Q3 2025 Walmart Inc Earnings Call

November 19, 2024

<unk> lifted our sales growth by a small amount and negatively affected operating income growth by a larger amount.

The takeaway should be that we delivered on our financial framework. Despite the noise from these events.

This was clearly a strong quarter and the changes we've been working on for years are continuing to bear fruit.

Doug McMillon: By typing into a search bar and getting a list of results to choose from, we're racing to improve all the things that people love about shopping and remove or diminish all the things they don't. In addition to the customer-facing work, 15 months ago, we deployed a GenAI tool for all of our U.S. office associates. It's called My Assistant. We've expanded access to home office associates in 13 additional countries, and we continue to see engagement grow. It provides our associates a place to access knowledge and time-saving actions in a secure environment. Since launch, 50,000 associates have used My Assistant to ask 1.5 million questions. Our leaders can get insights into people-related metrics such as hiring and retention, and associates can get answers to common policy questions like, "How do I order my discount card?" through a conversational experience.

<unk> tapping into a search bar and getting a list of results to choose from.

We're racing to improve all the things that people love about shopping and remove or diminished all the things they do.

In addition to the customer facing work 15 months ago, we deployed a gin AI tools all of our U S Office associates.

Called myosin we've.

We've expanded access to home office associates, and 13 additional countries and we continue to see engagement grow.

It provides our associates a place to access knowledge and time saving actions in a secure environment.

Since launch 50000 associates have used my assistant to ask 1.5 million questions.

Our leaders can get insights into people related metrics, such as hiring and retention.

Associates can get answers to common policy questions like how do I order my discount card through a conversational experience will.

Doug McMillon: We'll continue to build on these use cases to enable more productivity and help identify the next best task for our associates in stores and clubs. Just as we're enhancing the customer experience with GenAI, we're working to remove friction for our associates so they can do high-value work that they enjoy, like serving our customers and being merchants. I continue to be excited about how our associates are learning and changing the way they think and work. With that, I'll wrap up and turn it over to our CFO, whose Baylor Bears beat my Arkansas Razorbacks in basketball recently. We'll see you in March, John David.

We will continue to build on these use cases to enable more productivity and help identify the next best task for our associates in stores and clubs.

As we're enhancing the customer experience with gene AI, we're working to remove friction for our associates. So they can do high value work that they enjoy flex serving our customers and being merchants.

I continue to be excited about our associates or learn and changing the way you think and work.

Speaker Change: With that I'll wrap up and turn it over to our CFO Who's Baylor Bears beat my Arkansas Razorbacks in basketball recently.

Speaker Change: We will see you in March John David.

John David Rainey: I look forward to that, Doug. I hope the Razorbacks have a good season, just not as good as the Bears. I want to start by thanking our team for delivering another strong quarter. We're encouraged by the steady momentum building across the business. Importantly, the drivers of our outperformance are similar to the past several quarters, with customers and members continuing to respond to our value proposition as we provide lower prices and greater levels of convenience. We're broadening our department, improving customer experience, and earning their trust, while seeing share gains as a result. We're also realizing benefits from the investments we've made in our core omni-retail business and seeing improved profitability with newer businesses. We're executing on our strategy, and the business model is delivering as it's designed to do, with operating income growing faster than sales, and yet there is much more opportunity ahead.

John David: Well, we look forward to that Doug I hope the Razorbacks episode season, just not as good as the bears.

Speaker Change: I want to start by thanking our team for delivering another strong quarter.

Speaker Change: We're encouraged by the steady momentum building across the business <unk>.

Speaker Change: Importantly, the drivers of our performance are similar to the past several quarters with customers or members continuing to respond to our value proposition is we provide lower prices and greater levels of convenience.

Speaker Change: Broadening our assortment proving customer experience and earning the trust Wilson share gains as a result.

Speaker Change: We're also realizing benefits from the investments we've made in our core omni retail business and seeing improved profitability with newer businesses.

Speaker Change: We're executing on our strategy and.

Speaker Change: The business model is delivering as it's designed to do with operating income growing Mr themselves and yet there is much more opportunity ahead.

John David Rainey: As Doug noted, the hurricanes that impacted southeastern United States resulted in unanticipated expenses during the quarter. I'm incredibly proud of how our team responded to support the communities that we serve, using our fleet of semi-trucks, supply chain, logistics capabilities, product inventory, and financial resources to support the restoration effort. At the peak of the storms, we had about 400 stores, clubs, and DCs closed. We're pleased that all of our associates in the affected areas remain safe, and we continue to support them during this disruptive period. We've since reopened all of our supercenters except for two that were extensively damaged, and we're in the process of restoring these stores to serve customers again as soon as possible. Now, let me review the highlights of our financial results. Q3 sales, operating income, and EPS all exceeded the top end of our guided ranges.

John David Rainey: As Doug noted, the hurricanes that impacted the southeastern United States resulted in unanticipated expenses during the quarter. I'm incredibly proud of how our team responded to support the communities that we serve, using our fleet of semi-trucks, supply chain, logistics capabilities, product inventory, and financial resources to support the restoration effort. At the peak of the storms, we had about 400 stores, clubs, and DCs closed. We're pleased that all of our associates in the affected areas remain safe, and we continue to support them during this disruptive period. We've since reopened all of our supercenters except for two that were extensively damaged, and we're in the process of restoring these stores to serve customers again as soon as possible. Now, let me review the highlights of our financial results. Q3 sales, operating income, and EPS all exceeded the top end of our guided ranges.

As Doug noted the hurricanes the impact to the southeastern United States resulted in unanticipated expenses during the quarter.

Speaker Change: I'm incredibly proud of how our team responded to support the communities that we serve.

Speaker Change: Using our fleet of semi trucks supply chain logistics capabilities product inventory and financial resources to support the restoration effort.

Speaker Change: At the peak of the storms, we had about 400 stores clubs and Dcs closed.

Speaker Change: We're pleased that all of our associates in the affected areas remains safe and we continue to support them. During this disruptive period.

Speaker Change: We have since reopened all of the Super centers, except for two that works simply damaged.

We're in the process of restoring these stores to serve customers again as soon as possible.

Speaker Change: Now, let me review the highlights of our financial results Q.

Speaker Change: Q3 sales operating income and EPS all exceeded the top end of our guided ranges.

John David Rainey: Enterprise net sales growth was over 6% on a constant currency basis, with all three operating segments outperforming our expectations, aided by strong eCommerce growth. Walmart U.S. comp sales increased 5.3%, including eCommerce sales growth of 22%. Growth in customer transactions and units across stores and eCommerce remains strong. Store-fulfilled delivery increased nearly 50% and surpassed $2.5 billion monthly run rate. We've now had 12 consecutive months of deliveries above $2 billion. Food categories were especially strong this quarter, with unit volumes growing by the highest level in four years. We also generated mid-teens growth in health and wellness, due largely to branded pharmacy scripts, including GLP-1. GLP-1 sales contributed about one point to the segment comp, while continuing to create mixed pressures in gross profit. We're encouraged by the improvement in general merchandise, where we had low single-digit comp sales growth, including strength in home, hard line, and toys.

John David Rainey: Enterprise net sales growth was over 6% on a constant currency basis, with all three operating segments outperforming our expectations, aided by strong eCommerce growth. Walmart U.S. comp sales increased 5.3%, including eCommerce sales growth of 22%. Growth in customer transactions and units across stores and eCommerce remains strong. Store-fulfilled delivery increased nearly 50% and surpassed a $2.5 billion monthly run rate. We've now had 12 consecutive months of deliveries above $2 billion. Food categories were especially strong this quarter, with unit volumes growing by the highest level in four years. We also generated mid-teens growth in health and wellness, due largely to branded pharmacy scripts, including GLP-1. GLP-1 sales contributed about one point to the segment comp, while continuing to create mixed pressures in gross profit. We're encouraged by the improvement in general merchandise, where we had low single-digit comp sales growth, including strength in home, hardline, and toys.

Speaker Change: Enterprise net sales growth was over 6% on a constant currency basis with all three operating segments outperforming our expectations aided by strong e-commerce growth.

Speaker Change: Walmart U S comp sales increased five 3%, including e-commerce sales growth of 22%.

Speaker Change: Growth in customer transactions and units across stores and ecommerce remains strong.

Speaker Change: Historical fill delivery increased nearly 50%.

Speaker Change: And surpassed $2 $5 billion monthly run rate.

Speaker Change: We've now had 12 consecutive months of deliveries above $2 billion.

Speaker Change: Food categories were especially strong this order with unit volumes growing by the highest level in four years.

Speaker Change: We also generated mid teens growth in health and wellness due largely to branded pharmacy scripts, including G. O P. One G O P. One sales contributed about one point to the segment comp.

Speaker Change: <unk> to create mixed pressures and gross profit.

Speaker Change: We're encouraged by the improvement in general merchandise, where we had low single digit comp sales growth, including strength in home hardline and toys.

John David Rainey: U.S. customers remain resilient, with behaviors largely consistent over the past four to six quarters. They continue to seek value to maximize their budgets, while also choosing convenient options to save time. Our efforts to bring down pricing have helped as total like-for-like inflation has remained close to flat for the past four quarters, with Q3 general merchandise and consumables deflationary and food inflationary in the low single digits. We're seeing higher engagement across income cohorts, with upper-income households continuing to account for the majority of our share gains. Our international business had another strong quarter, with constant currency sales growth of 12.4%, reflecting strength in Flipkart, Walmart, and China. We saw positive unit growth across markets, with sales strength in both general merchandise and food and consumables. eCommerce sales increased 43%, and penetration grew across all markets, with speed of delivery becoming increasingly important to customers.

John David Rainey: U.S. customers remain resilient, with behaviors largely consistent over the past four to six quarters. They continue to seek value to maximize their budgets, while also choosing convenient options to save time. Our efforts to bring down pricing have helped as total like-for-like inflation has remained close to flat for the past four quarters, with Q3 general merchandise and consumables deflationary and food inflationary in the low single digits. We're seeing higher engagement across income cohorts, with upper-income households continuing to account for the majority of our share gains. Our international business had another strong quarter, with constant currency sales growth of 12.4%, reflecting strength in Flipkart, Walmart, and China. We saw positive unit growth across markets, with sales strength in both general merchandise and food and consumables. E-commerce sales increased 43%, and penetration grew across all markets, with speed of delivery becoming increasingly important to customers.

Speaker Change: Customers remain resilient with behaviors largely existed over the past four to six quarters. They.

Speaker Change: They continue to seek value to maximize their budgets, while also choosing convenient options to save time.

Speaker Change: Our efforts to bring down pricing helped us total like for like inflation has remained close to flat for the past four quarters with Q3 general merchandise and consumables deflationary and food inflationary in the low single digits.

Speaker Change: We're seeing higher engagement across income cohorts with upper income households, continuing to account for the majority of our share gains.

Speaker Change: Our international business had another strong quarter.

Speaker Change: With constant currency sales growth of 12, 4%, reflecting strength in flip cart <unk> in China.

Speaker Change: We saw positive unit growth across markets with sales strengthened both general merchandise and food and consumables.

Speaker Change: Commerce sales increased 43% and penetration grew across all markets with speed of delivery, becoming increasingly important to customers and last 12 months international delivered over $2 1 billion items same day or next day with about 45% of those delivered in under one hour.

John David Rainey: In the last 12 months, international delivered over 2.1 billion items same day or next day, with about 45% of those delivered in under one hour. Flipkart's Big Billion Days sales event was up double digits in both top line and customer growth. The timing of the event was earlier than last year, benefiting our year-over-year sales comparisons in Q3, with a corresponding headwind expected in Q4. Walmart's growth outpaced the comparable market for the sixth consecutive quarter, and our business in China continued to grow double digits, with strength in Sam's Club and eCommerce. PhonePe also had a good quarter, with monthly transactions surpassing 8.7 billion and total annualized payment volume of approximately $1.6 trillion. Sam's Club U.S. comp sales ex-fuel increased 7%, including eCommerce growth of 26%, with increased transactions and unit volumes accounting for almost the entirety of the comp growth.

Speaker Change: Slipped carts bvd or big billion day sales event was up double digits in both topline and customer growth.

Speaker Change: The timing of the event was earlier than last year benefiting our year over year sales comparison in Q3 with a corresponding headwind expected in Q4.

Speaker Change: <unk> growth outpaced the comparable market for the sixth consecutive quarter.

Speaker Change: And our business in China continued to grow double digits with strength in Sam's club and E Commerce.

Speaker Change: Phone pay also had a good quarter with monthly transactions, surpassing $8 7 billion and total annualized payment volume of approximately one six trillion.

Speaker Change: Sam's club comp sales ex fuel increased 7%, including e-commerce growth of 26% with increased transactions and unit volumes accounting for almost the entirety of the comp growth.

John David Rainey: In response to member feedback, Sam's Club rolled out new perks in August, like express delivery and the elimination of curbside pickup fees for Club tier members, which helped eCommerce growth. Since that launch, eCommerce growth has increased by more than 700 basis points versus our trends in the first half of the year, with Club fulfilled delivery more than doubling in that period. The convenience Sam's Club provides both inside the club and via eCommerce is a differentiator in the warehouse club channel. Scan and Go penetration of sales increased more than 250 basis points, and the nearly completed rollout of our Just Go exit technology across all 600 clubs is enabling about 70% of members to exit without a check. Members love it, with member satisfaction scores on exit now close to 90%.

John David Rainey: In response to member feedback, Sam's rolled out new perks in August, like express delivery and the elimination of curbside pickup fees for Club tier members, which helped eCommerce growth. Since that launch, eCommerce growth has increased by more than 700 basis points versus our trends in the first half of the year, with Club fulfilled delivery more than doubling in that period. The convenience Sam's provides both inside the club and via eCommerce is a differentiator in the warehouse club channel. Scan & Go penetration of sales increased more than 250 basis points, and the nearly completed rollout of our Just Go technology across all 600 clubs is enabling about 70% of members to exit without a check. Members love it, with member satisfaction scores on exit now close to 90%.

Speaker Change: In response to member feedback Sam's rolled out new perks in August like express delivery and the elimination of curbside pickup fees for club tier members, which e-commerce growth since that launch E. Commerce growth has increased by more than 700 basis points versus our trends in the first half of the year.

Speaker Change: With club fulfilled delivery more than doubling in that period.

Speaker Change: The convenience Ams provides both inside the club and via E. Commerce is a differentiator in the warehouse club channel.

Speaker Change: <unk> penetration of sales increased more than 250 basis points and the nearly complete rollout of our just go exit technology across all 600 clubs than I believe about 70% of members exit without a check.

Speaker Change: Members Love it with member satisfaction scores on exit now close to 90%.

John David Rainey: Our frictionless approach to serving members by leveraging technology is on full display at our new club opened in Grapevine, Texas, the first of 30 new clubs we expect to open in the coming years. If you're in the area, we'd encourage you to check it out. From a margin standpoint, consolidated gross margin expanded 21 basis points, led by Walmart U.S., with international results pressured by the timing of Flipkart's Big Billion Days sales event. In the U.S., improved margins reflected strong inventory management again this quarter, with a 0.6% decline on more than 5% sales growth, as well as a lower level of markdowns that has allowed us to manage pricing aligned to competitive price gaps. Providing everyday low prices for our customers and members remains a priority, and we continue to lower prices in the U.S. across our assortment of national brands and private brands.

Speaker Change: Our frictionless approach to serving members by leveraging technology is on full display at our New club opened in Grapevine, Texas. The first 30, new Clos with respect to open in the coming years.

Speaker Change: If you're in the area, we'd encourage you to check it out.

Speaker Change: For margin standpoint, consolidated gross margin expanded 21 basis points led by Walmart U S with international results pressure by the timing of flip cards Bvd sells event.

Speaker Change: The U S improved margins reflected strong inventory management again, this quarter with a 0.6% decline on more than 5% sales growth as well as a lower level of Mark Downs has allowed us to manage pricing aligned to competitive price gaps.

Speaker Change: Providing everyday low prices for our customers and members remains a priority and we continue to lower prices in the U S across our assortment of national brands and private brands.

John David Rainey: During the quarter, we had price rollbacks on approximately 6,000 items across our assortment, including around 3,000 items in grocery, and have converted nearly 2,000 price rollbacks over the past year to long-term price reductions. We're pleased with how customers and members are responding to our strong value proposition. As our business model evolves, it's encouraging to see our margins improve from a diverse set of offerings. Global eCommerce losses continued to narrow in Q3, most notably in Walmart U.S. While improved business mix helped, we're seeing good progress in core eCommerce margins. There are a few key factors driving this improvement: delivery densification, increased penetration of paid expedited delivery orders, and the automation of our supply chain. As we scale our store-fulfilled delivery business and expand our catchment areas, we've seen significant improvement in batch density, with orders per delivery up 20%.

During the quarter, we had price rollbacks on approximately 6000 items across our assortment, including around 3000 items in grocery and have converted nearly 2000 price rollbacks over the past year to long term price reductions, we're pleased with how customers and members are responding to our strong value proposition.

Speaker Change: As our business model evolves, it's encouraging to see our margins improve from a diverse set of offerings global ecommerce losses continued to narrow in Q3, most notably in Walmart U S.

Speaker Change: While improved business mix helped.

Speaker Change: Seeing good progress in core E Commerce margins.

Speaker Change: There are a few key factors driving this improvement deliver.

Speaker Change: Delivery Densification, Inc.

Speaker Change: Increased penetration of aid expedited delivery orders and the automation of our supply chain.

Speaker Change: As we scale, our store fulfilled delivery business and expand our catch Marriott, we've seen significant improvement in batch entity with orders per delivery up 20%.

John David Rainey: In addition, the popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than one hour or less than three hours. Lastly, we continue to make progress in the automation of our supply chain, as now more than 50% of our fulfillment center volume is automated, which is twice as much at this point last year. This has the obvious benefit of lowering the per unit cost of delivery. These factors contributed to the third consecutive quarter of approximately 40% reduction in U.S. net delivery cost per order. Importantly, while we drive greater efficiency, we're enhancing service levels with customer NPS for delivery reaching all-time highs this quarter.

Speaker Change: In addition, the popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than one hour or less than three hours.

Speaker Change: And lastly, we continue to make progress in the automation of our supply chain is now more than 50% of our fulfillment center volume is automated which is twice as much at this point last year.

Speaker Change: This has the obvious benefit of lowering the per unit cost of delivery.

Speaker Change: These factors contributed to the third consecutive quarter of approximately 40% reduction in U S net delivery cost per order.

Speaker Change: Importantly, while we drive greater efficiency enhancing service levels with customer NPS for delivery, reaching all time highs this quarter.

John David Rainey: We're also continuing to reshape our profit composition and business mix as we scale growth drivers such as advertising, membership, marketplace and fulfillment, and data analytics and insights. Our global advertising business increased 28% in Q3, driven by 50% growth in international, led by Flipkart, which was aided by the Big Billion Days event, as well as another strong quarter from Walmart Connect in the U.S., which grew 26%. We're building a highly unique retail media platform, and I've been encouraged by ongoing tests showing customer receptivity to growth in digital ads, especially where ads help customers discover relevant items that are trending, navigate and compare choices, and enjoy Walmart's everyday low prices. We're also pleased with the trends in our membership programs.

John David Rainey: We're also continuing to reshape our profit composition and business mix as we scale growth drivers such as advertising, membership, marketplace and fulfillment, and data analytics and insights. Our global advertising business increased 28% in Q3, driven by 50% growth in international, led by Flipkart, which was aided by the Flipkart Big Billion Days event, as well as another strong quarter from Walmart Connect in the U.S., which grew 26%. We're building a highly unique retail media platform, and I've been encouraged by ongoing tests showing customer receptivity to growth in digital ads, especially where ads help customers discover relevant items that are trending, navigate and compare choices, and enjoy Walmart's everyday low prices. We're also pleased with the trends in our membership programs.

Speaker Change: We're also continuing to reshape our profit composition of business mix as we scale growth drivers such as advertising membership marketplace, and fulfillment and data analytics and insight.

Speaker Change: Our global advertising business increased 28% in Q3.

Speaker Change: Driven by 50% growth in international led by flip cart, which was aided by the <unk> event as well as another strong quarter from Walmart connect in the U S, which grew 26%. We are building a highly unique retail media platform and have been encouraged by ongoing test showing customer receptivity to growth in digital ads and.

Speaker Change: Specialty or ads help customers discover relevant items that trending navigating compare choices and enjoy walmarts everyday low prices.

Speaker Change: We're also pleased with the trends in our membership programs in the U S. Sams club continued to grow membership counts and increase its penetration of plus members, resulting in 15% membership income growth, while Walmart plus membership income grew double digits again this quarter.

John David Rainey: In the U.S., Sam's Club continued to grow membership count and increase its penetration of Plus members, resulting in 15% membership income growth, while Walmart+ membership income grew double digits again this quarter. Within international, membership income in China from our Sam's Club business grew more than 30% as member counts continue to increase. For marketplace and Walmart fulfillment services, in the U.S., marketplace grew 42% in Q3, and we've now seen more than 30% growth in each of the past five quarters. The number of sellers on the platform continued to grow double digits, and SKU count is approaching 700 million items. With a broader assortment of the brands and items customers want, marketplace sales in beauty, toys, hard lines, and home all grew more than 20%.

Speaker Change: Within International membership income China from our Sam's club business grew more than 30% as member counts continue to increase.

Speaker Change: For marketplace, and Walmart fulfillment services in the U S marketplace grew 42% year three.

Speaker Change: And we've now seen more than 30% growth in each of the past five quarters.

Speaker Change: The number of sellers on our platform continued to grow double digits and SKU count is approaching 700 million items.

Speaker Change: With a broader assortment of the brands and items customers one marketplace sales in beauty toys hard lines and home all grew more than 20%. We continued to leverage our next generation supply chain and technology to provide fulfillment for sellers some of the lowest rates in the industry.

John David Rainey: We continue to leverage our next-generation supply chain and technology to provide fulfillment for sellers at some of the lowest rates in the industry. As a result, more sellers are using our marketplace fulfillment services, with WFS sales penetration reaching record highs at more than 40%. Outside of the U.S., we're seeing similar encouraging trends. For example, our marketplaces in Mexico, Canada, and Chile combined increased items by 20% versus last year. In Mexico, the number of items delivered through WFS grew over 50%, and during Flipkart's Big Billion Days event, we experienced same-day delivery growth 2.5 times higher than last year. This quarter, Flipkart also launched its quick commerce service called Flipkart Minutes in a number of cities, offering delivery in under 15 minutes for a variety of items, including groceries and electronics.

John David Rainey: We continue to leverage our next-generation supply chain and technology to provide fulfillment for sellers at some of the lowest rates in the industry. As a result, more sellers are using our marketplace fulfillment services, with WFS sales penetration reaching record highs at more than 40%. Outside of the U.S., we're seeing similar encouraging trends. For example, our marketplaces in Mexico, Canada, and Chile combined increased items by 20% versus last year. In Mexico, the number of items delivered through WFS grew over 50%, and during Flipkart Big Billion Days event, we experienced same-day delivery growth 2.5 times higher than last year. This quarter, Flipkart also launched its quick commerce service called Flipkart Minutes in a number of cities, offering delivery in under 15 minutes for a variety of items, including groceries and electronics.

Speaker Change: As a result, more sellers are using our marketplace fulfillment services with wf SLS penetration, reaching record highs in more than 40%.

Speaker Change: Outside of the U S. We're seeing similar encouraging trends for.

Speaker Change: For example, our marketplaces in Mexico, Canada, and Chile, combined increased items by 20% versus last year.

Speaker Change: In Mexico, the number of items delivered through W. F. S grew over 50%.

Speaker Change: And during flip cards Big billion days event, we experienced same day delivery growth two and a half times higher than last year. This quarter flip cart also launched its quick commerce service called flip cart myths and a number of cities offering delivery in under 15 minutes for a variety of items, including groceries and electronics.

John David Rainey: Within data analytics and insights, Walmart Data Ventures continues to grow rapidly, with net sales up double digits. Our client base has more than doubled over the past year, and we're excited about continuing to broaden our reach to new markets by launching the platform in Canada this month. As a reminder, the margin gains we've reported this year in the U.S. have been burdened by meaningful product headwinds from the outsized sales growth in health and wellness relative to general merchandise. Our plan calls for general merchandise to improve in future quarters, but to continue to underperform health and wellness in grocery until we return to a more normalized purchasing cycle across GM categories. We remain focused on building out our marketplace assortment and emphasizing early emergent categories like apparel, home decor, and automotive supplies.

Speaker Change: And within data analytics and insight Walmart <unk> debentures continues to grow rapidly with net sales up double digits.

Speaker Change: Our client base and more than doubled over the past year and we're excited about continuing to broaden our reach to new markets by launching the platform in Canada. This month.

As a reminder, the margin gains we reported this year in the U S have been burdened by meaningful product headwinds from the outsized sales growth in health and wellness relative to general merchandise.

Speaker Change: Our plan calls for general merchandise to improve in future quarters, but to continue to underperform health and wellness and grocery until we return to more normalized purchasing cycle across GM categories.

Speaker Change: We remain focused on building out our marketplace assortment and emphasizing early emerging categories like apparel home decor and automotive suppliers.

John David Rainey: We're continuing to optimize our business to deliver greater efficiency, and we're committed to balancing ongoing investments with improved returns for customers, associates, and shareholders. Our evolving business model, with more diversified and durable sources of profit, has provided the ability to fund investments while also delivering on our financial framework of operating income growing faster than sales. Price gaps remain healthy, and we continue to advocate on behalf of customers for lower prices. Wrapping up Q3 results, consolidated operating income grew 9.8% in constant currency, and adjusted EPS increased nearly 14% to $0.58 per share. Now, turning to guidance, we are raising our full-year guidance to reflect strong third-quarter results. On a constant currency basis, we now expect full-year sales growth of 4.8% to 5.1% and operating income growth of 8.5% to 9.25% versus prior guidance of growth of 3.75% to 4.75% and 6.5% to 8%, respectively.

Speaker Change: We're continuing to optimize our business to deliver greater efficiency and we're committed to balancing ongoing investments with improved returns for customers associates and shareholders.

Speaker Change: Our evolving business model with more diversified and durable sources of profit has provided the ability to fund investments while also delivering on our financial framework of operating income growing faster than sales.

Speaker Change: S gaps from healthy and we continue to advocate on behalf of customers for lower prices.

Speaker Change: Wrapped up Q3 results consolidated operating income grew 9% in constant currency and adjusted EPS increased nearly 14% to <unk> 58 per share.

Speaker Change: Now turning to guidance.

Speaker Change: We are raising our full year guidance reflects strong third quarter results.

On a constant currency basis, we now expect full year sales growth of four eight to five 1% and operating income growth of eight five to $9 two 5% versus prior guidance of growth of 375% to 475% and six 5% to 8%.

John David Rainey: Compared to our guidance that we provided at the start of the year, we now expect operating income to grow nearly 400 basis points more at the midpoint. Adjusted EPS is expected to be between $2.42 and $2.47 versus prior guidance of $2.35 to $2.43. This full-year guidance implies fourth-quarter constant currency growth in sales of around 3% to 4% and operating income around 5% to 7.5%. This guidance is slightly above our prior implied Q4 range and contemplates a series of wage investments that Sam's Club announced on September 17 to be effective in Q4. Recall that we guide sales and operating income growth on a constant currency basis. Currency fluctuations impacted the business negatively in Q3, after being a tailwind in Q1 and neutral in Q2. In Q3, currency pressured reported sales and operating income growth by about 70 basis points and 160 basis points, respectively.

Speaker Change: Actively.

Speaker Change: Compared to our guidance that we provided at the start of the year.

Speaker Change: We now expect operating income to grow nearly 400 basis points more at the midpoint.

Speaker Change: Adjusted EPS is expected to be between $2 42, and $2 47.

Speaker Change: Versus prior guidance of $2 35 to 243. This full year guidance implies fourth quarter constant currency growth in sales around 3% to 4% and operating income ground five to seven 5%.

Speaker Change: This guidance is slightly above our prior implied Q4 range and contemplates a series of investments that Sam's club announced on September 17th to be effective in Q4.

Speaker Change: Recall that we guide sales and operating income growth on a constant currency basis.

Speaker Change: Currency fluctuations impacted the business negatively in Q3.

Speaker Change: After being a tailwind in Q1 and neutral in Q2.

Speaker Change: In Q3 currency pressured reported sales operating income growth by about 70 basis points and 160 basis points respectively.

John David Rainey: If rates stay where they are currently, we would expect a headwind to Q4 reported sales and operating income growth of approximately 100 basis points and 200 basis points, respectively. In closing, while we still have one more quarter to go before we close out this year, we're really encouraged by our operational and financial performance. We have a lot of conviction in our strategy, and the leaders sitting around the table with me today, along with our team of over 2 million associates around the world, are executing on it. Hopefully, you share my sentiment and are as excited as we are to see what else is to come. We appreciate your interest in Walmart and are now ready to take your questions.

Speaker Change: If rates stay where they are currently we would expect a headwind Q4 reported sales and operating income growth of approximately 100 basis points and 200 basis points respectively.

Speaker Change: In closing, while we still have one more quarter to go before we close out this year.

Speaker Change: We're really encouraged by our operational and financial performance.

We have a lot of conviction in our strategy and.

Speaker Change: And our leader sitting around the table with me today, along with our team of over 2 million associates around the world are executing on it.

Speaker Change: Hopefully you share my sentiment and are as excited as we are to see what else is to come.

Speaker Change: We appreciate your interest in Walmart and are now ready to take your questions.

Operator: Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, we ask that you each keep to one question. Thank you. Our first question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question.

Thank you.

Speaker Change: If I can ask a question. Please press star one, Tennessee pad that information.

Speaker Change: Your line.

Keith you made the stock you if you'd like to remove your question from Nicky.

Speaker Change: For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

Speaker Change: As a reminder, we ask that you keep to one question. Thank you.

Speaker Change: Our first question comes from the line of Kate Mcshane with Goldman Sachs. Please proceed with your question.

[Analyst]: Hi, good morning. Thank you for taking our question. We wanted to focus our question today on general merchandise and gross margins. While general merchandise inflected positive in the quarter, it still seems like mixed with a headwind based on everything you walked through today. Do you have a view on when this gets more balanced? If we were to see a more balanced growth rate in general merchandise versus consumables and the growth of the alternative revenue businesses, what could gross margin expansion look like?

Kate Mcshane: Hi, Good morning, Thank you for taking our question.

Kate Mcshane: We wanted to focus our question Ken General electric gross margins.

Kate Mcshane: While general merchandising and positive in the quarter. It just seems like next year based.

Kate Mcshane: Based on everything you walk Jade.

Speaker Change: Do you have a dealer when this gets more balanced.

We're seeing more balanced growth rate in general merch versus consumables.

Speaker Change: The alternative revenue businesses, what could gross margins look like.

Doug McMillon: Hey, Kate. This is Doug. As it relates to general merchandise, I'll go first and then ask all three of the segment leaders to speak. We love general merchandise. First party, being a first-party merchant is something that we obviously grew up doing. When you go into our stores and clubs right now, the seasonal impact of GM is exciting and energizing. This is something that we're passionate about. In today's world, we can grow first-party general merchandise in stores, in clubs, plus through eCommerce with both pickup and delivery and the expansion of the marketplace. I think we've got a lot of opportunity, kind of big picture from a GM point of view. John, why don't you go first? Chris and Kath can chime in.

Speaker Change: Kate This is Doug as it relates to general Merchandize I'll go first and then ask all three of the segment leaders to speak we love General merchandise first party.

Speaker Change: First party merchants than we absolutely grab doing and when you go into our stores and clubs right now the seasonal impact G. M is exciting.

Speaker Change: Exciting energizing and so this is something that were passed about and in today's world. We can go first party general merchandize in stores and clubs plus through ecommerce with both pickup and delivery and the expansion of the marketplace. So I think we've got a lot of opportunity in a big picture from a GM point of view I'm, John Why don't you go first in Europe.

John Furner: Sure. Good morning, Kate. Thanks for the question. As Doug said, we're excited about the season. We're excited about seasonal merchandising. I've been in stores just the last couple of months in Utah, California, last week in Philadelphia, Tennessee, and the list goes on and on. The stores are ready. They're really set for the season. We had a good back to school. We had a good Halloween. It's important to string these holidays together. We go into the season with momentum. We're excited about that. We think we have a great plan for the season. It's early November. The team will be working on consistent execution the next couple of months to deliver the best quarter we can for our customers. As we said, general merchandise has improved. We are still experiencing some deflation in general merchandise. This is in the low to mid-single digits range.

Speaker Change: And Catherine China sure. Good morning, Hey, Thanks for the question.

Speaker Change: And as Doug said, we're excited about the season, we've got about seasonal merchandising ive been stores just the last couple of months in Utah, California, Lastly, Philadelphia, Tennessee, and the list goes on and on and the tour is already there and they are really set for the season, we had a good back to school, we had a good Halloween and it is important to string. These holidays together. So we go into the season with.

Speaker Change: Momentum, we're excited about that and we think we have a great plan for the season. It's early November.

Speaker Change: So the team will be working on consistent execution of the next couple of months to deliver the best quarter. We can for our customers as we said our general merchandise has improved we are still are still experiencing some deflation in general merchandise is in the low to mid single digits range that hasn't changed for some time, but we are positive comps due to growth in units primarily.

John Furner: That hasn't changed for some time. We are positive in comp due to growth in units, primarily coming out of, as we said earlier, home, toys, some of our hard lines categories. We're seeing some real bright spots as well in the marketplace with fashion and apparel. Really excited about the mix. We have a lot of ways that we can deliver to the customers, whether it's in the store, which really excited, again, as I said, about the stores being set seasonally, and with our eCommerce business growing at 22% in the quarter, that puts us in a spot with some momentum as we enter the fourth quarter. Maybe Chris, go to you at Sam's?

Speaker Change: <unk> are coming out of as we said earlier home toys some of our Heartlands categories, we're seeing them more bright spots well in the marketplace with fashion and apparel are really excited about that so we have a lot of ways that we can deliver to the customers whether it's in the store, which really excited again as I said about the stores being set seasonally and with our commerce business are growing at 22.

Speaker Change: Sent in the quarter that puts us in a spot with some momentum as we enter the fourth quarter to be Chris Godby with Sam's yeah. Thanks, Jon I mean, just a lot of similarity there with US we love general merchandise at very excited items and if you think about the way that we've constructed all of our strategic priorities. This is not just the consumables and food game Asa is death.

Chris Nicholas: Yeah, thanks, John. I mean, just a lot of similarity there with us. We love general merchandise. We get very excited about items. If you think about the way that we've constructed all of our strategic priorities, this is not just a consumables and food game. It's definitely a GM game. If you think about increasing digital engagement, the growth in eCommerce that helps people see the great items we've got, then investing in the value proposition, we're investing in a grapevine. Doug talked about it in his opening remarks. We've put a lot of effort into how we merchandise both the items you can buy in club, but also the items that you can buy online, and this online to offline connectivity. It's really powerful.

Speaker Change: <unk>, you think about increasing digital and engage with the growth in e-commerce to help people see the great items. We've got then investing in the value proposition, we're investing in our grapevine and Doug talked about it in his opening remarks.

A lot of effort into how we merchandise both the item can buy in club, but also the items that you can buy online in this online to offline connectivity and it's really powerful and we're seeing significant increases in <unk>.

Chris Nicholas: We're seeing significant increases in the participation of general merchandise in that club, which I think is the best articulation of our strategy physically that we have today. There's a couple of other things I'd say. From a comp point of view, we're really happy to see the second quarter of positive comps on GM. Units are still moving ahead of comps, so there's still good value out there. Similar to John, like in-home tech, toys, seasonal decor, all doing really well. Back to college and Halloween, we're also really strong. We see that momentum continuing.

Chris Nicholas: We're seeing significant increases in the participation of general merchandise in that club, which I think is the best articulation of our strategy physically that we have today. There's a couple of other things I'd say. From a comp point of view, we're really happy to see the second quarter of positive comps on GM. Units are still moving ahead of comps. There's still good value out there. Similar to John, like in-home tech, toys, seasonal decor, all doing really well. Back to college and Halloween, we're also really strong. We see that momentum continuing.

Speaker Change: The participation of general merchandise and not club.

Speaker Change: <unk> of our strategy physically that we have today.

Speaker Change: I would say.

Speaker Change: From a comp point of view, we're really happy to see it can come second quarter of positive humps on J M.

Speaker Change: But units hospital moving head.

Speaker Change: So the stupid value out there.

Speaker Change: And similar to John like in home Tech toys seasonal that coal all doing really well.

Speaker Change: And back to college and Halloween. We're also really strong so we see that momentum continuing.

Kath McLay: Yeah, I say from an international perspective, we saw strong growth in GM in Mexico, India, and China. Not surprisingly, in those markets, too, convenience is really important. As we kind of are growing our strength in delivery from a same day and also within the hour, we're seeing the GM growth continue to kind of correlate with that convenience play.

Kath McLay: Yeah, and I say from an international perspective, we saw strong growth in GM in Mexico, India, and China. Not surprisingly, in those markets, too, convenience is really important. As we kind of are growing our strength in delivery from a same day and also within the hour, we're seeing the GM growth continue to kind of correlate with that convenience play.

Speaker Change: Yeah, and I'll say from an international perspective, we saw strong growth in G M in Mexico, India, and China and not surprisingly in the US market has taken Vincent really impulse.

And so as we can of that growing our strength in delivery.

Speaker Change: From a same day and also within the hour with saying that jam growth continued at kind of correlate with that a convenience play.

Doug McMillon: I think to drive GM growth over the next few years, eCommerce becomes crucial. Obviously, we've seen good growth there recently, but we've got a lot more opportunity. This week, when we were in Mexico last week, we saw a pop-up toy shop outside of one of our stores that is just dominant in the toy category. It looks gorgeous, fun to shop. Kids love it. We just have such an opportunity in the physical world as well as in the digital world to create excitement with general merchandise.

Speaker Change: I think to drive GM growth over the next few years ecommerce becomes crucial obviously, we've seen good growth there recently, but we got a lot more opportunity and this week. When we were in Mexico last week, we saw a pop up toy shop outside of one of our stores that is just dominant in the toy category. It looks gorgeous fun to shop Kids love. It just have such as <unk>.

Speaker Change: Unity in the physical world as well as digital world that create excitement with general merchandise.

Operator: Thank you. Our next question comes from the line of Michael Lassner with UBS. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

[Analyst]: Good morning. Thank you so much for taking my question. What is Walmart finding out about its ability to drive steady growth in the core business while reinvesting back in areas like price and wages to lay the foundation for the future? As the company generates more evidence of the growth of the emerging alternative revenue streams, does it make sense to invest even more in these areas? Are there diminishing returns such that the overall enterprise-wide profit growth can accelerate next year and beyond, even as you make sizable investments back in the business? Thank you so much.

Michael Lasser: Good morning. Thank you so much for taking my question what is Walmart finding out about it to Billy to drive steady growth in the core business, while reinvesting back in areas like price and aegis.

Michael Lasser: To lay the foundation for the future and as the company generate more evidence of the growth of the emerging alternative revenue stream as it makes sense to invest even more in these areas or are there diminishing returns.

Speaker Change: The overall enterprise wide profit growth.

Speaker Change: Salary next year and beyond.

Speaker Change: Even as you make sizable investments back in the business. So thank you so much.

Doug McMillon: Yeah, thanks, Michael. This is a real-time conversation that we have all the time. Are we investing the right amount back? You called out prices and wages. I think those are the two areas that would come to the top of our list, too. We think we are investing the right amounts, obviously, but it is a fluid situation. We watch price gaps. We watch what's happening in the employment market and have freedom now to be able to make different investments if we want to. I think from a kind of an income statement point of view, I feel like we're being appropriately aggressive. On the capital side, you know that we've made some significant decisions over the last few years to invest in automation in the supply chain, for example. We're also being, I think, very aggressive as it relates to store and club remodels.

Speaker Change: Yeah. Thanks, Michael This is a real time conversation that we have all the time are we investing the right amount back you called out prices and wages I think those are the two areas that would come to the top of our list to.

Speaker Change: We think we are investing the right amounts obviously, but it is a fluid situation. We watch price gaps we watch what's happening in the employment market and have freedom now to be able to make different investment typically want to so I think from a kind of an income statement point of view I feel like we're being appropriately aggressive and on the capital side, you know that we have.

Speaker Change: Made some significant decisions over the last few years to invest in automation in the supply chain for example, but we're also.

Speaker Change: Being I think very aggressive as it relates to store and club Remodels.

Doug McMillon: I feel like on the capital side, we're also being aggressive. As we do that, because of the way that we've set ourselves up, we can grow profit faster than sales and do those things at the same time. It's just a matter of degree. We will manage that as we go from week to week.

Speaker Change: So I feel like on the capital side, we're also being aggressive and as we do that because of the way.

Speaker Change: That we've set ourselves up we can grow profit faster than sales and do those things at the same time, it's just a matter of degree and we will manage that as we go from week to week.

John David Rainey: Yeah, Michael, I would add to Doug's point that we feel like we're striking the right balance between profit expansion and investment in the business. We're all very focused on making sure that we are healthy for the next generation. We certainly provide an outlook over the next three to five years, but we want to continue to have the same type of financial performance after that. That requires a level of investment in the business. As Doug said, we feel like we're striking that balance appropriately. In terms of your part of the question about our ability to maybe accelerate profits into the future, look, we're comfortable with the outlook that we provided, where we said that the way to think about our financial architecture over the next several years is that operating income will grow faster than sales, and sales should, on average, be about 4%.

Speaker Change: Yes, Michael I would add to Doug's point that we feel like we're striking the right balance between profit expansion and investment in the business.

Speaker Change: We're all very focused on making sure that we are healthy for the next generation.

Speaker Change: We certainly provide an outlook over the next three to five years, but we want to continue to have the same type of financial performance after that requires.

Speaker Change: Our level of investment in the business and as Doug said.

Speaker Change: We feel like we're striking that balance appropriately.

Speaker Change: Terms of the <unk>.

Speaker Change: You are part of the question about our ability to maybe accelerate profits into the future.

Speaker Change: We're comfortable with the outlook that we provided where we said that the way to think about our financial architecture over the next several years is that operating income will grow faster than sales and sales should on average be about 4%. Some years will be a little better some years may be a little bit worse. We've had two years now since we provided that outlook and if you look.

John David Rainey: Some years will be a little better. Some years may be a little bit worse. We've had two years now since we provided that outlook. If you look at our performance last year and our performance year to date, along with our guidance this year, that would suggest that on the top line, we've grown about 5% and grown profits about 10%. We're really pleased about that. That is not a matter of us being overly conservative or anything like that. It's really, excuse me, it's really a matter of execution by the team sitting around this table. With anything that we do, with any strategy that we have, there's always going to be areas where you overperform and underperform. What you've seen is this team has done a really good job at executing on the basics and also our newer, faster-growing businesses. That's reflected in our financial performance.

John David Rainey: Some years will be a little better. Some years may be a little bit worse. We've had two years now since we provided that outlook. If you look at our performance last year and our performance year to date, along with our guidance this year, that would suggest that on the top line, we've grown about 5% and grown profits about 10%. We're really pleased about that. That is not a matter of us being overly conservative or anything like that. It's really a matter of execution by the team sitting around this table. With anything that we do, with any strategy that we have, there's always going to be areas where you overperform and underperform. What you've seen is this team has done a really good job at executing on the basics and also our newer, faster-growing businesses. That's reflected in our financial performance.

Speaker Change: At our performance last year and our <unk>.

Speaker Change: Performance year to date, along with our guidance this year that would suggest that on.

Speaker Change: On the topline, we have grown about 5% and grown profits about 10%.

Speaker Change: We're really pleased about that but that is not a matter of.

Speaker Change: <unk> been overly conservative or conservative or anything like that it's really.

Speaker Change: Excuse me, it's really a matter of execution by the team sitting around this table.

With anything that we do with any strategy that we have there is always going to be things where areas were you over perform and underperform, but what you've seen is this team has done a really good job of executing on the basics and also our newer faster growing businesses and so that's reflected in our financial performance and we.

John David Rainey: If we execute better into the future, yeah, perhaps profits could grow faster. The financial architecture that we've laid out is still what we believe today.

Speaker Change: Execute better into the future, yes, perhaps profits to grow faster, but the financial architecture that we laid out is still what we believe today.

Operator: Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

John Furner: Good morning. Hi, everyone. I wanted to talk about the top line, which it looks like it accelerated Q3 versus Q2, the underlying run rate. There were some storms, and I know you mentioned port strikes. Can you talk about the underlying inflection you're seeing? What do we attribute it to? I don't know if it's merchandising, marketplace, membership, all the above. Have we inflected? Does it feel like we've inflected to a higher growth rate? Thank you.

Speaker Change: Good morning, Hi, everyone I wanted to.

Speaker Change: The topline, which it looks like it accelerated.

Speaker Change: Q3 versus Q2, the underlying run rate there were some storms and I know you mentioned port strike.

Speaker Change: Can you talk about the underlying inflection you're seeing.

<unk>.

Speaker Change: Merchandising marketplace membership all the above and have we inflected does it feel like we've inflected too.

Doug McMillon: To me, it feels like it's pretty consistent. If you look at what happened in the first three quarters and the underlying rate, and then you look at what happened in this most recent quarter with the storms, things did increase a bit. I still feel like we're kind of running the same level of momentum and the same economy. The fourth quarter will be fun to watch. The calendar is not our favorite with fewer days between Thanksgiving and Christmas. I suspect when all that's said and done, it'll be similar to the kind of momentum that we've seen in the first three quarters.

Speaker Change: A higher growth rate.

Speaker Change: To me it feels like it gets pretty consistent if you look at web, but in the first three quarters and the underlying rate and then you look at what happened in this most recent quarter with the storms things did increase a bit.

Speaker Change: But I still feel like we're kind of running the same level of momentum in the same economy, the fourth quarterly fun to watch and the calendars not our favorite with fewer days between Thanksgiving and Christmas.

Speaker Change: And I suspect when all of that said then it'll be similar to the kind of momentum that we've seen in the first three quarters, yes, I mean, I would add that it does all very consistent to us the one exception to that does it.

John David Rainey: Yeah, Samien, I'd add that it does feel very consistent to us. The one exception to that is maybe the timing of the Big Billion Days event. As you know, that can fall into the third quarter some years, fourth quarter other years, goes back and forth. Because of the way it fell this year, it added about 60 basis points of growth to the top line for us in Q3. It also will work against us in Q4. Other than that, which is just a timing element, the business is performing very consistently, as Doug said.

John David Rainey: Yeah, Samien, I'd add that it does feel very consistent to us. The one exception to that is maybe the timing of the Flipkart Big Billion Days event. As you know, that can fall into the third quarter some years, fourth quarter other years, goes back and forth. Because of the way it fell this year, it added about 60 basis points of growth to the top line for us in Q3. It also will work against us in Q4. Other than that, which is just a timing element, the business is performing very consistently, as Doug said.

Speaker Change: The timing of the big billing days events.

Speaker Change: As you know that that can fall into the third quarter. Some years fourth quarter. Other years goes back and forth because of the way. It fell this year. It added about 60 basis points of growth to the top line for us and <unk>, but also will work against us in <unk>, but other than that and which is just a time element the business is performing.

Speaker Change: Very consistently as <expletive> said.

Operator: Thank you. Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Christopher <unk> with Jpmorgan. Please proceed with your question.

Thanks. Good morning, everybody. Can you speak to the changes in the Q4 operating income guide relative to where you started the year at CapEx change? To what extent did you change the top line outlook overall and in the U.S.? You called out Sam's wage investment. Was there any changes in your expectation around gross margin, given what you're seeing in the alternative profit pools? Q4 is a big spike in terms of volume. Could that tilt the U.S. eCommerce business to profitability? Thank you.

John Furner: Thanks. Good morning, everybody. Can you speak to the changes in the Q4 operating income guide relative to where you started the year at CapEx change? To what extent did you change the top line outlook overall and in the U.S.? You called out Sam's Club wage investment. Was there any change in your expectation around gross margin, given what you're seeing in the alternative profit pools? Q4 is a big spike in terms of volume. Could that tilt the U.S. eCommerce business to profitability? Thank you.

Speaker Change: Thanks, Good morning, everybody can you speak to the changes in the <unk> operating income guide relative to where I started the year ex the FX exchange too.

Speaker Change: To what extent did you change the top line outlook overall in the U S. And then he can.

Speaker Change: Called out Sam's wage investment, but was there any changes in your expectation around gross margin given what youre seeing in the alternative profit pools.

Speaker Change: <unk> is a big spike in terms of volume so could that till the U S e-commerce business to profitability. Thank you.

John David Rainey: I'll address this, and others may want to join in. Chris, the way to probably characterize this, if you look at our guidance last quarter versus what's implied this quarter, there's a modest improvement in 4Q performance. There's not been a lot of change before that in terms of our outlook for 4Q. The business is performing, as we've said, pretty consistent. In terms of GM, maybe one thing that has improved and been a little bit better than what we expected at the beginning of the year, and by GM, I'm talking gross margin, is shrink. Shrink has performed a little bit better in the U.S. and Sam's Club segment for the first part of the year here. Other than that, the business is continuing to perform very consistently with prior quarters.

Speaker Change: Ill.

Speaker Change: Address this and others may want to Japan.

Speaker Change: Chris the way to probably characterize this if you look at our guidance last quarter versus what's implied this quarter.

Speaker Change: Theres a modest improvement in <unk> <unk>.

Speaker Change: Performance.

Speaker Change: There's not been a lot of change before that in terms of our outlook for <unk> businesses been performing as we've had pretty consistent.

Speaker Change: In terms of G. M. Maybe one thing that has improved and been a little bit better than what we expected at the beginning of the year and by GM I'm talking gross margin is a shrink shrink has performed a little bit better in the U S and Sam segment for the first part of the year here, but other than that the businesses continuing to perform very.

John David Rainey: You do see some of the more digital businesses, the newer businesses that we have, did inflect a little bit higher in Q3. I think also keep in mind that that's a function of the movement of Flipkart Big Billion Days that I just mentioned. If you just go down the list, you look at, as an enterprise, 28% advertising growth, 42% marketplace growth, 22% membership income growth. We are executing. Our value proposition is resonating with customers. That's why you're seeing this gain share.

Speaker Change: Instantly with prior quarters.

Speaker Change: Some of the.

Speaker Change: More digital businesses, the newer businesses businesses that we have.

Speaker Change: Did inflect a little bit higher in <unk> I think also keep in mind that that's.

Speaker Change: A function of the movement Big billion days that I just mentioned, but just you go down the list you look at as an enterprise, 28% advertising growth, 42% marketplace growth 22%.

Speaker Change: Income growth.

Speaker Change: We are executing our value proposition is resonating with customers and what you're seeing is skincare.

Doug McMillon: As it relates to profitability in eCommerce, we don't think we should race to it. This is a long-term game. The 1P to 3P mix is one dimension to manage, for example. If we should carry more first-party items and that somehow delays crossing a threshold of profitability, we're good with that because that's what customers want. That's what will drive growth. If investments in delivery speed cause us to reach profitability a little later, that's fine, too. We want to deliver faster. I think we are very confident that we're going to make money in eCommerce. Whether that happens today, tomorrow, a week from now, a month from now, or a quarter from now, I don't really care. The total works. We've got a great opportunity to grow our eCommerce business. I'm leaning long term.

Speaker Change: As it relates to profitability in E. Commerce, we don't think we should risk to it and there is a long term game. The one to three P mix as wound amendment to manage for example, and if we should carry more first party items and that somehow delays crossing a threshold of profitability. We're good at that because that's what customers want that's what will drive growth investments and delivery speed caused us to.

Speaker Change: <unk> reached profitability a little later, that's fine too we want to deliver faster. So I think we're very confident that we're going to make money in e-commerce, whether that happens today tomorrow or a week from now or a month and I quoted from now I don't I don't really care. The total works and we've got a great opportunity to grow our ecommerce business. So I'm leaning long term.

Doug McMillon: At some point, we'll tell you guys we made money in eCommerce and then just move on and not have that conversation anymore. As we've said several times, when you look at the shape of the new income statement and you split it between the original income statement that looks like a store P&L and the newer income statement that's got membership, advertising, fulfillment services, data monetization, and maybe some other things in it, it's more profitable. It just took a period of investment for us to get there. We'll grow profit faster than sales. eCommerce will be part of the mix. Omni is our life. We love it. We think it's an advantage position. We look forward to someday telling you that we made money in eCommerce globally, as it obviously varies by country as well.

Speaker Change: And at some point, we'll tell you guys. We made money in E. Commerce, and then just move on and not have that conversation anymore and as we said several times when you look at the shape of the new income statement and you split it between the original income statement that looks like a store P&L and the newer income statement that Scott membership advertising fulfillment services.

Speaker Change: Data monetization, maybe some other things in it it's more profitable. It just took comparative investment for us to get there. So again, we'll grow profit faster than sales E. Commerce will be part of the mix Omni is our life, which we love we think it's an advantaged position and we look forward to someday, telling you that we made money in E. Commerce globally is it obviously varies by country.

Speaker Change: As well.

Operator: Thank you. Our next question comes from the line of Robbie Ohms with Bank of America. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Robbie <unk> with Bank of America. Please proceed with your question.

[Analyst]: Oh, good morning. Thanks for taking my question. Doug, this may be for you. I get a lot of questions on the share gains with upper-income consumers you guys keep talking about. I was hoping you could sort of talk about it across three dimensions: grocery versus general merchandise with that upper-income consumer, price driving that versus convenience with that consumer, and then sort of stores versus this huge marketplace growth in terms of driving the upper-income consumer.

Speaker Change: Hello, Good morning. Thanks, Thanks for taking my question.

Speaker Change: Does this maybe for you I get a lot of questions on the share gains with upper income consumers you guys keep talking about I was hoping you could sort of talk about it across three dimensions.

Speaker Change: Grocery versus general merchandise with that upper income consumer.

Speaker Change: Price driving that versus convenience with that consumer.

Speaker Change: And then sort of sores.

Speaker Change: Versus this huge marketplace growth in terms of driving the upper income consumer.

Doug McMillon: Yeah, Robbie, I'll go first, but I'll invite John or others to chime in here, too. It is an all of the above answer. You know, we want to sell grocery and GM. If you go through and look at by category, by income level, it kind of plays out the same way general merchandise does, in that people come to us to shop as a primary destination in many instances. They give us feedback across categories. If you look at our offer in food and consumables, our shares are pretty high and consistent relative to some of the things we see in general merchandise. Over the years, we had a really strong market share in categories like toys, bicycles. We had a lower market share in a lot of the fashion categories. That's basically just the customer telling us over the years, I'd rather buy my apparel somewhere else.

Speaker Change: And Rob I'll go first, but I'll invite jon or others to chime in here too.

Speaker Change: It is in all of the above answer we want to sell grocery N. G M and if you go through and look at by category by income level.

Speaker Change: It kind of plays out the same way general merchandise.

Speaker Change: Does in that people come to us to shop at a primary destination in many instances and then they give us feedback across categories.

Speaker Change: And if you look at our offer in food and consumables, our shares are pretty high and consistent relative to some of the things we see in general merchandize. So over the years, we had a really strong market share in categories like toys bicycles, but we had a lower market share in a lot of the fashion categories and that's basically just the customer.

Doug McMillon: In an Omni world, we have an opportunity with brands. We have an opportunity with presentation to increase the amount of market share we have in some of those categories where we should have had a higher share all along. That eCommerce opportunity is kind of bearing out as we grow our assortment. We're able to appeal to more people and appeal to higher income levels. When I think about it from a category point of view, the themes look the same to me. We have more opportunity in fashion areas than we do in basic areas. That's always been true. As it relates to price versus convenience, everybody wants to save money, and everybody wants to save time. It's a continuum. Those that have more discretionary income and want to save time are liking what we're doing with both pickup and delivery.

Speaker Change: Telling us over the years I'd, rather buy my apparel somewhere else.

Speaker Change: But in an omni world, we have an opportunity with brands, we have an opportunity with the presentation.

Speaker Change: To increase the amount of market share we have in some of those categories, where we should have higher had a higher share all along.

Speaker Change: And that e-commerce opportunity is kind of bearing out as we grow our assortment, we're able to appeal to more people and appeal to higher income levels. So when I think about it from a category point of view.

Speaker Change: The themes look the same to me we have more opportunity in fashion areas than we do in basic areas and that's always been true.

Speaker Change: As it relates to price versus convenience.

Speaker Change: Everybody wants to save money and everybody wants to save time, but its a continuum and those that have more discretionary income and want to save time are liking what we're doing.

Doug McMillon: I think that's one of the things that makes this moment in time different. We do get the question from time to time about whether this is sustainable. I look at what's happened with Walmart+ and the relationship you get through a membership, what's happened with our remodels, what's happened with convenience. It gives me more optimism that this is something that's going to last a long time, and it was a different inflection point. Did I leave anything, John, for you to add?

Speaker Change: With both pickup and delivery and I think that's one of the things at this moment in time different we do get the question from time to time about whether this is sustainable.

I look at what's happened with Walmart plus and the relationship you get through a membership what's happened with our Remodels.

Speaker Change: What's happened with convenience and it gives me more optimism that that this is something that's going to last a long time and it was different inflection point.

John Furner: That was.

Doug McMillon: Sorry.

John Furner: No, no, no.

Doug McMillon: Right on. I'll just add a couple of things to that, Doug. I think you covered a lot of it. Robbie, we do get the question from time to time. We talk about the different ways that we can serve consumers and how that's different from, say, a decade ago or even five years ago. As we've become Omni, we have the ability to sell customers in the store, at the curb, deliver to their home. We can do that whenever they want and in many cases, however they want. You heard earlier the number of orders that are sub three hours. People are prioritizing time and price. One of your questions is, it's not an or. We want to be a great price, and we want to be convenient. We can do both at the same time.

Speaker Change: Did I leave anything jump for you there.

Speaker Change: Well sorry.

Speaker Change: Right right on I will just add a couple of things that Doug I think you've covered a lot of it.

Speaker Change: But Ravi we do get the question from time to time in and we talk about the different ways that we can serve consumers and how that's different from say a decade ago or even five years ago as we become omni we have the ability to sell customers in the store at the curb delivered to their home and we can do that whenever they want and in many cases, however, they want.

Speaker Change: You heard earlier the number of orders that are sub three hours and full are prioritizing time and price.

Speaker Change: Questions is it is not an or.

Speaker Change: We want to be a great price and we want to be convenient and we can do both at the same time, the expansion and delivery catchments the expansion with delivery delivery density and the hours of operation have helped us lower our costs, which enable us to serve customers more flexible. So we can do both at the same time.

Doug McMillon: The expansion in delivery catchments, the expansion with delivery density, and the hours of operation have helped us lower our costs, which enable us to serve customers more flexibly. We can do both of those at the same time. In categories like grocery, yes, price obviously matters, and so does quality. We do see, and as we noted earlier, a large percentage of our market share gains came from higher-income customers. That has been happening for several quarters. We see categories like gluten-free and dry grocery or grass-fed beef, organic produce, where our share in pickup and delivery is much higher, and the mix is higher than in store. We can be a great opening price point value in the store. We can sell high quality, and we can deliver it the way that the customers want.

In categories like grocery.

Speaker Change: Yes price, obviously matters and so does quality, we we do see and as we noted earlier a large percentage of our market share gains came from higher income customers that has been happening for several quarters and we see categories like <unk>.

Gluten free and dry grocery or grass fed beef organic produce where our share in pickup and delivery is much higher and that mix is higher than in store. So we can be a great opening price point value in the store and we could all high quality and we can deliver it the way the customers want and then and then last thing is as Doug had mentioned this expansion in e-commerce.

Doug McMillon: The last thing is, as Doug did mention, this expansion in eCommerce, congrats to the team for another quarter with momentum at 22% growth. Leading that growth is our marketplace team and our marketplace business, which just tells you that our customers are looking for more of an assortment than they've had in the years prior to this one from Walmart Inc. We're seeing bright spots in apparel, in toys, in healthy foods. It's across the board. We have a lot of work left to do. Our assortment is growing. We think that will continue to happen over the next couple of years. It's great to see the momentum across so many channels.

Speaker Change: The team for another quarter with momentum at 22% growth are leading that growth is our marketplace team in our marketplace business, which just tells you that our customers are looking for more of an assortment than they've had in the years. Prior to this one from Walmart, we're seeing bright spots in apparel and toys and healthy foods. So it's across.

Speaker Change: We have a lot of work left to do our assortment is growing we think that will continue to happen over the next couple of years, but it's great to see the momentum across so many channels, maybe just to just push in from a Sam's point of view, whilst we serve.

Chris Nicholas: Maybe just to push in from the Sam's point of view, you know, whilst we serve all income cohorts, we do definitely skew higher than the core of Walmart. What I would say is that they love price more than anybody. Price is a core competitive advantage of ours. Great items and great prices we think isn't enough. You are seeing an acceleration in all of the metrics in Sam's because we're also leaning into experience. A big part of that is convenience. We're really excited to see the impact of that.

Speaker Change: <unk>.

Speaker Change: Oh holds we do definitely see high than the core of Wal Mart.

Speaker Change: And what I would say is that they love price more than anybody.

Speaker Change: Price is a core competitive advantage of ours, but great items, great prices, we think is not enough and so youre seeing an acceleration in all of the metrics and Sam's because we're also leaning into experience and a big part of that is convenient Simba, we're really excited to see the impact of that.

Operator: Thank you. Our next question comes from the line of Christina Gattai with Deutsche Bank. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Cristina <unk> with Deutsche Bank. Please proceed with your question.

[Analyst]: Hi, good morning, Doug and John David. I wanted to dig into the strengths of eCommerce a little bit. I was curious if you could talk about what you think is a sustainable level of growth on a go-forward basis. Clearly, it's a much larger business, but you have a lot more that are driving it as well, whether we think about marketplace and membership. How do you see the rapid expansion of marketplace sellers and SKUs contribute to both eCommerce growth and as we think about improving the profitability over the next several quarters? As part of that, can you talk about general merchandise performance, what you saw both in stores and in the marketplace? From an assortment perspective, as we think about newness and innovation that you called out, what specifically are you excited most about holiday? Thank you.

Speaker Change: Hi, Good morning, Gary and John David.

Speaker Change: I wanted to dig into the strength of E Commerce, a little bit I was curious if you could talk about what you think is a sustainable level of growth on a go forward basis, clearly, it's a much larger business, but you have a lot more.

Speaker Change: I'm driving at is what whether we think about marketplace membership is how do you see the rapid expansion of marketplace sellers and skus contribute to both ecommerce cabelas and as we think about improving the profitability over the next several quarters and as part of that can you talk about general merchandise performance that you saw both in stores and then Mike can play.

Speaker Change: And then just from an assortment perspective, as we think about newness and innovation that you called out.

Doug McMillon: Is that all, Christina? I'm excited about this year, not only the great items we have, but the convenience that we're going to provide. I think you could just take our eCommerce growth rate over the last, I don't know, eight quarters and look at the trend line. You can expect that we're going to continue investing to create a better customer experience to result in more growth. We have a relatively low market share in eCommerce versus brick and mortar, and that's our opportunity. I think all the investments we're putting in place, including supply chain automation, are aimed at capturing that opportunity. There's such a nice connection between these businesses. You know, as you grow eCommerce first party, for example, you get the opportunity to grow third party.

Speaker Change: Are you excited about holiday. Thank you.

Speaker Change: Is that all Krishna.

Speaker Change: Yeah.

Speaker Change: I am excited about this year not only the great items, we have the convenience that we're going to provide and I think you can just take our ecommerce growth rate over the last I don't know eight quarters and look at the trend line and you can expect that we're going to continue investing to create a better customer experience to result in more growth, we have a relatively low market share in e-commerce versus.

Speaker Change: <unk> brick and mortar and that's our opportunity and I think all the investments we're putting in place including supply chain automation are aimed at capturing that opportunity there's such a a nice connection between these businesses.

Doug McMillon: As you grow first and third-party eCommerce businesses, you get an opportunity to sell an ad, to sell a membership for delivery, to get additional data. It all does work together in a mutually reinforcing way. As I mentioned just a minute ago, that's nice for us in that it mixes us up. It not only gives us top line growth, but it gives us bottom line growth. I'll just wrap up by saying it is still an item business, and it's still fun. Like we talk these days a lot about our technology and our investments. When it gets to this time of year in particular, the hot toy is going to be fun to talk about. The Thanksgiving meal that's a lower price this year than it was a year ago is fun to be part of.

Speaker Change: You grow E. Commerce first party for example, you get the opportunity to grow third party as you go first and third party.

Speaker Change: E Commerce businesses, you get an opportunity to sell an AD seller membership for delivery to get additional data and it all it all does work together in a mutually reinforcing way and so.

Mentioned, just a minute ago, that's that's nice for us in that it makes us it up it not only gives us the topline growth, but it gives us bottom line growth.

Speaker Change: It is just.

Speaker Change: To wrap up by saying it is still an item business and it's still fun like we talk these days a lot about our technology and our investments.

Speaker Change: But when it gets to this time of year particular.

Speaker Change: The hot play is going to be fun to talk about Thanksgiving meal that are lower this year than it was a year ago as is fun to be part of we're sitting a room today that got a bit of Christmas feel to it.

Doug McMillon: We're sitting in a room today that's got a bit of Christmas feel to it, decor-wise, and it's exciting to be in this part of the year.

Speaker Change: Decor wise and it's exciting to be in this part of the year.

Operator: Thank you. Our next question comes from the line of Scott Ciccarelli with Truist Securities. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Scot Ciccarelli with curious Securities. Please proceed with your question.

[Analyst]: Good morning, guys. I think you've given us some numbers previously on how much of your EBIT growth was coming from your ancillary revenue streams. Do you have a number for that this quarter? Is it possible to rank the drivers between advertising, membership, 3P, etc.? Thanks.

Scot Ciccarelli: Good morning, guys.

Speaker Change: So I think you've given us some numbers previously how much of your EBIT growth was coming from your ancillary revenue streams.

Speaker Change: My questions are do you have a number for that this quarter and then is it possible to rank the drivers between advertising membership <unk> et cetera. Thanks.

John David Rainey: Got this, John David. I'll take that. The numbers this quarter are pretty similar to the last quarter. Membership fees, as well as advertising income, contributed to a little more than half of our operating income improvement and a little shy of a third of the overall operating income for the business. Those are important growth drivers to our business. They don't work without getting the basics right on core retail. I think we're striking a nice balance for all of that. It is worth noting that this quarter our business is 18% eCommerce. Reflecting back on Christina's question, that's a 300 basis point improvement from this point last year. We continue to make progress in these digital channels. Clearly, our customers are finding value in what they're finding at Walmart.

Speaker Change: David I'll take that the numbers this quarter pretty similar to last quarter. So membership fees as well as advertising income contributed to a little more than half of our operating income improvement.

Speaker Change: Little shy of a third of the overall operating income for the business.

Speaker Change: Those are important growth drivers for our business, but they don't work without getting the basics right for retail so I would expect.

Speaker Change: Bounce for.

Speaker Change: We're all about.

Speaker Change: Note that this quarter were 18, our business, 18% e-commerce and reflecting back on Christine's question that the 300 basis point improvement from this point last year. So we continue to make progress in these digital channels and clearly our customers are finding value in what.

Kath McLay: Can I just add on that one, too? I think you look at our results. We've consistently grown profit faster than sales every quarter this year. When you break it down, it's largely those ancillary businesses that are at higher margin that are driving the result. I look at our advertising businesses up 50%, and that is largely because of BBD. The other markets' growth is also strong. We'll see that kind of as you look at the half versus the quarter. We look at the growth in those businesses. It's advertising revenue. It's membership. We're seeing membership grow across each of the individual markets with slightly different offerings, but all of them tailored to what are the needs of the local consumers.

Speaker Change: With their front end and Walmart can.

Speaker Change: Can I just add on that one.

Speaker Change: Thank you know you look at our results we've consistently grind profit faster than sales every quarter this year.

And when you break it down it's largely those ancillary businesses that are at higher margin that are driving the results I look at our advertising business is up 50% and that is largely because of baby Jake but the other market growth is also strong and we'll see that kind of as you look at the half versus the quarter.

Speaker Change: When I look at the growth in that space.

Speaker Change: Advertising revenue its membership by saying like membership grow across each of the individual markets with different slightly different offerings, but all of the pad to what are the needs of the local <unk>. So that with the addition of financial services as well as really helping that whole model play out and the consistency of the execution across quarters I think his name.

Kath McLay: That, with the addition of financial services, as well as really helping that whole model play out and the consistency of the execution across quarters, I think has been one of the things I'm most proud of.

John David Rainey: Maybe one more thing to add, whether it's the international business or here in the United States, when we look at the composition of growth in GMV for us as an example, there's a healthy balance between increased traffic and improved conversion. You've got more shoppers that are coming to Walmart or Walmart properties that are finding value in price and convenience. We're also getting better at how we serve those customers. I say that through conversion, like we're getting better at converting someone who may just be eyeballs looking at our website to actually completing a checkout and putting something in their basket and having it delivered to their house. We're pleased with our progress. It also indicates we still have a long ways to go. We know that we can get better. Our team is very focused on that.

Speaker Change: One of the things that is proud of.

Maybe one more thing to add whether it's the international business here.

Speaker Change: Here in the United States, when we look at pump position of growth in <unk> for us as an example.

Speaker Change: There's a healthy balance between increased traffic.

Speaker Change: And improved conversion so you've got more shoppers that are coming to Walmart or properties that are finding value in price and convenience, but we're also getting better at how we serve those customers and I say that through conversion like where we're.

Speaker Change: Getting better at converting someone who may just be eyeballs looking at our website to actually completing a check out and putting something in their basket and having it delivered to your house. So.

Speaker Change: We're pleased with our progress but it also indicates we still have long ways to go we know that we can get better and.

Operator: Thank you. Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question.

Speaker Change: Team is very focused on that.

Speaker Change: Thank you. Our next question comes from the line of Peter Keith with Piper Sandler.

[Analyst]: Thank you. Good morning. Maybe as a follow-up to Scott's question, you did flag general merchandise should continue to improve in the coming quarters. I'm wondering if that continued improvement could have positive implications for some of these high-value revenue streams, such as marketplace, which accelerated nicely here, and supplier advertising and the like.

Speaker Change: Please proceed with your question.

Peter Keith: Hey, Thank you good morning, so maybe as a follow up to Scott's question. You did flag general merchandise should continue to improve in the coming quarters and I'm wondering if that continued improvement.

Peter Keith: Could have positive implications for some of these high value revenue streams, such as marketplace, we accelerated nicely here and supplier advertising and all that.

John David Rainey: Sure, Peter. Everything else being equal, you would expect that to have a positive benefit to the P&L, as GM items tend to carry a higher gross margin than many of the grocery items. We look forward to being able to benefit from that. Some of that is on us and continuing to grow our assortment through our marketplace. Some of it is a function of the economy overall, and we will watch that closely.

Speaker Change: Sure Peter everything else being equal you would expect that to have a positive benefit to the P&L as GM items tend to carry a higher gross margin than any of the grocery items. So when we look forward to being able to benefit from that but some of that is.

Speaker Change: Is on us and continuing to grow our sorting through our marketplace, but some of it is <unk>.

Speaker Change: A function of the economy overall, and so we'll watch that closely.

Operator: Thank you. Our next question comes from the line of Peter Benedict with Baird. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Peter Benedict with Baird. Please proceed with your question.

[Analyst]: Hi, good morning, everyone. Thanks for taking my question. It's around competition. I'm curious your observations, what you're seeing in terms of the competitive response to the share gains that continue to accrue to the business. I'm thinking primarily in the U.S., but any comments around that would be helpful. Thanks.

Peter Benedict: Hi, good morning, everyone. Thanks for thanks for taking my question.

Peter Benedict: Just around just around competition I'm curious.

Peter Benedict: Observations, what youre seeing in terms of the competitive response to the share gains continue to accrue.

Peter Benedict: Business I'm thinking primarily in the U S.

Doug McMillon: Peter, this is Doug. I think the only thing that I would say is that the competitive set we focus on today is different, and it's changing over time, probably at a more rapid rate than it used to. Being in China and Mexico recently, we have some strong competitors there, and the ones we're focused on and learning from are different than the ones that we were focused on just a few years ago. Here in the U.S., we have fierce competition from all kinds of different directions. Our mindset is to be aware, to watch, to learn, and when we see the customer responding to something, to react if it makes sense for us to react and to change if we need to change.

Peter Benedict: Really any any comments around that would be will.

Peter Benedict: It will be helpful. Thanks. This is Doug I think the only thing that I would say is that the competitive set we focus on today is different and it is changing over time.

Peter Benedict: At a more rapid rate than it used to being in China and <unk> recently, we have some strong better there and the ones we're focused on it and learning from our different than the ones. They were that we were focused on just a few years ago.

Peter Benedict: In the U S. We have fierce competition from them.

Peter Benedict: All kinds of different directions. So our mindset is to be aware to watch to learn and when we see the customer responding to something react if it makes sense for us to react to change we need to change. So we try to stay focused.

Doug McMillon: We try to stay focused, straight ahead, eyes on customers, members, focused on our associates, have our competitors in our peripheral vision, but study them and learn and apply. I think you can see that in some of our results today.

Peter Benedict: Straight ahead ion customers members focused on our associates have our competitors in our peripheral vision, but study them and learn and apply I think you can see that in some of our results today.

Operator: Thank you. Our next question comes from the line of Karen Short with Evercore ISI. Please proceed with your question.

Speaker Change: Thank you our next.

[Analyst]: Hi, thanks for taking my question. Good to talk to you again. I kind of have two interrelated questions. Your OpEx is 21.2%. I'm wondering what the potential is to get closer to 19% or get back to 19%. Obviously, that's in the context of eCommerce as it relates to losses. The second portion is, with all these alternative revenue streams that you have, at what point are you looking at a materiality conversation?

Speaker Change: Question comes from the line of.

Speaker Change: Karen short with Melius Research. Please proceed with your question.

Speaker Change: Hi, Thanks for taking my question.

Speaker Change: How do you again.

Speaker Change: My I kind of have two interrelated questions. So yes.

Speaker Change: 20.

Speaker Change: One 2%.

Speaker Change: Wondering what the potential is to get closer to 19%.

Speaker Change: Again back to 19% and obviously that's in the context of the economy.

Speaker Change: As it relates to losses and then the second.

Speaker Change: Of course.

Speaker Change: With all this alternative revenue streams.

John David Rainey: Karen, clearly, those questions are for me. This is John David. I'll take them in reverse order. We report on a segment basis right now, and that satisfies the requirements that we have for segment reporting. We'll continue to report out by International, Sam's, and U.S. If something changes in our business, we'll reevaluate that in the future. On OpEx, there are a couple of drivers. First of all, in the current quarter to the increase, and then I'll address your question related to where it could go. In the current quarter, we saw a little bit more investment in marketing in the U.S. business, and that's helping to drive some of the performance in general merchandise. We're really pleased about that. The other is incentive pay for our frontline associates. We think it's important that our frontline associates are rewarded in the same way that shareholders are.

Speaker Change: At what point are you looking at a materiality conversation.

Speaker Change: Karen clear those questions are for me this is John David.

Speaker Change: We report I'll take them in reverse order, we report on a segment basis right now.

Speaker Change: And that satisfies.

Speaker Change: The.

Speaker Change: Requirements that we have for segment reporting.

Speaker Change: So continue to put out by international Sam's and U S.

Speaker Change: If something changes in our business, we'll reevaluate that in the future.

Speaker Change: On Opex.

There are a couple of drivers first of all in the current quarter or two the increase and then I'll address your question related to where it could go but in the current quarter, we saw a little bit more investment in marketing in the U S business and that's helping to drive some of the performance center merchandise. So we're really pleased about that the other is incentive pay for frontline.

John David Rainey: As we've outperformed this year, we've seen additional incentive pay for them, and that pressured SG&A in the third quarter. The other element gets to, I think, the essence of your question, which is the changing mix of our business. If you look at SG&A on a brick-and-mortar basis, it's less than what you have in digital channels. As we continue to grow digitally, as we continue to have more of our business that's coming through eCommerce, you're going to see some pressure on SG&A. That said, the team here is very focused on continuing to try to provide everyday low costs to enable us to have everyday low prices for our customers. We'd love to get back to the 20% range on SG&A. That requires work.

Speaker Change: Associates, we think it's important that our frontline associates are rewarded in the same way that shareholders are and is without perform this year, we've seen additional incentive pay for them and that pressured SG&A in the third quarter. The other element gets too I think the essence of your question, which is the changing mix of our business.

Speaker Change: If you look at SG&A on a brick and mortar basis, it's less than what you have digital channels.

Speaker Change: So.

Speaker Change: As we continue to grow digitally as we continue to have more of our business has come through e-commerce youre going to see some pressure on SG&A.

Speaker Change: That said the team here is very focused on continuing to try to provide everyday low cost to enable us to have everyday low prices for our customers and so we'd like to get back to the 20% range on SG&A.

John David Rainey: In any company, and especially one our size, there's always opportunities for efficiencies and the use of technology to better serve our customers and members. We're working on that. You have to keep in mind going forward that as we get more digital, you're going to see pressure on the SG&A line.

Speaker Change: That requires work.

Speaker Change: But there's in any company and especially on our size, there's always opportunities for efficiencies and the use of technology to better serve our customers and members. So we're working on that but you have to keep in mind going forward that as we get more digital youre going to see pressure on the SG&A line.

Operator: Thank you. Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Seth.

[Analyst]: Great. Good morning, everyone. Obviously, the strength in the quarter was broad-based. I wanted to focus on the acceleration in average ticket in the U.S. I think that was the strongest in over a year. I am curious if that was impacted by the hurricane or if there's some other type of inflection that you're starting to see in basket size, maybe an improvement in GM or attachments. Is that also maybe a benefit of attracting that higher-income consumer? Any more context on that as we think about the run rate going forward. Thanks so much.

And then with Barclays. Please proceed with your question.

Speaker Change: Great. Good morning, everyone. Obviously, the strength in the quarter was broad based but I wanted to focus on the acceleration in average ticket in the U S.

Speaker Change: I think that was the strongest in over a year I am curious it was impacted by the hurricane or if there's some other type of inflection that you are starting to see in <unk>.

Speaker Change: Its size, maybe an improvement in GM or catch man is that also may be a benefit of attraction in that higher income consumer any more context on that as we think about the run rate going forward. Thanks, so much.

John Furner: Yeah, good morning. This is John. I think everything you said does represent some of the improvements that we did see in the quarter. We did mention that there were some tailwinds from some one-time events that happened in the quarter. The thing that I'm really proud of the team is we had the highest growth in units and food that we've seen in several years, which is great. Our general merchandise business, as we mentioned, despite some deflation in the low single digits and mid-single digits range, were positive comps. The units outgrew that. It is all, I think, a reflection of starting with, are we selling the things that customers want to buy during the season they're in? Seasons are important. We ended October with a strong Halloween. All those added up are important.

Speaker Change: Okay.

John David: Hey, Good morning. This is John I think I think everything you said it does represent some of the improvement that we did see in the quarter.

John David: We did mention that there are some tailwind from some one time events that happen in the quarter, but the.

John David: The thing that I am really proud of the team as we had the highest growth in units and food that we've seen in several years, which is right. Our general merchandise business as we mentioned despite some deflation in the low single digits mid single digits range for positive comps for the units outgrew that.

John David: It is all I think a reflection of starting with are we selling the things that customers want to buy during the season. There in seasons are important.

John Furner: The shift from, I'd say not necessarily from, but adding on digital business on top of our store business is helping us attract new customers and serve them well with the options that we have. The combination of both the product offerings are working. The growth in deliveries under three hours is impressive. The team's doing a great job with that. We need to continue that. We know customers are looking for both value, and they're looking to save time.

John David: We ended October with a strong Halloween and so all those added up.

John David: And the shift from.

John David: I'd say not necessarily from but adding on digital business on top of our store business.

John David: Helping us attract new customers and serve them well with the options that we have the combination of both.

John David: Sop brings are working on the growth in deliveries under three hours is impressive the team's done a great job with that and we need to continue that way, Brazil came from a value and they're looking to save time.

Operator: Thank you. Our final question this morning comes from the line of Greg Mellick with Evercore ISI. Please proceed with your question.

Speaker Change: Thank you our final question this morning.

John Furner: Hi, thanks, guys. I wanted to follow up on the membership growth and what's driving that there and what sort of behavior you're seeing in terms of lift from people when they do sign up for Walmart+ in particular and what that flows through in terms of the importance of data and then using that in the new businesses. Hey, Greg. This is John. I'll start with Walmart+. Walmart+ is a really important part of the offer. As we said this morning, we have a clear strategy. Our results reflect the financial framework that we have laid out. The growth in eCommerce is an indicator of where the customer is headed. Walmart+ is a great way for customers to amortize the cost of delivery over time.

Speaker Change: As Greg Melick with Evercore ISI. Please proceed with your question.

Speaker Change: Yeah.

Speaker Change: Thanks, guys.

Speaker Change: Wanted to follow up on the membership growth.

Speaker Change: What's driving.

Speaker Change: Driving out there and what sort of behavior, you're seeing in terms of lift from people when they do sign up for water plus a particular.

Speaker Change: And and what that flows through in terms of the importance of data.

Speaker Change: And then using that in the new businesses.

Yes.

John David: Congrats John I'll start with with water plus <unk> plus is a really important part of the offer and as we said this morning, we have a clear strategy and our results reflect the financial framework that we've laid out.

John David: The growth in e-commerce, as an indicator of where the customer is headed and Walmart pluses a great way for customers to amortize the cost of delivery over time and so when someone joins the program. We're focused right away on ensuring that we deliver their order on time when they ask for it not ahead not after and that the orders is full and it's complete with as few as substitute.

John Furner: When someone joins the program, we're focused right away on ensuring that we deliver their order on time when they ask for it, not ahead, not after, and that the order is full and it's complete with as few substitutions as possible. When we do that well, that opens up the ability for the business to talk to them about other things that are going on in their life, whether it's changing the tires on their car or helping them with a birthday cake. There are just so many things we can do in core retail that make life easier at a value for our customers. This is an important part of the overall equation. We mentioned results up over double digit in Walmart+ again. Good to see the momentum. Looking from here forward in this quarter in particular, it's about executing really well.

John David: As possible and then when we do that well that that opens up the ability for the business to talk to them about other things that are going on in their life, whether it's changing the tires on their car or helping them with the birthday cake.

So many things we can do in core retail that it makes life easier adding value for our customers. So this is an important part of the overall equation, we mentioned results up over double digit in Walmart plus again, so good to see the momentum and you know looking from from here forward and this quarter particular, its about executing really well we need to be really clear.

John Furner: We need to be really clear on our offer. We need to pull the orders on time without substitutions. We need to deliver to customers exactly what they're looking for. This is a time of year when families get together for meals and gifts. It's really important that we're there for them. We enable them to have the best season they can have.

John David: On our offer we need to pull the orders on time without substitution and we need to deliver to customers exactly what they are looking for this is the time of year when families get together for meals and gifts and it's really important that we're there for them and we enable them to have the best season. They can have.

Kath McLay: I'll just add from an international perspective. I think when we think about membership, there's a bit of a spectrum. If you think about in Chile, we actually have a loyalty program, which allows us to have over 80% of our customers' data. If you look at it in Mexico, we've just launched Beneficios, which has allowed us to get 28 million members to sign up, which allows us just to be a lot more personalized in the way that we show up for those members. Those are free loyalty membership programs right through to a paid membership where you're really bundling delivery capabilities. If you look at that, we're seeing growth across most of the major markets. If I then just point to Sam's Club China, they've had membership income grow of over 30%.

John David: And from an international perspective, I think when we think about membership there's a bit of a sector. So do you think about in Chile, we actually have a loyalty program, which allows us to have over 80% of our customers' data.

John David: And then if you look at it in Mexico, We've just launched beneficiary off which has allowed us to get 28 million members sign up which allows us just to be a lot more personalize and the way that we subsidized members.

John David: Our free loyalty.

John David: Loyalty membership program five three to a pay amendment shape, where you're really battling delivery capabilities. If you look at that we're seeing growth across most.

Kath McLay: I think that is a testament to the quality of their CVP and how attractive that is to our customers, not only the in-club offering, but also the ability to do convenience with over 80% of their deliveries being under an hour. We think about membership as a way of driving loyalty to create the ability to personalize, to have a richer, stickier relationship with our members, and to bundle up the ability to do delivery, which is something our customers are telling us is really important.

John David: Most of the major market.

John David: If I then just point to Sam's China, they've had membership income grew up by the 30% and I think that is it a testament to the quality of they say they pay and how attractive that is to our customers not only the in club offering but also the ability to de convenience with like over 80% of their deliveries being under an hour.

John David: So we think about membership as a way of driving loyalty to create the ability to personalize that rich has stickier relationship with our members and to bundle up the ability to do delivery, which is something our customers are telling us is really important.

Chris Nicholas: Yeah, I think in Sam’s Club, we had a 15.1% growth in membership income. None of this is a gift. It’s all an achievement. It’s just hard work. John talked about execution. We are executing on our member value proposition, which is value, assortment, great experiences, and building that trust with the members so that you build a lifelong relationship with them. We had some great results, as you’ve heard, in eCommerce and in club, which we’re really proud of, and we’ve seen the outcome of that. Great inputs give you great outcomes. We’ve seen digital penetration increase 400 basis points, Scan & Go up 250 basis points, and that’s resulted in all-time high memberships increasing, plus penetrations up 300 basis points. Our renewal is up 230. Just really nailing those basics, listening to your members, and giving them what they want gives you great outcomes.

Speaker Change: Yeah, I think in Sam's club had a 15.1% growth in membership income, but none of this is a gift is all achievement Todd work John talked about execution, we are executing on our member value proposition, which is value.

Speaker Change: Saltman is Greg Syrian says in this building that trust with the members of your build lifelong relationship with them.

Speaker Change: We had some great results as you've heard in e-commerce and in club, which will be proud of and.

Speaker Change: And we've seen the outcome of that so great inputs he'd be a great outcomes.

Speaker Change: We've seen digital penetration increased 400 basis points scan and go up 250 basis points I should we still take notes and ambitious.

Speaker Change: Increasing plus penetrations of standard basis points and our renewals at 230 so.

John David Rainey: All right, I want to thank everybody for joining us today. We look forward to engaging with many of you in the coming weeks and months at investor conferences. I want to ask you to mark your calendars for our next investment community meeting, which is on April 8 and 9, 2025. Doug?

Speaker Change: Just breathing eating those basics listening to your members and giving them what they want gives you great outcomes.

Speaker Change: Alright, I want to thank everybody for joining us today, we look forward to engaging with many of you in the coming weeks and months at Investor conferences I want to ask you to Mark your calendars for our next investment community meeting, which is on April 8th and ninth 2025, Doug.

Doug McMillon: Really proud and grateful to the team and of the team. The folks that are in this room, our leaders more broadly, and our associates around the world, they're doing a nice job of delivering short-term results, managing today, and building for tomorrow at the same time so that we can continue this momentum. I think we are being appropriately aggressive as it relates to our level of investments, whether that's related to price or associate investments or automation, for example. I'm really encouraged by the way folks are working together with our tech teams to build things in a way that's faster and more effective. We've got room to improve there. We probably always will.

Speaker Change: Really proud and grateful to Tina the team.

Speaker Change: Folks who are in this room are leaders more broadly and our associates around the world and they're doing a nice job of delivering short term results managing today and building for tomorrow at the same time. So that we can continue this momentum.

Speaker Change: I think we are being appropriately aggressive as it relates to our level of investments, whether that's related to price or.

Speaker Change: Associated investments or or automation for example, and I'm really encouraged by the way folks are working together with our tech teams to build things in a way that is faster and more effective we've got room to improve there, we probably always will but when I look at what we're putting together the combination of businesses I think the outcome.

Doug McMillon: When I look at what we're putting together, the combination of businesses, I think the outcome is one that can continue to grow the top line while growing the bottom line faster in a sustainable way, while making the necessary investments as we work towards trying to serve people better. For decades, it's been my experience that our customers and members want four things from us. They want low prices. They want a really broad assortment of products and services. They want to have a great experience. That includes convenience and saving them time. They want to do business with somebody they trust. In this business, you get what you earn. We are working hard today to make sure that tomorrow we're continuing to have quarters like the one that we had this quarter. Thank you all.

Speaker Change: <unk> is one that can continue to grow the topline while growing the bottom line faster in a sustainable way, while making necessary investments as we work towards trying to serve people better for four decades, it's been my experience at our customers and members want four things from us they want low prices, they weren't really broad assortment of products and services.

Speaker Change: They want to have a great experience and that includes convenience and saving them time and they want to do business with somebody their trust.

Speaker Change: And in this business you get with <unk>.

Speaker Change: So we are working hard today to make sure that tomorrow, and we're continuing to have quarters like the one that we had this quarter. Thank you all.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.

Q3 2025 Walmart Inc Earnings Call

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