemented with onsite market fulfillment centers or off site Mfc's, where we see incremental does.

Man.

Importantly, imagine our supply chain is interconnected so the cost to meet or exceed customer expectations is optimized.

And imagine our growing network with our nextgen level of automation.

I think the next few years will represent more change in our supply chain than even the grocery DC rollout, we did to support Super centers, it's really exciting.

We will keep investing in store remodels, so that our stores are fresh and appealing.

We will also continue to invest in our people.

Last fall, we changed the structure in our U S stores leaning even more entities at that time, we gave a raised to 165000 people.

And now we'll be raising wages for 425000 more.

These are investments in people that are important to our future because they provide a great pick up delivery and in store experience for our customers. These.

These investments are part of our strategy, we pursued since I started in this role we've increased our starting wages by more than 50% since 2015.

Once these increases are implemented approximately half of our U S. Hourly associates about 730000 people will earn at least $15 an hour.

Our average wage in the U S will be at least $15.25 per hour.

Our supply chain associates are already earning $15 or more and we've made additional wage investments and Sam's club over the last few years.

Importantly in addition to hourly wage rates, we will continue investing to provide career opportunities through our internal education programs and access to affordable degrees.

Because of technology, the future of work will be different and we want to prepare our associates for that journey.

We believe we should do more than provide just an hourly wage bonuses for some roles. Our 401k match stock ownership plan affordable health care and other components are smart investments, we will make these.

These investments in our supply chain and people, while also staying on track to modernize our technology.

To pay for all that will keep growing sales expand our general merchandise business and scale mutually reinforcing and profitable businesses.

The guidance that Brent provided this morning includes these investments for these areas Ive just described.

One way to think about us is to recognize our people and physical assets as strategic moats and realize that we're changing how we think and work to build digital products and related businesses that complement those assets and have helpful margins marketplace advertising and membership income for example.

We arent strangers to membership.

Sam's club in the U S, China, and Mexico is performing very well and that performance accelerated during 2020.

Sam's is innovating, adding new capabilities and improving our merchandise offer, especially in fresh food and with our member's Mark private brand.

Sam's is a big business for us and it has strong momentum.

As I mentioned before this mutually reinforcing flywheel concept applies in our priority markets outside the U S.

Specific elements of the flywheel, such as pickup and delivery e-commerce and marketplace fulfillment services payment and other financial services and advertising have application in Mexico, Canada, India and China.

The same flywheel assets are adapted to be relevant to the specific needs of the customer in each market and to leverage our different operating models.

Let me focus on Mexico, and India for a minute.

We see an opportunity to grow ecommerce market share in Mexico.

Our stores business is strong and an omnichannel approach will be a winner in this market.

Our Walmart team has done a great job of growing ecommerce, including a strong same day delivery option from stores and clubs.

The pandemic had a similar impact to customer trends in Mexico as it did in the U S.

So now the next step for US is to leverage the momentum we have to grow one P and three P e-commerce through investments in technology supply chain and customer acquisition.

The team is building alternative income streams to complement our traditional retail business, including advertising.

In India, our momentum and potential for growth make this a unique opportunity.

E Commerce penetration is still low but growing rapidly we are well positioned to grow as an emerging middle class spends more money through their mobile phones.

Like the U S and Mexico. This is a market, where we will step on the gas to ensure we have the appropriate level of investment in areas like supply chain.

The phone pay business continues to grow and perform very well.

These are homegrown businesses with innovation and problem solving for the Indian customer at their core.

We continue to be impressed with flip cart and phone pay talent led back Kalyan and Samir you'll hear from them along with you that in a little while.

I talked a lot about investing for growth and I also think it's important for us to call out the areas, where we're narrowing our focus and making choices.

We're deploying capital to areas, where we see the best opportunity for growth, while pulling back in other areas over.

Over the last few years, you've seen us divest restaurants, and apparel specialty chain banks, Vudu and e-commerce businesses and brands, along with markets like Brazil and Argentina.

We've announced new ownership structures in the U K and Japan, moving us to a minority position.

We've executed these decisions to narrow our focus while also developing important partnerships to drive growth like those with J D. Dot com data at each of Birla fashion retailer and Ninja carton.

We're being deliberate about where we invest where we divest and where we partner.

We're a good partner and we're flexible.

In order for us to pull all of these work streams together and.

So a cohesive well executed strategy. The organization has to think and work in new ways think about it as an enabler of our strategy.

Whether it's moving to an agile way of working prioritizing digital acumen and diversity in our talent base.

We're developing new ownership structures around the world, we will function in a way that supports innovation speed and productivity are.

Our product teams and technologists are working hand in hand with business leaders every day to develop and deploy the right products at the right time for our customers and associates the.

The Tech team, we've assembled is working to take our technology to the next level.

We'll do the things I've described while staying true to our purpose and our core values and while taking a shared value approach.

The best way to create a valuable company is to build for the long term manage the short term and serve all the relevant stakeholders.

So we're systems thinkers, we connect dots, we design sustainability into our holistic supply chain and save money doing it by eliminating waste.

Environmental social and governance issues arent side projects, they are strategic core and part of our culture.

His aspirations push us beyond sustainability.

This is a holistic approach that supports and replenishes humanity in nature.

Regeneration means renewing and replenishing in addition to preserving and doing less harm.

Our target of zero emissions by 2040 with no offsets is an ambitious and motivating challenge.

We believe it's important to push towards zero and our own operations, even where its difficult and may not be feasible with current technology or push will help drive necessary innovation will will lead where we can and help make possible what is not currently possible.

Climate change remains at the forefront of our ambitions on regeneration and you've heard US talk many times about project Gigaton and our efforts to reduce emissions in the supply chain of our business and those of our suppliers.

To date suppliers have reported a cumulative 375 million metric tons of avoided emissions, we're well on our way to our goal of avoiding 1 billion metric tons of emissions.

In summary, we are confident in our strategy now is the time for us to be aggressive speed matters, we're going to keep the customer in the center and designed for them. The new business model. We're building will allow us to thrive to reinvent.

There is so much opportunity in front of us.

Our associates, including our leadership are the reason we have so much confidence.

Sam Walton was described as a merchant with a servants heart.

Our associates are continuing that legacy.

Thank you for your attention.

In a moment, we will begin the first of two Q&A sessions, Brett now we'll take your questions about what we've shared so far and then you'll hear more from the team.

Okay.

Yes.

Thank you for joining our Q&A session. This morning.

As a reminder, if you have a question. Please click Reis hand, you can find this under the reactions were participants button.

On the host calls upon you click the <unk> button that will appear on your screen and then you may ask your question.

I'll take a moment.

Our first question will come from Peter Benedict at RW Baird and after that we'll go to Paul Trussell.

Peter.

Okay, Hey, Dan. Thanks can you hear me.

Yeah, We got you.

Oh, Okay, Great Hey, guys. Thanks.

So I guess two part question here first.

Just on the higher capital spend.

Maybe can you tease that out a little bit more maybe some of the components there what areas of the business are getting how much and then as you think beyond this year you talked about the two 5% to 3% of sales.

There are certain areas that we'll get.

More of that versus last kind of what's the state of what continues beyond this year and I guess related to that.

On the on the on.

On the U S wage investment when do you think.

Your U S associate base should all be making at least $15 in hours or a timeframe, we should be thinking about for that thank you.

Yeah, Peter Thanks, I'll kick off so on on capital is as I mentioned in my remarks earlier, we're going to lean into the places that we've talked about from a strategic standpoint really for several years, but definitely this morning. So we'll lean in more particularly on supply chain and E Commerce, Peter you've been following the company for a long time. If you go back several years, we were spending 50, 60%.

More of capital in new stores now that's turning toward ensuring we have.

The right amount of capacity, we need to fulfill the customers' desires as much as the way that they want to be fulfilled, but then also.

Getting it to customers more quickly those are the kinds of things that we're going to be focused on and innovation. There's so many things that are going on from an innovation standpoint is supply chain and we've been on the front edge of that Doug and thinking about how we get pallas the stores and how we make it easier to pick in the back rooms, and those are the kinds of things over the next few years, where you're going to continue to see us lean in and globally not just in the U S. Yes.

Good morning, Peter I'll, just add that I'm really excited that we're now to the point, where we can invest in some of this automation I know you've been following us closely when we've been working on this for a while and now we've got these various forums distribution center technology fulfillment Center technology store level market fulfillment center technology that we can start to really scale.

And that'll take a few years to roll that out, but we like the customer experience benefits, we like the the productivity improvements that we're going to see and this year, just really fast forwarded things in terms of customer behavior. We think the vast majority of that behavior is going to last and it's terrific that the automation we've been working on is now ready.

Maybe if anything I wished had been ready a year ago, but at least we're there. We're there now and we can get going on it. So I'm really excited about that as it relates to associate wages. The approach that we have been trying to take for years now is to make sure that we're creating this latter of opportunity providing an opportunity for people.

When they start with the company to build a career like so many of us have and so the investments that we're making right now are aimed at this new structure that we've put in place. It's even more of a team approach to getting the work done across the store that needs to get done obviously picking and the store has become really important.

Managing inventory is obviously really important in this new structure is going to help us do those things more effectively and those people that were raising wages for tenda had been with us for a longer period of time than someone that that might be earning the entry wage and so we're trying to move that average up create that ladder and continue to have associates. It come.

Through our system and become store managers, we've got about 75% of our store management that starts as our lease.

The alternative would be to invest all of that to try and get to $15 faster, but if we do that then we wouldn't be able to create this this succession that where we're committed to creating we will raise our starting wage rate over time and I think our history proves that when we've gone since 2015 from nine to 10 to 11 were up over 50% in our stock.

Seeing wage rate now and we will be sensitive to the geographies on their parts of the country, where the starting wage should be lower than others, and we're obviously really well aware of what's happening nationally with this discussion around $15.

And.

I think that that's an important target, but also think that that should be paced in a way. That's good for the U S economy, and you can kind of see us as a model working through how that works, but I'm really excited to raise the wages today for so many people.

Great. Thank you Peter.

We'll go to Paul Trussell with Deutsche Bank next day minimum Karen short after that.

Good morning, Thank you for the color.

And especially for the willingness to provide guidance.

In a volatile and dynamic backdrop and guidance is really where my questions lie.

Brett.

To the extent you can dig deeper can you just help us a little bit more on some of the many moving parts in looking at your fiscal 'twenty. Two just how best we should think about the impact of the UK, Argentina, Japan wage invest.

Covid costs, just as best as you know today and then Doug as you kind of still expect the top line in the U S to remain positive. Despite the tough compares just discuss what's driving that confidence and what what the digital contribution to that growth.

Slide.

Yeah, Paul started good good to see you.

You almost answered your question.

How you were asking the question as we were talking through as you can imagine we're talking through wanting to give guidance. This year because it's we want to give you. The best view that we have right now knowing everything that we know, but we know less than we typically do in a normal year about what's going to happen with the vaccine was going to happen with economies, what's going to happen in other parts of.

What's going on.

So we've tried to raise up the guidance a little bit in and to be fair to give you just to give you a little more high level guidance than we have and so getting to the individual pieces and talking about any of those specifics would be pretty challenging, but if you look at even the top line guidance. We've we've given you as close as we can without divestitures or excluding divestitures.

We're trying to give you apples to apples and so with that we think low single digit growth for the company in Wal Mart U S is possible and you've got stimulus plans and other things that are that are sitting out there, but even with that Walmart U S would have a 10% to your stacks will be very very healthy growth same thing on the EPS and operating income were trying to give you apples to add.

Apple's a zip as in Japan, and all that are still in the business, obviously, there's not and there'll be an impact topline and bottom line from that.

I know you appreciate the situation that all of US are in with Covid and we wanted to give you as good a guidance as we could right now.

As it relates to U S growth, Paul obviously, theres a lot of variance week to week month to month quarter to quarter and I'm sure every retailer and we certainly did kept a really good diary about what was happening every day as we went through that year end.

Just looking back on all the things that happened even in February and March a year ago is is a it's a long list of activities things that occurred in the environment and decisions that we made.

Many of those decisions restricted sales in our stores.

We changed hours, we metered, how many people could be in the store and obviously, we were hit hard from an in stock point of view normally it's a great thing to have inventory turns and we were managing our supply chain well, but we didn't have these huge stockpile sitting to the side for the searches that we saw in things like consumables.

So I've never seen anything like what happened in our stores as we went through the year and it was a real challenge for our associates.

Our store managers, our system managers are our associates deserves so much credit for being able to adapt.

Some of them were on leave we had people joined the company we hired over half a million people. During the course of last year to help fill in for those on leave and to react to the additional demand that we had for picking delivery, so imagine being a store manager dealing with a lot of associates without much experience. So we've got all these things underneath the surface in stock store out.

Worse associates that were less experienced all of those factors caused us to think if things continue to improve the vaccine rollout continues people start to come back out.

People will come back to Walmart that may have been shopping locally because they were trying to manage the COVID-19 situation carefully.

We've talked about our market shares as we've gone through the year, we think we've got an opportunity in food and consumables to grow market share. This next year. So those are the kinds of things that caused us to feel like it's appropriate to forecast that increase in sales and then go earn it there will be a lot of volatility quarter by quarter and we will just do the best job. We can poll of explaining what we're seeing as we go.

Sure.

Thank you Paul next we'll go to Karen short with Barclays and then Simeon Gutman after them.

Hi can you hear me okay.

Yeah. Thanks, so much for all the color very helpful.

One clarification.

Yes, Ian Slide 28 as base correct in terms of its flat to slightly up.

But then the bigger question I had just on the U S.

Operating profit in general so when I kind of do back of the envelope math on.

The employees getting the wage increase I guess.

Kind of curve.

14% impact to operating profit in the U S.

And you've obviously guided to slightly up operating profit in the U S.

Maybe can you parse that out a little bit more because that.

And I know you've guided to upscale.

<unk> com.

And part of that but maybe give a little color on that because that 14% yet.

Like a fairly large one to overcome.

Yeah sure I'll walk you through this on the EPS you are correct. The 20th century, we've talked about as it relates to asset there'll still be a little bit of impact from.

From Japan, because that is accretive as well assuming we get that transaction closed in the next few weeks, but the way you did your math would be accurate on the U S. There's a lot changing in the P&L and one of the things that over the last several years as we've had gross margin that has decreased fairly significantly as we've invested in price and done other things.

Now as we have price gaps in a pretty good position certainly versus versus where they were years ago.

The way that we're able to move product, we're getting efficiencies there the new income streams that you see as having the general merchandise business, which has improved that helps mix ecommerce contribution margin that continues to prove all of that helps gross margin. So in the past where you were starting with gross margin going down fairly significantly at times.

That's really not the case, probably as we look forward so on the expense side.

Do have increased wages, but you also had significant COVID-19 costs this year and other things that hit that hit the expense line, but when you balance all of that out and again, Karen we're giving you. The best view that we can we do think that Walmart U S. Can continue to grow operating income, but theres a lot of things inside of that.

It's helpful to have the ecommerce improvements that we saw and Brett mentioned the contribution profit improvement.

That's driven through apparel and home mix and other things, including the fact that we.

We finally put our merchant teams together and John and Mark worked really well with the merchants Scot Mccall and others to help people come onboard and take on that additional responsibility in a way that that's been helpful. And then the volume growth leverages fixed costs in a different way so as you've heard over and over again a lot of things just got fast forwarded and change the shape of what.

We're looking at and the additional revenue streams that we've been talking about and we will talk about even more this morning advertising financial services marketplace, those things that really werent.

Large businesses at all they're growing and they're scaling and they're becoming a bigger part of the Walmart U S. P&L. So that's that's a positive.

Thank you. Thank you Karen next we'll go to Simeon Gutman with Morgan Stanley and then we'll go to Bob <unk> with Guggenheim.

Thanks Simon.

Hey, good morning, Thanks for taking my question.

And maybe a two parter for Doug and then a one part for you Brett.

Doug you mentioned balancing.

And managing all the interests of stakeholders and you guys have done a good job of that over the last few years. So this is the why not invest more upfront. This year how much of a debate is that and then can you tell us how much of this investment plan is new or is it pulling forward what would've been a five or 10 year plan and then to you Brett.

Thinking about fiscal 'twenty, three and beyond to realize you gave construct.

Is the leverage point of the business, Oregon of a retail business.

Increasing such that you can't get higher incremental margins over time and for some of those things you just mentioned plus advertising it seems like the incremental margins should get better, especially as you invest in supply chain and get more efficient.

But you said roughly in line EBIT growth to sales I'm sure. It's far out so you're being careful but why shouldn't we expect higher incrementals over time.

You may start and you want to go.

So first I mean, when you think about why not more the two pieces that go through my mind are the the automation investments and in the wage investment on the automation side I think we're going as quickly and as aggressively as we can and should go. These things will take some time, if we find that it's working really well and we can go faster I'm going to be in the camp of wanting to go faster because this looks like it's going to be really great.

For our supply chain, great for customers great for the company from a financial point of view.

On the wage side, we've been on.

On a path we've got a strategy, we've got a plan and we're executing that plan and you'll just see us continue to make investments at the right time, we think in the right levels. While also investing in automation to help with productivity. We're trying to play a harmony here and balance these things together and one of things I'm excited about by the way is that as we've been chi.

<unk>.

We've been able to add a lot of jobs, which I think is great. It's great for the economy. It's great for people to have employment and automation you know historically tends to change work and create new opportunities and I think that's what we're seeing I mean, the number of people that we've hired to pick orders in stores in a number of people that will need to run.

The automation investments that we're making there's going to be opportunity for folks and we're trying to craft. This this whole approach with not only hourly wages, but what we do with benefits and incentives what we do with health care, what we do with four one K match and all of those things to retain people in a way that you get the highest level of productivity.

City because people are bought in on what what the company's doing so we think we're doing this strategically at the right pace as it relates to the wage investments so I.

The one place where we could go faster if it all works is automation and it is a pull forward and we were planning on doing these things I think two things happened one is the pandemic change behavior faster than we would've had in our model and then secondly, it just so happens that two or three of these kind of came together in a way that they are ready to be scaled at the same time.

And that's great.

I mean, the way Youre thinking about the profit algorithm is right and I said in my comments that.

This company looks pretty different than five years ago and five years from now it's going to look different again in the comment I made in the remarks was that I do think operating income should grow faster than sales and as an executive team as we talked through these investments you've been making these investments. That's what we think we should do and when you look at the our ability to generate revenue and profit in different ways.

If you look at our general merchandise business, that's growing and changes the mix as you look at the contribution margins in e-commerce changing all of that lead you to believe that operating income can grow faster than sales.

In the mid to long term and that's that's what we expect to do as a company absolutely. We want that to happen. We think that will happen. We've got a path to make that happen and it's cool that it's happening in a different way that sustainable and more digital in nature. I mean, we've we've become more of a digital company and Thats important in the way that customers live and work can behave these days and.

The way you can stitch things together.

I remember growing up watching other retailer Sears comes to mind that diversified and learning and business schools that there were mistakes made in la.

Looking at what's happening today, and what we're trying to do the thing that's different is technology. The internet is different digital is different the way you can stitch. These things together is different and when I look at the flywheel that we showed you a few minutes ago I get really excited about the arrows that connect the dots. If we can design. These things in a way that we become more of a default for certain.

Because of their life because of the way we've intuitively designed things, that's where the magic can really happen and that is.

Possible today, because of digital and technology when it wasn't years ago.

If those don't get excited very often but as I see this business model shaping up it is really exciting it's it's a.

It's a really different look to the company integrate it doesn't feel like we're getting too far away from core no worry to boards yeah. Yeah. That's what's so exciting about it and we've got a team today that that thinks that way.

Some of the talent that's been with us for a long time as well as some new folks.

Thanks, Kevin.

Next we'll go to Bob <unk> with Guggenheim and then to Steph Wissink with Jefferies following that.

Good morning, guys.

I just got a couple of questions I think the first one on the why will you Doug you talked about the final a little bit can you just talk about how you think it will evolve with the new businesses that youre, adding beyond what you showed today can we start with that one.

Yes.

Well, Bob if we're ready to talk about that we would have gone ahead and told you that that was what we were planning, but it's obvious that as you put the customer in the middle you put families in the middle and you think about the opportunity you have.

If you're the one selling them the items they buy all the time and serving up the items that.

That they might love to discover it just creates all kinds of opportunity I think financial services is a suite is one example, health care lead you in a lot of different places the idea that we can help people with health care in a way that makes health care in the country more preventative.

Certainly high quality affordable accessible is is something that I think not only opens us up to two all of the industries that makeup health care, but also helps with their overall relationship in a way that people think about Walmart and that could lead us in a lot of different directions. The other one that comes to mind that was on our list, but we didn't talk a lot about it is data monitor.

<unk> data is obviously really valuable and we've got a history of giving our data away to suppliers and in doing that so that we could get in stock and that's obviously really important in some portions of our data will continue to be free because we need their help serving our mutual customers, but there are other aspects of our data that are really.

Valuable and can be put to work in ways that we haven't before and the concept of building products digital products that we can use internally and also monetize outside is a really exciting prospect in some of those things will be purely digital someone would be a combination of people plus digital think of last mile. For example, this this advair.

Vantage that we have with supercenter, so close to people can be monetized in ways that we that we haven't before because of the speed. It provides and the relationship that it provides so I think in future years, just as we did today. We'll show you. This evolving business model and show you new things in some cases, we may tell you. This one didn't work we're taking it off we're adding this one on.

And I think that's how it should be frankly.

Go ahead, Bob we still see.

Sorry, yes.

Two questions for Brett really I think the first one is can you talk about your price investment flexibility theres been a lot of discussion from the CPG companies about taking price in your ability to take price. So how do you guys get into that and how are you thinking about it the second question.

And he goes over Brent with the cost of debt being where it is can you talk a little bit about your willingness to perhaps maybe take on some debts for additional share buyback or any thoughts around that would be helpful. Thanks that'll be it yes.

Yeah, So on price I said, our price gaps.

Really as good as they've been in some cases higher than they've been we're going to continue to be the price leader in markets is really important to what we do it's important to our customers and it's part of who we are as a company, but we're going to be thoughtful about it we're going to be strategic about it.

We want you to come in and as a customer as you get a basketball Walmart we want that to be the best deal you can get as a customer. That's all that's who we are and in E. D. L. P. I'll just add to that John and Scott and the team are thinking about rollbacks, and if theyre going to be times. This year that it can be difficult for families and we've got this history of creating rollbacks in lowering prices in some.

Those plans are in place with the guidance that we gave you earlier today, yes.

On your question on capital obviously is a good one we just announced the $20 billion share buyback today that we think will execute over the next three years or so we're in an enviable cash position because of the cash flow generated because of the execution now the asset transaction and cash coming in it's okay to think to hold a little more cash right now.

We're.

We always look at share buyback. The first thing we want to do Bob and you've seen it this morris who want to invest in the business. That's the first thing we always want to do and I think we're doing that to the extent that we feel like we need to to execute our strategy. Our dividend. We just increased to 48 years in a row and then you get down and kind of to share buyback I feel good about our company I feel great about the valuation of the company and so you'll continue to.

To see us as you can tell by what I said this morning pretty aggressive from a share buyback standpoint.

Thanks, Bob next we'll go to Steph Wissink of Jefferies and then Michael Lasser after that.

Good morning, everyone. We also have two questions. If we could drive the first is for you I was really struck by the language you were using around shifting from an oxygen for your consumers to be near preferred trade through their preferred destination primary destination.

But can you talk a little bit more about how year energized here to really think about Walmart as a primary destination and maybe give us a little hint on Walmart plus wearing.

You are in front of the learnings around that and then Brian a question for you and maybe this goes back to an earlier question on the incremental margin. If I'm hearing you correctly, you're past fiscal 'twenty, two expanding margin leverage from an expense perspective, expanding margins on the growth side from a mix and through the alternative streams of value.

How should we translate that into the flow through to operating margin something better than that 30 to 40 basis points of the year. Thank you.

I'll go first on primary destination, the Supercenter does a great job of doing that and I always think of what it was like when I was a teenager my mom was headed out the door and she would say I'm going to Walmart what do you need I didn't really think about it then but looking back on it now the fact that she didn't say I'm going shopping or I'm going to the grocery store, where you need she said I'm going to Walmart and she bought everything that we can.

Possibly buy at Walmart and so many Americans and people around the world do that today and that's obviously really important but we didn't get that done in E. Commerce in early stages. We werent. The first place you go when it's time to buy products online. We're trying to change that obviously you got to earn that you've got to have the assortment you get at the price you got to provide service you got deliver when you are supposed to deliver.

All of those things have to be done and it takes some time to build those kinds of capabilities, but as we're building that the opportunity that we have is in a way that we put them together.

The combination of the Supercenter stores neighborhood markets in some cases Sams club and the Internet can cause Walmart in the Omnichannel future to continue to be primary destination. That's obviously the number one thing that we would want to get done and that's a priority for us once you have that and that doesn't mean, it's just food consumables people are buying a lot of hard lines are buying <unk>.

Merchandize, our Gen merchandize share went up this past year, driven largely by what was happening in stores E. Commerce, obviously grew at a higher rate, but the store volume was was amazing if we can get that done it opens up all of these other opportunities with the flywheel as we were discussing earlier Walmart plus as a component of that plan, but.

The number one aspect of the three dimensions, we've got today for Walmart plus is the delivery of items from our Super centers E. Commerce deliveries are important but the supercenter perishable assortment is obviously really important and we've got a limit on how much we can pick and deliver from stores. The automation that we're investing in will help change that and the other.

<unk> choices that we're making will help unlock that which will enable walmart plus to grow more we don't want to get ahead of ourselves and go sell too many Walmart plus memberships and have a customer experience that is less than our expectation of their expectation. So net promoter score as a key metric for example that we keep our eye on so Walmart plus will grow.

And there may be some things that we add to it over time that are more digital in nature that enable even more membership growth, but when I think about Walmart plus the thing that I'm focused on most is the net promoter score of a Walmart plus remember not the number of memberships that were selling the number of memberships will work out, but let's focus on quality as we saw.

Hard to scale at Walmart plus then unlocks data that we can use to serve up items for customers more effectively which helps us with margin mix. So that's important and something that overtime will matter to the company, we're not great at that today, it's a skill we're learning.

And I think in the future it'll be even more important to the company.

Yeah. The the construct of the P&L as you can imagine, it's pretty near and Dear to my heart and it's been fun to go through the last several months with the executive team in and again I said in my comments, even though it's been or as long as I have you have to step back and realize how many levers we have to pull as a company and now were in higher growth markets in international.

We're investing in e-commerce and exciting things in international we're growing at Sam's. There's all these levers that we can pull.

And the good thing about that is that there may be a year. We pulled this lever maybe a year, we pull a different lever maybe a quarter, we pull a lever a quarter, we pull another lever, but it all it all works.

When you look longer term.

Where we're really trying to control our own destiny is really important as we've been focused on operating discipline on the expense side and we've made progress in that regard and I still think that's going to happen longer term I feel very confident about that.

These new revenue streams are growing revenue streams and profit streams are a big part as well of giving us a different way to make money that just frees up even more levers and gives the company more optionality, which is so important we talked about sales growth or being over 4% into the future that helps a lot with every data point when you get sales growing like that because even at the same operating opera.

<unk> margin percentage you can just grow dollars and that's really what the productivity loop was all about how there was a time when I think a lot of people thought given our scale that we can only grow 1% or 2% and even before the pandemic. We had proven that was not the case I mean, if you do what customers want you to do you can grow the topline and then you can manage the bottom line. So we think what we put.

In place the last few years I'm really confident will help us for a generation and that's that's what we're out to do we're out to position the company for the next generation retail and we think because of Ami and because of our culture because of our progress in technology and mindset shift that we've got the opportunity to do that and we'll manage the short term, but we're building for the long.

But that if these things come together the way that we believe the will and the way we planned them. It does give opportunity for that operating margin to grow overtime and some of those things are scaling now so as we talk about fulfillment services and advertising in some of these other things you know two years ago. We were just getting started or 18 months ago I think phone.

<unk> is only four five years old I mean, some of the numbers Judith was covering.

Really it reached that scale in like four years three years ago, we weren't even talking that much about a pick up business, which is huge the day right. So when I when I look at our situation our flywheel I don't feel like there is anything speculative in it we've got traction on these things, it's just that they're smaller, but but the ability to grow them seems apparent if we just.

Execute and we can execute.

Thanks, Steph Hey go to Michael Lasser with UBS next and then Robbie Holmes after that.

If the on mute Michael Michael we can see it but we can't hear you. The most uttered phrase these days you're on mute.

Sorry, thank you.

Thanks, a lot for taking my questions.

More deeply connect investments that youre, making this year and how they're going to allow Walmart to generate 4% topline growth that youre expecting.

Specialty because one could argue that eco investments are necessary just to keep up with the changing environment.

For instance, does this mean you expect to be able to maintain 20% to 30% e-commerce growth in the U S business, even as you generate stable to improving sales in the U S and why.

And as part of this you expected the wage investment yield as much of a return this time around as they might have last time around whereas last time, you were a bit more proactive and this time the environment's a little different and then I have a follow up from your guidance for this year, Yes, I think the the wage investment will pay off.

And if you're one of those 400000 people that we're talking about today your attitude about Walmart the way your feeling today is different and we're asking them to do work in a different way.

Asking our associates to adapt and I think the investments, we're making in them correspond to that so I do expect a nice return from those investments that will help with retention it'll help with them being able to do their jobs at a really high level of productivity.

I am a little distracted by Michael's.

Lack of an ability to shave.

I'm worried about a razor sales I'm, sorry, I could not get done got out of the mine.

We sell a lot of razors on the App, Michael you can give some update there I know there's a lot we haven't seen some of you in a while.

Yes.

I look forward to when we're together in person this challenge to do all this virtually.

As it relates to the 4% growth.

We just have a lot of opportunity with ecommerce we're not good at it yet I mean, we're adding assortment, we're adding brands things are scaling the marketplace is scaling nicely.

We need more investment in capacity to have the fulfillment service achieve its potential and serve customers as well as ultimately we must so yeah. I think the investments that we're making are going to create upside which should translate into not just keeping up with market growth, but exceeding market growth building on the <unk>.

Other relationships, we have with customers, including the one that's most important right now which is the one in our stores and one thing too Michael If you think about now the international markets that were in there for the most part higher growth markets than the total that we've had over the last several years, so that that helps as well.

My follow up question is as you pointed out at the outset. There is a lot of uncertainty with trying to project sales this year and this is happening.

Simon you are making sizable investments.

If your top line.

Result is a little bit lower than you expect do you see outsized deleverage in your in your P&L or is there room to preserve your profitability such that we should think about while there is uncertainty with the topline there is less uncertainty with the bottom line for this year, yeah. There theres some room and we will manage the year as we can.

Go through it as best we can we've got as Brett and I talk about all these all these levers all the time in gross margins one of them, but I wouldn't want to do anything Michael that harms the business or slows down the strategy beyond. This this coming year I think we're gonna be fine this coming year and we've done the best job, we can of describing to you what we see but where the decisions were.

Thing about mostly today are not aimed at the next 12 months, they're aimed at the next few years and we won't lose side of that will stay on track as it relates to those kinds of things.

Thank you Michael Thanks, Michael we'll go to Robbie <unk> with Bank of America next and then Seth Sigman.

Sorry, guys can you hear me erratic for good.

Great great to see.

A couple of questions I guess for you Doug I was hoping the multibillion dollar.

AD business in the near future I was hoping you can maybe talk about a little more maybe than I was expecting what where's the confidence come from.

If you can weave into it.

The tick tock situation is there anything you guys learned from that situation about where Walmart fits in.

Within the social media platform World that you can share with us.

And then my separate Kwok of I'll ask my separate question for Brad After you answer that question.

Yeah, I think as it relates to advertising Robin we've got a unique opportunity because of our stores. We've got all of the things available to us related to ecommerce growth in digital growth in the reporting we provide for the investors in our advertising program as is there and we can show you that down the road, if a customer decides to come into a physical store.

Our store and buy it we can connect those dots for you. That's the unique proposition of our advertising program and we just haven't been that aggressive with our site and App, we want to preserve the customer experience. When they are looking for an item and not have ads clutter that up in a way that is going to detract from the experience. So we're going to manage that is.

As we drive the growth up but as I mentioned before there's just a ton of traction there what's.

What's happening with social Commerce is exciting it's been nice to have assets around the world, including in China to learn from how people are behaving as it relates to social commerce, and we think we've got an opportunity to partner in in different ways with different people to connect the dot on commerce, because sometimes a marketplace approach to a front end that is.

Driven by advertising doesn't result in the best customer experience because of lack of fulfillment or other components that make up a great seamless fast simple experiment experience.

Tick Tock livestream that we tried I think attracted 700000 people in that.

That happened kind of quick and I think we can we can do an even better job of bringing attention to events like that when we want to and so the teams learning and I think it's six months 12 months, we will look back on social Commerce, and we'll see more traction and will see Walmart playing a role in that and.

In some cases that will be just a simple partnership and we'll work out the terms of that partnership and that's what I think you can expect from us as it relates to that there is a connection back to advertising.

I think our mindset needs to be where retailer first commerce for serve the customer first and all these other things that flow from that including the monetization monetization of data and advertising will be secondary and tertiary to the number one thing.

That's helpful. Thanks, and then Bret I was hoping you could if you take the U S e-commerce business and and takeaway alternative profit streams and just look at the profitability per transaction across the U S. E Commerce business did that how did that look.

Last fiscal year versus previous years, and then maybe automation and a lot of these investments youre, making do they improve the profitability of the transactions or is that more about driving revenue growth in digital.

Yeah. It's you know Rob we've talked about several things over the past few years several things we look at when we when we look at that that ecommerce P&L, which is a very integrated part of the U S. P&L. When we look at contribution margin and that's improved this year, it's improve the years before that and so that's a big reason of why we've seen losses reduced in the U S E Commerce business, but also on the logistics.

<unk> side the cost of ship the variable cost of ship has continued to improve and these investments are there I would answer yes to all of what you just asked as they are there to drive revenue there to drive efficiencies are there to drive better customer service better customer experience at all of that and that's what's great about these investments because there's just there's all of the piece.

Says that we need from the ecommerce business. It fulfills that the growth in marketplace was a big deal too I mean, the first party contribution profit got better and then marketplace scaled which helps Linda whole thing together no Robbie it's it's.

Kind of reminiscent of how we manage mix back when I learned merchandising to begin with we had items that we made higher margins on an items when they had lower margins on today. We're just doing the same thing it's mixed management, but we not only manage category mix, but we manage channel mix with one P. Three P. All the components that we're talking about.

Which I think is helpful.

As it relates to our structure now that the Omnichannel approach gives people an opportunity to manage things across and that's that's how they should be managed it.

Thanks, Rob Thanks Ravi.

We've got time for just one more question, we'll go to Kelly Bania with BMO capital markets.

Hi, Kelly Hi, can you hear me, Okay, we can.

Perfect.

Just wanted to ask another question on U S E Commerce, maybe following up a little bit from Robbie's question.

We look at U S. EBIT dollar growth. It was about one six to $1.7 billion. This year can you just help us understand a little bit the magnitude that e-commerce the improvement in ecommerce losses contributed to that could it be a third or more.

And then I guess, Brett you talked about reaching maybe a 100 billion globally I think that was an e-commerce over the next few years. So it sounds like maybe 15% to 25% growth.

But can you talk a little bit longer term about what mature margins could be there and as you think about advertising financial services marketplace.

What what is part of that as you think about U S ecommerce margins or maybe those are separate.

There's a lot in those questions Kelly.

As you look at the profitability increase in Walmart U S. Because last year. There are so many pieces of that there is improvement obviously eight 6% comp sales helped a lot all the way down the P&L gross margin rates with improvement in mix as Doug was talking about general merchandise with a lot of increased costs over $4 billion in costs globally.

As a company related to Covid. So it's a little tough to parse out out of all of that in E. Commerce business is becoming even more integrated part of what we're doing in the stores, but but ecommerce losses did improve significantly during the year.

As we think about going forward, what I'd said in my remarks is that we expected $100 billion globally commerce over the next couple of years and could see 200 billion of a few years after that.

All of these and go back to the comment I made about levers and we certainly think about and we know the pieces of the business and what the profitability of as each one and that's important but we are looking at that total and how do we grow the total.

And we wouldn't be going into these businesses any of these businesses. We didn't think they were going to be profitable long term.

But each business serves a purpose and it serves potentially a different purpose at a different time. So all of this goes into how we think about our financial algorithm, but having that 4% topline growth having operating income grow faster than sales. That's the algorithm how we get there.

You know can change over time, and I think that's great that it can change over time that we have that flexibility to do that.

Thanks, Kelly, so that wraps up our first Q&A session, we're going to take a brief 10 minute break and then we'll resume our program. Thank you.

Yes.

Great.

Yes.

Yes.

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