Q1 2026 Walmart Inc Earnings Call

May 15, 2025

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Speaker Change: Greetings with Walmart's first quarter fiscal year 2026 earnings call.

Speaker Change: At this time all participants are in listen only.

Speaker Change: Okay.

Speaker Change: A question and answer session.

Speaker Change: Presentation.

Speaker Change: Okay.

Speaker Change: Certainly.

Speaker Change: Please press Star Zero on your 12 key pad.

Speaker Change: This conference is being recorded.

Stephane: I'll now turn the conference over to Stephane.

Stephane: Senior Vice President of Investor Relations.

Speaker Change: You may begin.

Speaker Change: Thank you and welcome everyone.

We appreciate you joining us and your interest.

Speaker Change: Joining me today from our home office.

In some cases, we'll absorb cost within a category or department and not simply pass on a tariff cost attributable to each item individually.

Speaker Change: From Walmart CEO, Doug Mcmillon and CFO Jonathan.

Speaker Change: Yeah.

Speaker Change: David will first share their views on the quarter and then we'll open up the lines for your questions.

We will be managing mix across items categories and businesses.

Speaker Change: During the question and answer portion, we will be joined by our segments.

We also have suppliers shifting materials from tariff impacted components like aluminum to fiberglass, where there is no tariff.

Speaker Change: Suffer from Walmart.

Speaker Change: Kathryn Mcquade from more international.

Our merchants sourcing team and suppliers or being creative it's been impressive to watch our team identify opportunities and adjust.

Speaker Change: Next question.

Speaker Change: For additional detail on our results including highlights.

Speaker Change: See our earnings release and accompanying presentation on our website.

As we continue to diversify our profit streams through our e-commerce offering our marketplace in membership and advertising.

Speaker Change: We will make every effort to answer as many of your questions.

We have some room to absorb costs.

Speaker Change: Any hour scheduled for this call.

We're committed to growing profit faster than sales there isn't anything about this quarter or anything about this coming year that shakes, our confidence about growing profit faster than sales over the term of our long range plan the strategy and business model are set up to do that.

Speaker Change: As a courtesy to others. Please limit yourself to one question.

Speaker Change: Today's call is being recorded and management may make forward looking statements.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements.

In summary, the takeaways from my remarks today are one we delivered a good first quarter.

Speaker Change: These risks and uncertainties include but are not limited to the factors.

To our strategy and Omnichannel capabilities are strong we will keep getting better in terms of assortment delivery speed and we'll keep scaling our newer businesses will keep driving growth and we will control what we can control.

Speaker Change: Our filings with the SEC.

Speaker Change: Please review our press release and accompanying slide presentation for a card.

Speaker Change: Generic state regarding forward looking statements.

Speaker Change: As long as our entire safe non-GAAP reconciliation on our website at stock stock Walmart Com.

We continue to be confident in our ability to strengthen this business, even as we navigate cost of goods changes.

Speaker Change: John that concludes my intro, we're ready to begin.

Our short and longer term opportunities are clear.

Speaker Change: Okay.

Speaker Change: Good morning, and thank you for joining us.

And three we're positioned to manage the cost pressure from tariffs as well or better than anyone but even at the reduced levels. The higher tariffs will result in higher prices.

Speaker Change: I'll start today by thanking our associates.

Speaker Change: To drive results for today, while changing to strengthen our business for tomorrow.

The timing of the tariffs in our inventory receipts matters as you interpret our results by quarter, John David will say more about how retail accounting and timing will play out through the year.

Speaker Change: More than 475000 associates participated in our Walmart share purchase plan.

Speaker Change: 81% of them are hourly.

Speaker Change: For all those associates that are listening nice job everybody.

I'll wrap up my remarks today, the same way I opened by thanking our associates.

Speaker Change: First quarter, we grew sales, 4% and profit by 3% in constant currency.

Our store club and supply chain associates are working hard and learning new capabilities.

Speaker Change: We grew international sales by seven 8%.

Office and Tech associates are partnering to manage the short term while building for the long term.

Speaker Change: We drove assumes U S comp of six 7% excluding fuel.

We've been operating in challenging environments for years, now and we will come through this one stronger than ever just as we have before.

Speaker Change: U S comp of 5%.

Speaker Change: The strong Q1 results were not driven by inflation.

We have associates shareholders week coming up it's my favorite week of the year I look forward to seeing so many of our associates and many of you here in northwest Arkansas.

Speaker Change: Actions in unit drove our top line.

Speaker Change: Globally, we pre commerce, 42% with each segment delivering growth of at least 20% inventories in good shape.

John David I'll turn it over to you.

John David: Thanks, Doug.

Speaker Change: So the first quarter.

John David: First quarter performance demonstrates the strength of our business and the relevance of our omni strategy in the context of a highly dynamic backdrop.

Speaker Change: On the top line.

Speaker Change: And better than what we expected on bottom line. It was a good first quarter.

Speaker Change: There's a lot to like about how we are changing and where we are.

John David: I'm pleased with our continued sales momentum across the company and it speaks to the competitive advantages that set us apart in the retail marketplace.

Speaker Change: We feel great about our team our strategy and stores and clubs.

Speaker Change: Feel great about how we're driving your comp growth in a way that serves customers and members better, but reshaped our business model, resulting in a more profitable business towards higher returns over time.

John David: Our commitment to delivering value and convenience to our customers is resonating more than ever.

John David: At the same time, we're driving progress in high growth areas like advertising membership and marketplace services.

Speaker Change: Delivery speed continues to help drive our business.

John David: Our April results were better than we had expected, particularly in Walmart U S sales across segments improved as the quarter progressed, including strong Easter seasonal events and our teams did a nice job managing inventory and controllable expenses, leading to a stronger than forecasted performance in both gross profit and SG&A.

Speaker Change: We will soon reach 95% of the population in the U S with delivery options of three hours or less.

Speaker Change: For Walmart U S. The number of deliveries in less than three hours grew by 91% for Q1 versus a year ago.

Speaker Change: And in China, and India, where frequently talking about delivery times it happened in minutes.

Speaker Change: We're confident in our ability to strengthen this business, even as we navigate cost of goods changes.

John David: Consolidated revenue increased 4% in constant currency, despite lapping last year's leap day, driven by strong growth in ecommerce of 22%.

Speaker Change: Our short and longer term opportunities are clear.

Speaker Change: The immediate challenges, obviously navigating the impact of tariffs here in the U S.

John David: Currency headwinds reduced reported sales results by $2 $4 billion or 150 basis points of growth.

Speaker Change: Our mindset and approach haven't changed since our Investor Conference last month in Dallas.

John David: Walmart U S comp sales grew four 5% aided by strong ecommerce sales growth of 21%.

Speaker Change: I think president Trump and Secretary Bersin for the progress made recently.

Speaker Change: We're hopeful that it leads to a longer term agreement between the U S and China that would result in even lower tariffs.

John David: Momentum in grocery sales continued with a mid single digit comp and ongoing share gains.

Speaker Change: We will do our best to keep our prices as low as possible, but given the magnitude of the tariffs even at the reduced levels announced this week, we arent able to absorb all of the pressure given the reality of narrow retail margins.

John David: Health and wellness sales increased high teens, reflecting higher prescription volumes and over the counter cells, while general merchandise sales declined slightly with softness in electronics home products and sporting goods.

Speaker Change: In retail managing inventory is always important and this situation is even more important and even more challenging. It is helpful that we're entering the second quarter with well managed inventory is.

John David: We're focused on value and managing our relative price position, while also saving customers time with our ecommerce options in Walmart U S. We have more than 5000 price rollbacks across our assortment.

Speaker Change: It is helpful that we're crossing the threshold of profitability with ecommerce globally and then we had these newer higher margin businesses growing like membership and advertising.

John David: And we've seen private brand sales outperform with grocery private brand penetration up 60 basis points versus last year.

John David: Our international business grew sales, 7.8% in constant currency.

Speaker Change: Full that we sell a broad assortment that includes food consumables and general merchandise.

John David: Collecting strength in China and flip cart.

Speaker Change: Helpful that so much of our assortment is replenishable, which means we can flow. It we don't have to make a onetime call on a quantity instead, we can adjust our forecast and partner with our suppliers to adjust quantities over time as we navigate tariff impacts on costs.

John David: E Commerce was strong with double digit growth across markets led by pickup and delivery and marketplace.

John David: We're increasing speed of delivery for customers and.

John David: No items delivered same or next day increased by 35% with about 45% of those items delivered in under three hours.

Speaker Change: It is helpful that we have so many talented and experienced merchants and replenishment associates.

Speaker Change: Treating our suppliers well as a priority we have worked with most of these companies for many years and we will be doing business together for many years to come. So we will have that longer term mindset as we work together through this year.

Speaker Change: At Walmart's lapping last year's government stimulus payments, the Easter shift and some early quarter softness tied to a weaker and uncertain macro environment led to slightly softer sales than anticipated.

Speaker Change: We're encouraged by the pickup in business more recently with cells back in line with our expectations.

Speaker Change: It's helpful that more than two thirds of what we sell in the U S is made assembled or grown here in.

Speaker Change: Sams Club U S comp sales ex fuel increased nearly 7% with strong growth in transactions, including strength in member's Mark.

Speaker Change: In recent years, our U S percentage has grown.

Speaker Change: Last year, we purchased $296 billion in the United States and we made a commitment back in 2021 to add another 350 billion in incremental U S volume over the following 10 years.

Speaker Change: E Commerce grew 27% led by triple digit growth in club fulfilled delivery and double digit growth in pickup.

Speaker Change: We recently announced additional support for U S businesses in the form of grow with us, which will provide small businesses in the U S with the education training and resources they need to help them get started with us.

Speaker Change: Members value the convenience of scan and go and their usage of this tool continues to grow with penetration, increasing 600 basis points versus last year.

Speaker Change: Over 50% of our members now transact digitally in some form with Sam's online or using digital solutions and club.

Speaker Change: Might be surprised to know that nearly 60% of our suppliers in the U S are small businesses.

Speaker Change: We will also continue to hold our open call event in October where we invite U S companies that aren't doing business with us to introduce their company and their products that is one of the most fun days of the year for us as merchants.

Speaker Change: From a margin standpoint, consolidated gross margin increased 12 basis points due to better than expected results at Wal Mart U S, partially offset by lower than expected results in international which saw increased pressure from channel and format mix changes.

Speaker Change: The merchandise that we import comes from all over the world from dozens of freeze.

Speaker Change: Gross margins in Walmart U S increased 25 basis points, reflecting continued disciplined inventory management, including a lower level of markdowns and improvements in business mix that have offset increased pressure from merchandise category mix.

Speaker Change: Other than the U S. The other large markets are China, Mexico, Vietnam, India and Canada.

Speaker Change: China in particular represents a lot of volume in certain categories like electronics and toys.

Speaker Change: All of the tariffs create cost pressure for us, but the larger tariffs on China have the biggest impact.

Speaker Change: As our business model evolves contributions to profitability are increasingly influenced by a diverse set of drivers, including improved E Commerce economics and business mix.

Speaker Change: The cost pressure from all the tariff impacted markets started in late April and it accelerated in May.

Speaker Change: Let me describe how we think about that and what we're doing about it.

Speaker Change: We achieved ecommerce profitability both in the U S as well as for the global Enterprise in Q1 for the first time, an important milestone for our company.

Speaker Change: First we wanted to keep our food and consumables prices as low as we can food prices in the U S have gone up in recent years and our customers have been feeling that all along.

Speaker Change: In the U S E Commerce net delivery cost have declined as we've continued to densify, our last mile deliveries and as customers pay fees for faster delivery.

Speaker Change: We won't let tariff related cost pressure on some general merchandise items put pressure on food prices, but as it relates to food tariffs on countries like Costa Rica, Peru, and Colombia are pressuring imported items like bananas, avocados coffee and Roses.

Speaker Change: Business mix, most notably from higher margin areas like advertising or membership fees also contributed to the improvement in Q1 profitability.

Speaker Change: Our advertising business across markets increased 50%, including Vizio Walmart connect in the U S, which doesn't include Vizio grew 31%.

Speaker Change: We will do our best to control, what we can control in order to keep food prices as low as possible.

Speaker Change: An example would be controlling the amount of fresh food waste.

Speaker Change: In some cases, we're holding our retails were they are despite the tariff cost pressure flowers for mother's day at Sam's Club U S is a good example.

Speaker Change: Sam's Club U S AD business was up 21% and we saw 20% growth in our international markets led by flip cart.

Speaker Change: When it comes to the general merchandise categories that are impacted.

Speaker Change: Membership fee income was up nearly 15% across the enterprise.

Speaker Change: We'll move production, where that's possible that is an easier fast, but we've been working on that for years. So it's not like we've just started to make adjustments.

Speaker Change: In the U S. Sams club continued to see steady growth in member counts renewal rates and increased penetration of plus members, resulting in membership income growth of nine 6%, while Walmart plus membership income grew double digits within international membership income from Sam's Club, China grew more than 40% as member.

Speaker Change: In some cases, we'll absorb costs within a category or department and not simply pass on a tariff cost attributable to each item individually.

Speaker Change: I'll be managing mix across items categories and businesses.

We also have suppliers shifting materials from tariff impacted components like aluminum fiberglass, where there is no tariff.

Speaker Change: <unk> continue to increase.

Speaker Change: SG&A expenses, Deleveraged six basis points, including the benefit from lapping last year's business reorganization costs as expected International and Sam's Club U S expense deleverage reflects planned investments in associate wages Walmart.

Speaker Change: Our merchants sourcing team and suppliers or being creative it's been impressive to watch our team identify opportunities and adjust.

Speaker Change: As we continue to diversify our profit streams through our e-commerce offering our marketplace in membership and advertising.

Speaker Change: Walmart U S deleverage reflected increased depreciation expense as well as vizio operating costs post acquisition.

Speaker Change: We have some room to absorb costs.

Speaker Change: We're committed to growing profit faster than sales there isn't anything about this quarter or anything about this coming year that shakes, our confidence about growing profit faster than sales over the term of our long range plan the strategy and business model are set up to do that.

Speaker Change: As we previewed at our Investor day, we experienced higher than expected casualty claims expense were accruing a higher rate for claims costs based on the industry trends that point to higher risk adjustment factors. We expect this trend to persist for at least a few quarters.

Speaker Change: In summary, the takeaways from my remarks today are one we delivered a good first quarter.

Speaker Change: Adjusted operating income was better than expected with growth of 3% in constant currency and adjusted EPS of <unk> 61 cents was higher than our guided range importantly, our inventories at a healthy level up three 8%.

Speaker Change: To our strategy and Omnichannel capabilities are strong we will keep getting better in terms of assortment delivery speed and we'll keep scaling our newer businesses will keep driving growth and we will control what we can control.

Speaker Change: That's obviously as important as ever as we head into a tariff impacted period, where cost pressures will impact item pricing and make it more challenging to anticipate demand by item.

Speaker Change: We continue to be confident in our ability to strengthen this business, even as we navigate cost of goods changes.

Speaker Change: Our short and longer term opportunities are clear.

Speaker Change: This is a highly fluid situation and we'll need to manage quantity decisions as we measure the price elasticity of impacted items.

Speaker Change: And three we're positioned to manage the cost pressure from tariffs as well or better than anyone but even at the reduced levels. The higher tariffs will result in higher prices.

Speaker Change: I'm grateful that we have a team of experienced merchants various levers we can pull in the tools available to manage this in a thoughtful and proactive way.

Speaker Change: The timing of the tariffs in our inventory receipts matters as you interpret our results by quarter, John David will say more about how retail accounting and timing will play out through the year.

Speaker Change: Our cash position provides the flexibility we need to lean into opportunities to grow share. While also continuing to invest in areas with long term strategic value such as supply chain automation store growth Remodels in tech.

Speaker Change: I'll wrap up my remarks today, the same way I opened by thanking our associates.

Speaker Change: Our store club and supply chain associates are working hard and learning new capabilities.

Speaker Change: In April we completed an approximately $4 billion debt issuance at attractive terms, we continue to expect FY 'twenty six capex to be in the range of three to three 5% of cells.

Speaker Change: Office and Tech associates are partnering to manage the short term while building for the long term.

Speaker Change: We've been operating in challenging environments for years, now and we will come through this one stronger than ever just as we have before.

Speaker Change: During Q1, we repurchased $4 $6 billion in stock an amount equivalent to our share repurchases for the entire year last year.

Speaker Change: We have associating shareholders week coming up it's my favorite week of the year I look forward to seeing so many of our associates and many of you here in northwest Arkansas.

Speaker Change: We have a lot of confidence in our business and will continue to be opportunistic with buybacks of share price dislocations occur.

Speaker Change: John David I'll turn it over to you.

John David: Thanks, Doug our first quarter performance demonstrates the strength of our business and the relevance of our omni strategy in the context of a highly dynamic backdrop.

Now turning to guidance as a matter of practice, we provide an update on our full year outlook at the end of the second quarter, if appropriate, but I'd like to give some color on how we're thinking about the impact from tariffs.

Speaker Change: I am pleased with our continued sales momentum across the company and it speaks to the competitive advantages that set us apart in the retail marketplace.

Speaker Change: I want to start with reiterating our message from our Investor day in early April we have a lot of confidence in our strategy and there is nothing about this current period that makes us feel differently about anything. We've previously said about our long term financial framework to grow annual sales about 4% and operating income faster themselves.

Speaker Change: Our commitment to delivering value and convenience to our customers is resonating more than ever.

Speaker Change: At the same time, we're driving progress in high growth areas like advertising membership and marketplace services.

Speaker Change: Our April results were better than we had expected, particularly in Walmart U S sales across segments improved as the quarter progressed, including strong Easter seasonal events and our teams did a nice job managing inventory and controllable expenses, leading to a stronger than forecasted performance in both gross profit and SG&A.

Speaker Change: We've seen during periods of economic uncertainty in the past, we tend to gain share and come out the other side and an even stronger position. We expect this period to be no different we.

Speaker Change: We will play offense in the opportunistically invest in areas to improve our value proposition.

Speaker Change: But we're not fully immune from the financial impacts in the short term.

Speaker Change: Consolidated revenue increased 4% in constant currency, despite lapping last year's leap day, driven by strong growth in E Commerce a 42%.

Speaker Change: We've done work internally to model various scenarios related to the ongoing trade policy discussions please.

Speaker Change: These scenarios involved making assumptions about how long tariffs persist at certain levels versus coming down to some lower level. Once bilateral trade deals are completed.

Speaker Change: Currency headwinds reduced reported sales results by $2 4 billion.

Speaker Change: Or 150 basis points of growth.

Speaker Change: Walmart U S comp sales grew four 5% aided by strong ecommerce sales growth of 21%.

Speaker Change: We also must make assumptions about the elasticity of demand as well as the overall macro backdrop in this environment.

Speaker Change: Perhaps it's obvious but worth stating the range of possible outcomes is much greater than when we originally provided our annual guidance that said and what we believe are the most likely scenarios that we've modeled we still have the ability to achieve our full year guidance for both sales and operating income.

Speaker Change: Momentum in grocery sales continued with a mid single digit comp and ongoing share gains health.

Speaker Change: Health and wellness sales increased high teens, reflecting higher prescription volumes and over the counter sales, while general merchandise sales declined slightly with softness in electronics home products and sporting goods.

Speaker Change: These scenarios involved the belief that trade policy discussions will result in bilateral agreements agreements in principle for the existence of good faith discussions moving toward agreements that could result in tariff levels lower than those initially proposed in early April however.

Speaker Change: We're focused on value and managing our relative price position, while also saving customers time with our ecommerce options in Walmart U S. We have more than 5000 price rollbacks across our assortment.

Speaker Change: And we've seen private brand sales outperformed grocery private brand penetration up 60 basis points versus last year.

Speaker Change: However, if we see a restoration of dramatically higher tariff levels the impact on our financials could be significant and even jeopardize our ability to grow earnings year over year.

Speaker Change: Our international business grew sales seven 8% in constant currency, reflecting strength in China and flip cart.

Speaker Change: In any case, we're comfortable with our ability to grow sales in the range. We've guided for the year. There was a mix of AUR versus units may be much different in these scenarios.

Speaker Change: Commerce was strong with double digit growth across markets led by pickup and delivery and marketplace.

Speaker Change: We're increasing speed of delivery for customers and international items delivered same or next day increased by 35% with about 45% of those items delivered in under three hours at Walmart's lapping last year's government stimulus payments, the Easter shift and some early quarter softness tied to a weaker and.

Speaker Change: While the swings from quarter to quarter could be large we still think we can achieve our operating income guidance for the year, given what we know and our assumptions that I referenced.

Speaker Change: Should more progress on trade in the next several weeks be favorable there could be upside if.

Speaker Change: If elevated tariffs remain in place for a long gated period, there would be downside risk.

Speaker Change: Macro environment led to slightly softer sales than anticipated.

Speaker Change: We will know a lot more than a couple of months, but we are equipped to manage this as well or better than other retailers.

Speaker Change: We're encouraged by the pickup in business more recently with sales back in line with our expectations.

Speaker Change: Turning to the second quarter.

Speaker Change: Sams Club U S comp sales ex fuel increased nearly 7% with strong growth in transactions, including strength in member's Mark.

Speaker Change: The operating environment is highly fluid and it makes the very near term exceedingly difficult to forecast the level and speed at which tariff impacted prices could go up as more extreme than a normal periods.

Speaker Change: E Commerce grew 27% led by triple digit growth in club fulfill delivery and double digit growths in pick up.

Speaker Change: The U S is by far our number one market for sourcing for.

Speaker Change: For the less than a third of what we sell in the U S. That's imported China, Mexico, Canada, Vietnam, and India are our largest markets.

Speaker Change: Members value the convenience of scan and go and their usage of this tool continues to grow with penetration, increasing 600 basis points versus last year.

Speaker Change: As Doug noted we are encouraged by the recent trade negotiations, especially concerning China. The level of tariffs that result from those discussions and the timing of when they ultimately become final may cause larger swings in our financial performance from one quarter to the next.

Speaker Change: For 50% of our members now transact digitally in some form with Sam's online or using digital solutions in club.

Speaker Change: Moreover, there are two specific accounting methods that make these swings more difficult to forecast I want to take the time to explain these because they may impact the second and future quarters, given cost pressures caused by tariffs.

Speaker Change: The first relates to our method of accounting for the cost of inventory for the majority of our U S business. The retail inventory method or rim for short term, we've always used Ram in Wal Mart U S is not new for us and it's a common method of accounting in the retail industry.

Speaker Change: As our business model evolves contributions to profitability are increasingly influenced by a diverse set of drivers, including improved E Commerce economics and business mix.

Speaker Change: Rim accounting applies a ratio of the actual cost of the inventory to its retail price to calculate any inventory and therefore derive cost of goods sold.

Speaker Change: We achieved e-commerce profitability, both in the U S as well as for the global Enterprise in Q1 for the first time, an important milestone for our company.

Speaker Change: As prices go up this can result in the potential for markups on our inventory and increased merchandise margin gains relative to periods of more constant price levels to the extent that later markdowns needed to be recorded it can have an offsetting effect.

Speaker Change: In the U S E Commerce net delivery cost have declined as we've continued to densify, our last mile deliveries and as customers pay fees for faster delivery.

Speaker Change: The magnitude of these swings both positive and negative given the level of additional cost that could be applied to the inventory that we're purchasing right now are unprecedented in our business and could result in swings in margin and earnings by quarter.

Speaker Change: Business mix, most notably from higher margin areas like advertising or membership fees also contributed to the improvement in Q1 profitability.

Speaker Change: The second is the possibility of LIFO related charges as prices go up which we experienced in Sam's club U S. During a sustained inflationary period in FY 'twenty four.

Speaker Change: Our advertising business across markets increased 50%, including Vizio Walmart connect in the U S, which doesn't include Vizio grew 31% Sam's Club U S AD business was up 21% and we saw 20% growth in our international markets led by flip cart.

Speaker Change: We currently expect that sales growth on a constant currency basis will be in the range of three and a half to four 5% for the second quarter. So the composition of sales through AUR versus units may be different than what we expect today.

Speaker Change: Membership fee income was up nearly 15% across the enterprise in the U S. Sams club continued to see steady growth in member counts renewal rates and increased penetration of plus members, resulting in membership income growth of nine 6%, while Walmart plus membership income grew double digits within international.

Speaker Change: Notably if current exchange rates were to stay where they are right now for the entire second quarter, we would expect a headwind of approximately 120 basis points to reported sales growth.

Speaker Change: For operating income the range of outcomes for the quarter is much wider.

Speaker Change: Membership income from Sam's club, China grew more than 40% as member counts continue to increase.

The information related to the trade discussions taking place is changing by the week and in some cases by the day.

Speaker Change: Importantly, we also want to provide flexibility for us to play offense in this environment.

Speaker Change: And lastly, our method of accounting for inventory could have a larger impact on our earnings than a normal quarters.

Speaker Change: For these reasons the range of outcomes for the quarter is so wide that it would be impractical to provide a range of operating income guidance that investors could credibly rely upon.

Speaker Change: Walmart U S deleverage reflected increased depreciation expense as well as vizio operating costs post acquisition.

Speaker Change: I want to encourage you to think about the next couple of quarters in the aggregate we may experience larger gains related to markups in the second quarter and some of those may be offset by markdowns in the third and fourth quarters is why we've underscored the importance of managing inventory well in this environment in total, though we believe that we can still achieve our operating and <unk>.

Speaker Change: Adjusted operating income was better than expected with growth of 3% in constant currency and adjusted EPS of <unk> 61 was higher than our guided range.

Speaker Change: Guidance for the year.

Speaker Change: In closing as we look ahead, while operating conditions are expected to remain dynamic our strategy is clear our topline momentum is strong and we're flexing into our advantages to protect margins as we grow.

Speaker Change: <unk>, our inventories at a healthy level up three 8%.

Speaker Change: History tells us that when we lean into these times of economic uncertainty we emerge on the other side as a stronger company. We expect this time to be no different. We appreciate your interest in our company and are now ready to take your questions.

Speaker Change: This is a highly fluid situation and we will need to manage quantity decisions as we measure the price elasticity of impacted items.

Speaker Change: I'm grateful that we have a team of experienced merchants various levers we can pull in the tools available to manage this in a thoughtful and proactive way.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

I would like to ask a question today. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press star two if he like to Australia question from the queue.

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

Speaker Change: In April we completed an approximately $4 billion debt issuance at attractive terms, we continue to expect FY 'twenty six capex to be in the range of three to three 5% of cells.

Speaker Change: So the major questions from as many participants as possible. We ask you. Please limit yourself to one question.

Ramon: Ramon please for our first question.

Speaker Change: During Q1, we repurchased $4 6 billion in stock.

Speaker Change: First question today is from the line of Paul Lajoie with Citigroup. Please proceed with your question.

Speaker Change: Equivalent to our share repurchases for the entire year last year.

Speaker Change: Hey, Thank you guys.

Speaker Change: We have a lot of confidence in our business and we will continue to be opportunistic with buybacks of share price dislocations occur.

Speaker Change: Thanks for detail on your pricing philosophy tied to tariffs very helpful. On my question is on E Comm Big milestone for the company achieving profitability in E Comm business.

Speaker Change: Now turning to guidance as a matter of practice, we provide an update on our full year outlook at the end of the second quarter if appropriate.

Speaker Change: Finally got you over the hump.

Speaker Change: And where to from here in terms of where margins in that business can go relative to the rest of the business and what do you see as the key drivers of further improvement E comm profitability from here. Thanks.

Speaker Change: I'd like to give some color on how we're thinking about the impact from tariffs.

Speaker Change: I want to start with reiterating our message from our Investor day in early April we have a lot of confidence in our strategy and there is nothing about this current period that makes us feel differently about anything we previously said about our long term financial framework to grow annual sales of about 4% and operating income faster than sales.

Speaker Change: Paul. Thank you for your question. This is John David Let me start with just given a little bit more detail on the global E. Com profitability. We noted that we achieved it on an enterprise basis globally as well as for the U S segment and so for you to break that down by segment. The U S was profitable Sam's was profitable and the international was slight.

Speaker Change: <unk> unprofitable, but if you take all of those together we had a profit for the quarter. So we're really pleased with that there are a few things that have driven the performance, notably in the U S and John will talk more about this but one is the densification of our network and what I mean by that as we have more customers that are coming to Walmart now and taking advantage of our E comm.

Speaker Change: We will play offense in the opportunistically invest in areas to improve our value proposition.

Speaker Change: But we're not fully immune from the financial impacts in the short term.

Speaker Change: We've done work internally to model various scenarios related to the ongoing trade policy discussions.

Speaker Change: These scenarios involved making assumptions about how long tariffs persist at certain levels versus coming down to some lower level. Once bilateral trade deals are completed.

Speaker Change: <unk> offerings, we're able to spread those deliveries over multiple households, so think about the opportunity to deliver a package to five houses on our street versus one house on the street and so as we grow we continue to spread those costs over more volume.

Speaker Change: We also must make assumptions about the elasticity of demand as well as the overall macro backdrop in this environment.

Speaker Change: Perhaps it's obvious but worth stating the range of possible outcomes is much greater than when we originally provided our annual guidance.

Speaker Change: The second is delivery cost and this is where John and his team have made a tremendous amount of progress.

Speaker Change: That said and what we believe are the most likely scenarios that we've modeled we still have the ability to achieve our full year guidance for both sales and operating income.

Speaker Change: And in reducing the unit cost and this is a lot of the supply chain infrastructure that we've implemented but part of that too is the willingness that customers have shown to be able to pay for expedited delivery and what I mean by that is delivery within one hour within three hours. We noted in the last quarter that fully a third.

Speaker Change: Of our customers are taking advantage of that option and it shows the relevance of convenience we've seen an uptick in that even in the most recent period and so John maybe you want to add a little bit more of it to me those are a couple of things that stand out to help improve the profitability. Yeah. Thanks, Sean David Paul a few things that if you look back over the last few years I think it's.

John David: Combination of investments, we made for about the last decade and those investments will include.

John David: Getting our applications to a single App building, new fulfillment centers, enabling stores to be part of the omni solution.

Speaker Change: Should more progress on trade in the next several weeks be favorable there could be upside.

John David: The speed of delivery has been encouraging the last year or sub three hour deliveries are up about 91% year on year.

Speaker Change: If elevated tariffs remain in place for an elongated period, there would be downside risk.

Speaker Change: John David mentioned also the scale of the operation. It has taken a number of years, but we're pleased with the progress and the growth we've been running 21% growth for multiple quarters in a row.

Speaker Change: We will know a lot more than a couple of months, but we are equipped to manage this as well or better than other retailers.

Speaker Change: Turning to the second quarter.

John David: For customers in particular, what the team has done that.

John David: Really impressed with is providing customers flexibility to serve customers when they want it be served the way they wouldn't even be serve so a walmart customer can shop at the counter they can shop with curbside pick up they have been home delivery, our first and third party delivery options, including fulfillment services for our sellers has been on a strong growth rate for the last few years and that has resulted in us.

Speaker Change: The U S is by far our number one market for sourcing for.

Speaker Change: For the less than a third of what we sell in the U S. That's imported China, Mexico, Canada, Vietnam, and India are our largest markets.

Speaker Change: As Doug noted we are encouraged by the recent trade negotiations, especially concerned in China. The level of tariffs that result from those discussions and the timing of when they ultimately become final may cause larger swings in our financial performance from one quarter to the next.

John David: John David said lower delivery costs due to density and frequency all of that put together has enabled us to has helped us enabled business mix with advertising our data businesses and when you put it all together just really proud of the team to be able to sit here today and announced the quarter profitability for the first time as we told you just had just a month ago, we were together.

John David: Dallas and and importantly, the team has exited the quarter with momentum there was a strong April we had a strong Easter our omni capabilities enabled us to deliver floral and other things that people need last minute for the Easter holiday and mother's day. So we'll keep working on better ways to serve customers improving speed improving desert.

Speaker Change: The first relates to our method of accounting for the cost of inventory for the majority of our U S business. The retail inventory method or rim for short we've always used Ram in Walmart U S. It's not new for us since the common method of accounting in the retail industry.

John David: City and working efficiently across all the channels.

Speaker Change: Rim accounting applies a ratio of the actual cost of the inventory to its retail price to calculate Indian inventory and therefore derive cost of goods salt.

John David: Thank you guys. Good luck.

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

Simeon Gutman: Hey, good morning, everyone and good quarter.

Speaker Change: So Doug and John David You both touched on this you built this business and financial model now that your margins could go up and invest faster for growth of growth at the same time.

Speaker Change: The magnitude of these swings both positive and negative given the level of additional costs that can be applied to the inventory that we're purchasing right now are unprecedented in our business and could result in swings in margin and earnings by quarter.

Speaker Change: Asked you in the past about like the toggling that balance and I kind of heard some of the prepared remarks on this.

Speaker Change: Back and say why not toggle it.

Speaker Change: Favre investments even more in this environment, we know how much how important it is getting more gross profit dollars, especially in Jan March why not lean into there.

Speaker Change: The second is the possibility of LIFO related charges as prices go up which we experienced in Sam's club U S. During a sustained inflationary period in FY 'twenty four.

Speaker Change: Said, it yourselves Walmart should be better positioned than most to navigate this environment.

Speaker Change: We currently expect that sales growth on a constant currency basis will be in the range of three five to four 5% for the second quarter. The composition of sales through AUR versus units may be different than what we expect today.

Doug: Thanks, Simeon this is Doug I'll go first and then John David can comment.

Doug: With our guidance, where it is for the year, we positioned ourselves to be appropriately aggressive I think as the quarters play out.

Doug: We may make different choices, depending on what's happening with pricing. It is fluid we're watching what's happening with cost of goods. There are a lot of moving parts as it relates to merchandising these days and as it relates to the retail prices, we'll watch where our price gaps are but will also watch what customers are telling us and the response that we get from them in the <unk>.

Speaker Change: For operating income the range of outcomes for the quarter is much wider.

Speaker Change: The information related to the trade discussions taking place is changing by the week and in some cases by the day.

Speaker Change: Importantly, we also want to provide flexibility for us to play offense in this environment.

Doug: Pressure that they're feeling.

Doug: So the bottom line is if we need to invest more we can having said that I really want to grow profit faster than sales like we've been working on this for a long time I think we deserve that you guys deserve that and we can navigate this in a way as we balance all the interests between customer shareholders and everyone else such that we can keep prices low enough to help people and grow.

Speaker Change: And lastly, our method of accounting for inventory could have a larger impact on our earnings than a normal quarters.

Doug: Profit faster than sales, that's what that's what winning looks like to me.

Speaker Change: I would underscore the points that Doug made I feel Simeon that we are striking the right balance between investment and growing profits. If you look over the last two years. We grew operating income about 10% on average our guidance is let's call. It roughly half of that this year and so this is a year of investment, but even while doing.

Speaker Change: Guidance for the year.

Speaker Change: That we are hopeful to be able to grow profits faster themselves. If there's to me a story about the quarter from a financial perspective, it's really one of the diversification of our income streams and so you're seeing all these things play out if you were to just take advertising in membership as an example, that's a quarter of our profits membership was really.

Speaker Change: Strong in the quarter, we grew each segment membership double digits International was north of 20%. So you are seeing this diversification of our income streams that allows us to continue to take a very long term perspective and invest in this business. So these are always a little tricky in terms of what striking that right balance, but we feel like the plan.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

Speaker Change: We like to ask a question today. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker Change: That we have right now is the right one for us.

Speaker Change: You May press star two if he like to Australia question from the queue.

Speaker Change: Participants are your speaker equipment may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Thanks, Good luck.

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

Speaker Change: So he may just questions from as many participants as possible. We ask you. Please limit yourself to one question.

Speaker Change: Thanks, Good morning, everybody. So wanted to ask a question about the consumer in the upper and lower end you called out strong gains with upper income households is that coming through on the commerce side, mainly in addition to what's going on in the store and then on the other side, there's been a dialogue in the market that may be the law.

Speaker Change: Well known please for our first question.

Speaker Change: First question today is from the line of Paul Lajoie with Citigroup. Please proceed with your question.

Speaker Change: Hey, Thank you guys.

Speaker Change: Thanks for the detail on your pricing philosophy tied to tariffs very helpful. And my question is on E Com Big milestone for the company achieving profitability in the E. Comm business was curious what finally got you over the hump.

Speaker Change: Lower end consumer is getting weaker and seen some incremental pressure in and perhaps leading to some bottom of funnel loss, where they're trading out of Walmart.

Speaker Change: Lower sort of unit lower average cost locations and doing smaller shops. So can you talk about what youre seeing on the boats that both sides in terms of the health as well as the share performance. Thank you.

Christopher: Christopher It's John.

Christopher: First anchor uncovered that John David made early this morning, which are that our customers in some cases, we've heard of some concern they remain choice will and consistent.

Christopher: And we continue to see customer customers prioritizing value and speed of delivery.

Speaker Change: Unprofitable, but if you take all of those together we had a profit for the quarter. So we're really pleased with that there are a few things that have driven the performance, notably in the U S and John will talk more about this but one is the densification of our network and what I mean by that as we have more customers that are coming to Walmart now and taking advantage of our e-commerce.

Christopher: We have seen growth across all income cohorts in the quarter.

Christopher: Fortunately and I'm proud of the fact that in April we saw a number of new customers and probably it's probably a good time to remind you just the shape of the quarter in terms of the calendar. This is a calendar where we had leap year last year and then we had a very late Easter. So February was softer than we expected March was back to normal we exited the quarter with a very strong.

Christopher: April including a strong Easter holiday, which is a reminder, that customers are prioritizing seasonal events getting together, having meals at home and and importantly, we want to be very flexible for our customers if customers choose to shop in store, we want to have a great store experience were very pleased with our remodel program we.

Speaker Change: The second is delivery cost and this is where John and his team have made a tremendous amount of progress.

Speaker Change: And reducing the unit cost and this is a lot of the supply chain infrastructure that we've implemented but part of that too is the willingness that customers have shown to be able to pay for expedited delivery and what I mean by that is delivery within one hour within three hours. We noted in the last quarter that fully a third.

Christopher: Continue to see accelerated results in high NPS scores after remodel our fast delivery scores are some of the highest scores that we have in the in the company and over the course of the rest of the year, you'll continue to see us expand our capacity and capability to deliver from FCS quickly, including same day next day and two days and we are grown.

Speaker Change: Our customers are taking advantage of that option and it shows the relevance of convenience we've seen an uptick in that even in the most recent period and so John maybe you want to add a little bit more of it to me those are a couple of things that stand out to help improve the profitability. Yeah. Thanks, Sean David Paul a few things that if you look back over the last few years I think it's <unk>.

Christopher: Our fast delivery options almost 100% year on year, you heard that this morning growing 91%. So we'll continue to focus on value with great products and meat produce are better goods line really proud of the progress in apparel toys has had a strong quarter, particularly the holiday and then we will remain very very flexible for our customers as we move.

Combination of investments, we made for about the last decade.

Speaker Change: And those investments will include.

Christopher: Throughout the year.

Speaker Change: Getting our applications to a single App building, new fulfillment centers, enabling stores to be part of the omni solution and the speed of delivery has been encouraging the last year or sub three hour deliveries are up about 91% year on year.

Speaker Change: I think from a Sams club point of view.

John David: Underlying everything that John just said I think right now I think we're leaning into the power of the model of the membership warehouse retail model, we have incredible prices because with curated items for members and what we find is that this resonates whether you will.

Speaker Change: Earning a lot of money or whether you're.

John David: No.

John David: Working through how you spend your money each.

Speaker Change: For customers in particular, what the team has done that.

John David: Towards the end of your pay packet, we're seeing growth in convenience, we really see that convenience is something that resonates for everybody and in fact, what we give to them back as the power of time. So if we make things easier for people. They have more time and that's that's incredibly value too valuable to people. So I would just close by saying that the growth in our membership the five person.

Speaker Change: Been really impressed with is providing customers flexibility to serve customers when they want it be served the way they wouldn't even be serve so a walmart customer can shop at the counter they can shop with curbside pick up they have been home delivery, our first and third party delivery options, including fulfillment services for our sellers has been on a strong growth rate for the last few years and that has resulted in us.

John David: A 10% growth in our membership income is driven by more people renewing more new members and a higher mix of plus participation and we're seeing that across all of our income cohorts.

Speaker Change: John David said lower delivery costs due to density and frequency all of that put together has enabled us to has helped us enabled business mix with advertising our data businesses and when you put it all together just really proud of the team to be able to sit here today and announced the quarter profitability for the first time as we told you just had just a month ago, we were together.

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

Peter Benedict: Hi, Good morning, guys. Thanks for taking the questions. So I'm kind of on capital allocation you talked about Capex three to three 9% of sales.

Speaker Change: Dallas and and importantly, the team has exited the quarter with momentum there was strong April we had a strong Easter our omni capabilities enabled us to deliver floral and other things that people need last minute for the Easter holiday and mother's day. So we'll keep working on better ways to serve customers improving speed improving desert.

Peter Benedict: It sounds like that probably trends towards the upper end of that range. This year I'm wondering if you could frame, where we stand with the automation investment and the spend on that.

Peter Benedict: On that front is should we be thinking capex in dollars is kind of at a peak ish level here.

Speaker Change: City and working efficiently across all the channels.

Peter Benedict: At least for the intermediate term and then on the buyback rate to see in the first quarter. It looks like you spent as you said more than last year, but also more than two years ago any any way, we should be thinking about that going forward and your willingness to commit more to.

Speaker Change: Thank you guys. Good luck.

Speaker Change: Our next questions come from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman: Hey, good morning, everyone and good quarter.

Peter Benedict: The buyback thanks, so much.

Simeon Gutman: So Doug and John David You both touched on this you built this business and financial model now that your margins could go up and invest faster for growth of growth at the same time.

Peter Benedict: Sure Peter Thank you for the question on capital allocation I'll start with Capex.

Peter Benedict: The right way to think about that level for our business is in the three to three 5% of cells.

Speaker Change: Asked you in the past about like the toggling that balance and I kind of heard some of the prepared remarks on this.

Peter Benedict: So that should grow with revenue as we go forward it may vacillate, a little bit between the top and the bottom end of that but given what we know and the opportunities that we have to drive improved returns through some of this investment we're not shying away from this and we're taking a very long term perspective, even in this current operating environment, where we see some of those.

Simeon Gutman: Back and say why not toggle it.

Favre investments even more in this environment, we know how much how important it is getting more gross profit dollars, especially in Jan March may not lean into there.

Simeon Gutman: Said, it yourselves Walmart should be better positioned than most to navigate this environment.

Peter Benedict: Costs are coming in higher.

Peter Benedict: We look at capital allocation as every dollar has too.

Doug: Thanks, Simeon this is Doug I'll go first and then John David can comment.

Our fight for its highest return and this is one of the best ways that we can spend a dollar that said we saw significant price dislocation in the quarter as some of the uncertainties filtered through the market and we are very aggressive in our share buyback as I noted buying back more than we did in the entirety of last year and we will continue to do that as we see prices.

Doug: With our guidance, where it is for the year, we positioned ourselves to be appropriately aggressive I think as the quarters play out.

Peter Benedict: Location, because we have a lot of conviction in our strategy, we have a lot of confidence in the plan that we have and we believe theres a lot of shareholder value to be created here and so as we see these types of dislocations youre going to see us be more aggressive I think it's fair to say, obviously, we're going to use we're going to spend more on share buyback. This year than we did last year given that.

Doug: Pressure that they're feeling.

Speaker Change: So the bottom line is if we need to invest more we can having said that I really want to grow profit faster than sales like we've been working on this for a long time I think we deserve that you guys deserve that and we can navigate this in a way as we balance all the interests between customer shareholders and everyone else such that we can keep prices low enough to help people and grow.

Peter Benedict: We've already done that one quarter into the year.

Peter Benedict: The total amount of that you know is to be determined we will see where prices are we need to balance this with both increasing our dividend as well as investing in ourselves through capex.

Doug: Profit faster than sales, that's what that's what winning looks like to me.

Doug: I would underscore the points that Doug made I feel Simeon that we are striking the right balance between investment and growing profits. If you look over the last two years. We grew operating income about 10% on average our guidance is let's call. It roughly half of that this year and so this is a year of investment, but even while doing.

Speaker Change: Our next question is from the line of Brad Thomas Keybanc Capital markets. Please proceed with your question.

Brad Thomas: Thanks, Good morning.

Brad Thomas: Walmart connect growth was particularly impressive this quarter and should see an acceleration for you I was wondering if you could comment a bit more on the strength in advertising and any incremental learnings you've had so far as you continue to integrate video. Thanks.

Doug: That we are hopeful to be able to grow profits faster themselves if there.

Doug: There's to me a story about the quarter from a financial perspective, it's really one of the diversification of our income streams and so youre seeing all these things play out if you were to just take advertising in membership as an example, that's a quarter of our profits membership was really strong in the quarter. We grew each segment membership double digits International was north of 12.

Brad Thomas: In the initial stages of integrating busy Oh I'm excited about the plans we have for vizio the rest of the year.

Brad Thomas: A great operating system very frictionless easy to sign up and we're looking forward to the contributions of the vizio team going forward.

Doug: Percent. So youre seeing this diversification of our income streams that allows us to continue to take a very long term perspective and invest in this business. So these are always a little tricky in terms of what's striking that right balance, but we feel like the plan that we have right now is the right one for us.

Brad Thomas: In terms of the core advertising business, we've had strength with the growth of advertising with our marketplace sellers are G. M. B in marketplace has been very consistent in the mid to high twenties.

Brad Thomas: Last quarter was it was in the mid Twenty's as well.

Speaker Change: Thanks, Good luck.

Brad Thomas: We also have had continued strength with first party and third party suppliers. So it's a broad mix of capabilities.

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

Brad Thomas: Additionally, this quarter, we launched pharmacy delivery and that's another opportunity for our customers to enjoy the flexibility that we offer and so there will be new opportunities I think as we go forward and look ahead.

Speaker Change: Thanks, Good morning, everybody. So wanted to ask a question about the consumer and the upper and lower end you called out strong gains with upper income households is that coming through on the ecommerce side, mainly in addition to what's going on in the store and then on the other side, there's been a dialogue in the market that maybe the <unk>.

Brad Thomas: But in general we're really pleased with the progress the momentum and the team that we've established at Walmart connect.

Speaker Change: Lower end consumer is getting weaker and seen some incremental pressure and perhaps leading to some bottom of funnel loss, where they're trading out of Walmart.

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

Michael Lasser: Good morning. Thank you so much for taking my question John David in your remarks, he said.

Speaker Change: <unk>.

Michael Lasser: Elevated tariffs remain in place for an elongated period, there would be downside risk now you guys are still poker players and probably will not articulate clearly define what elevated tariff rates are but would you consider the current level of tariffs to be elevated.

Christopher: Christopher It's John I'll first anchor incumbents that John David made early this morning, which are that our.

Michael Lasser: There could be downside risk if they don't come down.

Christopher: Customers in some cases, we've heard of some concern they remain choice will and consistent.

Michael Lasser: Sure.

Michael Lasser: Importantly over the long term is there anything about the tariff situation that would exit essentially impact wal-mart margins, meaning that given that the opportunity of time and flexibility he would be able to fully mitigate all of that you see in front of the U S.

Christopher: And we continue to see customer customers prioritizing value in.

Christopher: Speed of delivery.

Christopher: We have seen growth across all income cohorts in the quarter.

Christopher: Fortunately and proud of the fact that in April we saw a number of new customers and probably it's probably a good time to remind you just the shape of the quarter in terms of the calendar. This is a calendar where we had leap year last year and then we had a very late Easter. So February was softer than we expected March was back to normal and we exited the quarter with a very strong.

Michael Lasser: And such that you would be able to have margin rates that are consistent with what you would expect it over the longer term. Thank you very much.

Michael Lasser: Thanks for the question, Michael Let me start with the second part of your question first we.

Michael Lasser: We don't see anything in this as we indicated this in our prepared remarks, we don't see anything that changes the way that we think about our business long term related to the current environment that we're in and so we think that we can navigate this I think the the thing that everyone is focused on certainly the fed is to make sure that these are one time price.

Christopher: April including a strong Easter holiday, which is a reminder, that customers are prioritizing seasonal events getting together, having meals at home and importantly, we want to be very flexible for our customers if customers choose to shop in store, we want to have a great store experience were very pleased with our remodel program we.

Michael Lasser: Kris and not something that persist and bleeds into wage growth and other things that have a more longer term effect in terms of the first part of your question. What I was referring to is where the level of tariffs that were announced at the beginning of April keep in mind, a week ago, we were at 145% tariffs in China.

Christopher: Continue to see accelerated results in high NPS scores after remodel our fast delivery scores are some of the highest scores that we have in the in the company and over the course of the rest of the year you will continue to see us expand our capacity and capability to deliver from FCS quickly, including same day next day and two days and we are grown.

Michael Lasser: And certainly you know as well as anyone the preparation that goes into this day for us and so when we started the preparation around earnings. That's the construct that we were working under and ends and a 145 tariff environment and tariffs at a level that are approaching 50% for other countries is.

Michael Lasser: Is not a good outcome for retailers not get out come for the economy, We're very pleased and appreciative of the progress that's been made by the administration to bring tariffs down to this level and the guidance that we gave today are.

Christopher: Throughout the year.

Speaker Change: I think from a Sams club point of view.

Speaker Change: Underlying everything that John just said I think right now I think we're leaning into the power of the model of the membership warehouse retail model, we have incredible prices because with curated items for members and what we find is that this resonates whether you will.

Michael Lasser: The affirmation of our full year guidance is with tariffs at this level, but let me emphasize we still think that's too high there are certain items certain categories of merchandise that we're dependent upon it.

Michael Lasser: Import from other countries and prices of those things are likely going to go up and that's not good for consumers.

Speaker Change: Earning a lot of money or whether you're youll.

Speaker Change: Working through how you spend your money each.

Speaker Change: Towards the end of your pay packet, we're seeing growth in convenience, we really see that convenience is something that resonates for everybody and in fact, what we give to them back as the power of time. So if we make things easier for people to have more time and that's that's incredibly value too valuable to people. So I would just close by saying that the growth in our membership to 5%.

Edward Kelly: The next question is from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Edward Kelly: Hi, good morning, everyone.

I wanted to follow up on another tariff question and inventory planning and as you stated, it's a difficult backdrop for planning inventory.

Edward Kelly: Tariffs, obviously, a moving target.

Speaker Change: 10% growth in our membership income is driven by more people renewing more new members and a higher mix of plus participation and we're seeing that across all of our income cohorts.

Edward Kelly: Uncertainty around elasticities, so against that backdrop, how are you thinking about the planning of the inventory.

Speaker Change: Do you stay lean, hoping at tariffs come down do you get aggressive because we're on a 90 day pause and bigger picture question that I have related to this is Ken.

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

Edward Kelly: Can you.

Edward Kelly: Avoid the risk of another 22 scenario.

Peter Benedict: Hey, good morning, guys. Thanks for taking the question so kind of on capital allocation you talked about Capex three to three 5% of sales.

Edward Kelly: Given the dynamic backdrop do you think that that is a risk for for retail.

Edward Kelly: Thank you.

Doug Mcmillon: Yeah. Thanks for the question. This is Doug and you guys can chime in if he want to I think the way to start is to remind you as I said in my prepared remarks that we have a lot of replenishable items at Walmart, it's such a strength to be operating off the side counters, rather than some sort of high low.

Peter Benedict: On that front is should we be thinking capex in dollars is kind of at a peak ish level here.

Doug Mcmillon: Marketing driven model, where we're focused on features and the action alley and that and in caps. For example, so on Replenishable goods, we have the opportunity to partner with our suppliers to see what happens with sales as cost and then eventually retails adjust and then manage that through the weeks and months ahead. So that's a that's a great position.

Peter Benedict: At least for the intermediate term and then on the buyback great to see in the first quarter. It looks like you've spent as you said more than last year, but also more than two years ago any any way, we should be thinking about that going forward and your willingness to commit more.

Peter Benedict: The buyback thanks, so much.

Speaker Change: Sure Peter Thank you for the question on capital allocation I'll start with Capex, the right way to think about that level for our business is in the three to three 5% of cells.

Doug Mcmillon: <unk> to be in and our merchants and our replenishment team are really good at that and they are managing that on a daily basis as tariffs numbers have changed they've done a great job of pivoting recalculating quantities and thinking through it again, where it can get more challenging as we make decisions related things like Halloween and Christmas farther out and how do you make of quantity call in what.

Speaker Change: So that should grow with revenue as we go forward it may vacillate, a little bit between the top and the bottom end of that but given what we know and the opportunities that we have to drive improved returns through some of this investment we're not shying away from this and we're taking a very long term perspective, even in this current operating environment, where we see some of those.

Doug Mcmillon: Tariff number do you use and the best answer we can give you is we've got a sales plan. We're operating against that sales plan. Some of the quantities will be adjusted based on what we think the tariffs are going to be we've made some tariff assumptions and they will partner with our suppliers to flow that and if we need to chase goods Chase some goods and the bottom line is yeah, we we want to avoid what happened back.

Speaker Change: Costs are coming in higher.

Speaker Change: We look at capital allocation as every dollar has too.

Speaker Change: Our fight for its highest return and this is one of the best ways that we can spend a dollar that said we saw significant price dislocation in the quarter as some of the uncertainties filtered through the market and we are very aggressive in our share buyback as I noted buying back more than we did in the entirety of last year and we will continue to do that as we see prices.

Doug Mcmillon: In 2022 and by paying close attention to our unit decisions.

Doug Mcmillon: That's how we'll do it.

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

Speaker Change: Location, because we have a lot of conviction in our strategy, we have a lot of confidence in the plan that we have and we believe theres a lot of shareholder value to be created here and so as we see these types of dislocations youre going to see us be more aggressive I think it's fair to say, obviously, we're going to use we're going to spend more on share buyback. This year than we did last year given that.

Kate Mcshane: Hi, good morning, Thanks for taking our question.

Kate Mcshane: Wondering if you could talk about how the tariff situation is impacting our sellers on marketplace. Both from an inventory standpoint, and how you think about the contribution to advertising as a result of this more difficult environment.

Kate Mcshane: It's John in terms of overall inventory management.

Speaker Change: We've already done that one quarter into the year. The total amount of that is to be determined we will see where prices are we need to balance this with both increasing our dividend as well as investing in ourselves through capex.

Kate Mcshane: Walmart along with our capability to serve sellers, we built a number of tools in the last three years that are particularly helpful.

Kate Mcshane: And for sellers in particular, having services like Walmart fulfillment service with heightened visibility of their inventory, where it is our ability to move around the country is particularly helpful. As as we sit here today. The ports are flowing inventory is moving so we don't have any concerns at this point about port backups in the United States. So our inventory.

Speaker Change: Our next question is from the line of Brad Thomas with Keybanc Capital markets. Please proceed with your question.

Brad Thomas: Thanks, Good morning.

Kate Mcshane: It's flowing through I did mention earlier.

Kate Mcshane: That our GMB growth rates in marketplace in particular have been consistent over the last few quarters.

Brad Thomas: Hey, Brad it's John we had a good quarter with Walmart connect as you mentioned up 31% year on year and also a strong quarter around the world and the other advertising businesses that we operate we are in the initial stages of integrating busy Oh I'm excited about the plans we have for vizio. The rest of the year, that's a great operating system very frictionless.

Kate Mcshane: You saw that in the release, we're also seeing that again as you exited the quarter. So he has strong April and E. Commerce and this is a big contributor to the overall health of the ecommerce business with the 'twenty one growth rate that has been in place for some time, which we are pleased to see.

Kate Mcshane: And then finally, adding together our stores, our first party ecommerce business, our new automated fulfillment centers distribution capabilities, our third party business and fulfillment services that has enabled us to have this AD business and data business, which has helped us Mcdowell makes out to achieve our first quarter profitability in United States.

Brad Thomas: Less easy to sign up and we're looking forward to the contributions of the vizio team going forward.

Brad Thomas: Last quarter was it was in the mid Twenty's as well.

Brad Thomas: We also have had continued strength with first party and third party suppliers. So it's a broad mix of capabilities.

Scot Ciccarelli: The next question is from the line of Scot Ciccarelli with <unk> Securities. Please proceed with your question.

Speaker Change: Good morning, everyone.

Speaker Change: I know you talked about 50% growth in advertising and 15% and membership. So can you help reconcile those figures against what looks like just under 4% growth in the membership and other line in the P&L. Just so we can better understand the components. There and then secondly, now that E. Comm has turned positive can you provide any color on the magnitude of losses incurred over.

Brad Thomas: But in general we're really pleased with the progress the momentum and the team that we've established in Walmart connect.

Speaker Change: The last call. It year two just so we can better understand the size of the profit improvement. Thanks.

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

Speaker Change: Sure I'll take the question.

Michael Lasser: Good morning. Thank you so much for taking my question John David in your remarks, you said.

Speaker Change: First on advertising really pleased with the growth that we've seen there.

Speaker Change: Elevated tariffs remain in place for an elongated period, there would be downside risk now you guys are still poker players and probably will not articulate clearly define what elevated tariff rates are but would you consider the current level of tariffs to be elevated.

Speaker Change: It was inflated this period, because we've got we've got vizio in there versus comparing against a period that we don't but our overall advertising on an apples to apples basis was 27%. So we feel really good about that.

Speaker Change: On on membership.

Speaker Change: We felt really good about the progress there as I noted we had international that grew north of 20% both Sams in U S grew a.

Michael Lasser: There could be downside risk if they don't come down.

Michael Lasser: Sure.

Michael Lasser: Importantly over the long term is there anything about the tariff situation that would potentially impact wal-mart margins, meaning that given that the opportunity of time and flexibility he would be able to fully mitigate all of that you see in front of the U S.

Speaker Change: Double digits. The line that we have in our P&L includes other says membership and other and that includes things like sustainability income So think about recycling revenue things like that.

Speaker Change: And that's probably a larger figure than what some people expect and so that's what's that's the reconciliation to I think the 4% number that you quoted there but overall membership is is that actually its really one of the shining points of the quarter were doing really well there on E. Comm losses, I don't think I want to get into the the magnitude of some of the losses that we've had historically we've can.

Michael Lasser: And such that you would be able to have margin rates that are consistent with what you would expect it over the longer term. Thank you very much.

Michael Lasser: Thanks for the question, Michael Let me start with the second part of your question first we.

Speaker Change: Certainly, though for years seen improvements there.

Michael Lasser: We don't see anything in this as we indicated this in our prepared remarks, we don't see anything that changes the way that we think about our business long term related to the current environment that we're in and so we think that we can navigate this I think that's the thing that everyone is focused on certainly the fed is to make sure that these are one time price.

Speaker Change: You'd have to go back several years to see the.

Speaker Change: The the depth of sort of where losses topped out, but John and his team and it's really all segments. So you can look at what flip cart Stewart in India look at with Sam's has been doing we've continued to see contribution profit would be positive and with the digital platform as you grow that at a positive contribution profit you ultimately get to.

Michael Lasser: Kris and not something that persist and bleeds into wage growth and other things that have a more longer term effect in terms of the first part of your question.

Speaker Change: Overall profitability, which is where we are today. So this is.

Michael Lasser: I was referring to is where the level of tariffs that were announced at the beginning of April keep in mind, a week ago, we were at 145% tariffs in China, and certainly you know as well as anyone the preparation that goes into this day for us and so when we started the preparation around earnings that's the construct that we were <unk>.

Speaker Change: Kind of a milestone moment for us as a company I hopefully we don't talk about it every single quarter, but I think it's notable this quarter that we've we've reached this milestone and we've achieved this level of profit and we're looking forward to continuing to have that grow into the future.

Robbie: The next question is from the line of Robbie <unk> with Bank of America. Please proceed with your question.

Michael Lasser: Working under and ends in a 145 tariff environment and tariffs at a level that are approaching 50% for other countries is is not a good outcome for retailers not good outflow come for the economy, We're very pleased and appreciative of the progress that's been made by the administration to bring tariffs down to this level and.

Speaker Change: Hey, good morning. Thanks for taking my question I was wondering if you guys could talk a little give a little more detail on general merchandise you guys had deflation in general merchandise in the first quarter.

Speaker Change: Can you help us think about deflation versus inflation and tariffs.

Michael Lasser: The guidance that we gave today the affirmation of our full year guidance is with tariffs at this level, but let me emphasize we still think that's too high there are certain items certain categories of merchandise that we're dependent upon to import from other countries and prices of those things are likely going to go up and that's not good for consumers.

Speaker Change: For the for the outlook here for the next three quarters and also is there any are there is pretty significant differences between mix of general merchandise or changing in mix of general merchandise for in store versus what you guys are doing in.

Speaker Change: E Commerce.

Speaker Change: Ravi Thanks for the question I'll start and some of the others may want to jump in.

Speaker Change: The next question is from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Speaker Change: General merchandise has been deflationary for over a year right now and we've seen.

Edward Kelly: Hi, good morning, everyone.

Speaker Change: The impact of that and think of it is deflationary in the low single digits.

Edward Kelly: I wanted to follow up on another tariff question and inventory planning and as you stated, it's a difficult backdrop for planning inventory.

In the quarter importantly, though we grew units in the quarter. So we continue to see progress there.

Edward Kelly: Tariffs have you seen moving target.

Edward Kelly: Certainty around elasticities.

Speaker Change: But the consumer has pressured we've seen for a couple of years now.

Edward Kelly: So against that backdrop, how are you thinking about the planning of the inventory.

Speaker Change: Shifting the baskets away from general merchandise to those items that are more necessities versus discretionary. So people are spending more on food. So we'll continue to monitor that going forward, but the team in particular has made really good progress on the assortment that we have and enrollment.

Edward Kelly: Do you stay lean, hoping at tariffs come down do you get aggressive because we're on a 90 day pause and bigger picture question that I have related to this is Kent.

Edward Kelly: Can you.

Edward Kelly: Avoid.

Edward Kelly: Risk of another 22 scenario.

Speaker Change: Advancing general merchandize, Sir John you want to sure sure.

Edward Kelly: Given the dynamic backdrop do you think that that is a risk for for retail.

Speaker Change: Good morning, we did see strong growth in categories like toys, kids' apparel, and our baby categories and others.

Edward Kelly: Thank you.

Edward Kelly: Yeah. Thanks for the question. This is Doug and you guys can chime in if he want to I think the way to start is to remind you as I said in my prepared remarks that we have a lot of replenishable items at Walmart is such a strength to the operating upside counters, rather than some sort of high low.

Speaker Change: Across the business, we do have stronger growth rates in E Commerce and the total you can see that as well with 21% growth rates, which would reflect really a strong mix across categories.

Edward Kelly: Marketing driven model, where we're focused on features and the action alley and that and in caps. For example, so on Replenishable goods, we have the opportunity to partner with our suppliers to see what happens with sales as cost and then eventually retailers adjust and then manage that through the weeks and months ahead. So that's a that's a great position.

Speaker Change: And as we as we look at where we ended the quarter. We were softer in February just a reminder, we had really tough weather. It was lapping leap year, we had snow across the country, including the south Easton and on beaches across the southeast. So we had unusual weather in February.

Speaker Change: I mentioned this earlier March was felt like more of a normalized month closer to what we expected given the flip and leap year and a much later Easter and then as we got these Easter holiday units Street is pretty significantly and we reported this morning that we were slightly negative in general merchandise with deflation.

Edward Kelly: <unk> to be in and our merchants and our replenishment team are really good at that and they are managing that on a daily basis as tariffs numbers have changed they've done a great job of pivoting recalculating quantities and thinking through it again, where it can get more challenging as we make decisions related to things like Halloween and Christmas farther out and how do you make of quantity call in what.

Speaker Change: But was really encouraged by the results that we had from the Easter holiday until the end of the quarter.

Edward Kelly: Tariff number do you use and the best answer we can give you is we've got a sales plan. We're operating against that sales plan. Some of the quantities will be adjusted based on what we think the tariffs are going to be we've made some tariff assumptions and they will partner with our suppliers to flow that and if we need to chase goods Chase some goods and the bottom line is yeah, we we want to avoid what happened back.

Speaker Change: Again at Sam's Club, we hill positive.

Speaker Change: Positive quarter of G. M sales back to back and then deflated environments of units of the driver of that performance.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of <unk> <unk> with Oppenheimer. Please proceed with your question.

Edward Kelly: In 2022 and by paying close attention to our unit decisions, that's how we'll do it.

Speaker Change: Morning, and thanks for taking my question. So I just wanted to go back to a strong momentum in the health and wellness category just wanted to get a sense of how you guys feel about the sustainability of the momentum and then as you look at the pharmacy rollout how is that trending versus expectation and any sense as whether whether it's driving new customer acquisition at this point.

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

Kate Mcshane: Hi, good morning, Thanks for taking our question. We were wondering if you could talk about how the tariff situation is impacting our sellers on marketplace. Both from an inventory standpoint, and how you think about the contribution to advertising as a result of this more difficult environment.

Speaker Change: <unk>. Thanks for the question when we look at the pharmacy business and you saw in the reported results. This morning.

Speaker Change: Growth in the mid twenties, when you strip out the impact of G. O P ones, we saw prescription growth over 10% growth in the quarter, which is very encouraging that result is inclusive of market share gains.

Speaker Change: It's John in terms of overall inventory management.

Speaker Change: Walmart along with our capability to serve sellers, we built a number of tools in the last three years that are particularly helpful.

Speaker Change: And it's driven by a few things first I would just like to complement our pharmacists are pharmacy techs the team in the field, who do such a great job, helping customers and patients with whatever they need help with and then and then the second was the initiative of pharmacy delivery, which we launched in the first quarter, which has been helpful not only for customers to receive their <unk>.

Speaker Change: For sellers in particular, having services like Walmart fulfillment service with heightened visibility of their inventory, where it is our ability to move around the country is particularly helpful. As as we sit here today. The ports are flowing inventory is moving so we don't have any concerns at this point about port backups in the United States. So our inventories.

Speaker Change: Prescriptions the way they want to receive them, but it has resulted in growth of new digital users in our ecommerce business. So we've had a digital business with text message for some time, where you could renew now that you can deliver we see people signing up for an account on Walmart dot com and our App and we're looking forward to being able to serve them in more ways.

Speaker Change: Putting through I did mentioned earlier.

That our GMB growth rates in marketplace in particular have been consistent over the last few quarters.

Speaker Change: You saw that in the release, we're also seeing that again as you exited the quarter. So he has strong April and E. Commerce and this is a big contributor to the overall health of the ecommerce business with the 'twenty one growth rate that has been in place for some time, which we are pleased to see.

Speaker Change: Cross categories.

Speaker Change: I think it's worth mentioning that Sam's once again for the ninth year in a row when the J D power pharmacy company of the year and the X J L. P growth is still double digit at double digits. So it's over 10%. So we're feeling really good about that business.

Speaker Change: And then finally, adding together our stores, our first party ecommerce business, our new automated fulfillment centers distribution capabilities, our third party business and fulfillment services that has enabled us to have this AD business and data business, which has helped us Mcdowell makes out to achieve our first quarter profitability in the United States.

Speaker Change: Oh.

Speaker Change: Our next question is from the line of David Bellinger with Mizuho Securities. Please proceed with your question.

David Bellinger: Hey, good morning, Thanks for the questions.

Speaker Change: First one just on <unk>.

Speaker Change: Just staying outcomes for Q2 or so wide on the guidance right now and you can't give us a definitive range. There on profitability can you just walk us through your positioning on a full year guide.

Speaker Change: The next question is from the line of Scot Ciccarelli with <unk> Securities. Please proceed with your question.

Speaker Change: We're still confident that keep that range.

Scot Ciccarelli: Good morning, everyone.

Scot Ciccarelli: I know you talked about 50% growth in advertising and 15% in membership. So can you help reconcile those figures against what looks like just under 4% growth in the membership and other line in the P&L. Just so we can better understand the components. There and then secondly, now that E. Comm has turned positive can you provide any color on the magnitude of losses incurred over.

Speaker Change: Do you expect these wide swings you talked about a margin.

Speaker Change: Operating income could those be contained within the combined Q2 and Q3 timeframe.

Speaker Change: Anything on the international side.

Speaker Change: The momentum you're seeing there, especially on the operating income side. Thank you.

Speaker Change: I'll start with the first part of your answer then kick it over to Kathy to talk about international.

Scot Ciccarelli: The last call. It year two just so we can better understand the size of the profit improvement. Thanks.

Speaker Change: It's hard to predict we don't know the level of tariffs, where the bilateral bilateral agreements are going to.

Scot Ciccarelli: Sure I'll take the question.

Scot Ciccarelli: First on advertising really pleased with the growth that we've seen there.

Speaker Change: Finalize that we.

Speaker Change: We do know that we're probably going to be in a period in the second quarter were gonna see more markups the normal.

It was inflated this period because we've got we've.

Scot Ciccarelli: We've got vizio in there versus comparing against a period that we don't but our overall advertising on an apples to apples basis was 27%. So we feel really good about that.

Speaker Change: If we that's why Doug and others have mentioned that it's so important to get inventory right in this environment because that reduces the likelihood of taking markdowns in the third quarter and potentially even into the fourth and so you know it.

Scot Ciccarelli: On on membership.

Scot Ciccarelli: We felt really good about the progress there as I noted we had international that grew north of 20% both sands in U S grew a.

Speaker Change: It remains to be seen what the elasticity of demand is that something that's 30% higher or in other cases.

Scot Ciccarelli: Double digits. The line that we have in our P&L includes other it says membership and other and that includes things like sustainability income So think about recycling revenue things like that.

Speaker Change: 10% higher in certain items. So we'll have to see that we've got a really really good team of merchants and we have a lot of confidence in their ability to to navigate this environment and fortunately or unfortunately, depending on how you look at it. We've we've got some experience here from a couple of years ago, and so we'll try to navigate this and as.

Scot Ciccarelli: And that's probably a larger figure than what some people expect and so that's what's that's the reconciliation to I think the 4% number that you quoted there but overall membership is is that actually its really one of the shining points of the quarter were doing really well there on E. Comm losses, I don't think I want to get into the the magnitude of some of the losses that we've had historically we've can.

Speaker Change: Doug said I I like our hand here I think we can navigate this as well or better than anyone but theres a lot of uncertainty a lot of volatility, it's a dynamic and fluid environment and and we feel confident that we can land the year in the range that we've talked about but the swings from quarter to quarter are a little harder to predict and we'll have to see how that comes.

Scot Ciccarelli: Certainly, though for years seen improvements there.

Scot Ciccarelli: You'd have to go back several years to see the.

Scot Ciccarelli: The the depth of sort of where losses topped out, but John and his team and it's really all segments. So you can look at what flip cart Stewart in India look at with Sam's has been doing we've continued to see contribution profit would be positive and with the digital platform as you grow that at a positive contribution profit you ultimately get to.

Speaker Change: Yeah, if I pick it up from there because definitely full share that we have swings by quarter in international when we were together in Dallas.

Speaker Change: If I was to characterize the quarter I would say it was a good result, but I think we can still do better and I think my team would be surprised to hear me say that because I think that's the constant posture. We typically have them when I look across the composition of the market. We had a couple that had a wake of backdrop, which should be more Mexico and Canada.

Scot Ciccarelli: Overall profitability, which is where we are today. So this is.

Scot Ciccarelli: Kind of a milestone moment for us as a company I hopefully we don't talk about it every single quarter, but I think it's notable this quarter that we've we've reached this milestone and we've achieved this level of profit and we're looking forward to continuing to have that grow into the future.

Speaker Change: We made strategic investments in high growth markets like India, you had kellyanne assay out flip cart talk about that when we were together at ICM.

Speaker Change: But if I and then I think we also had some choppy calendar results.

Speaker Change: The next question is from the line of Robbie <unk> with Bank of America. Please proceed with your question.

Speaker Change: Slip here, a star et cetera say when.

Speaker Change: Hey, good morning. Thanks for taking my question I was wondering if you guys could talk give a little more detail on general merchandise you guys had deflation in general merchandise in the first quarter.

Speaker Change: When I look step back and kind of look at the overall results are ice.

Speaker Change: I think we're in high growth markets, we've got really strong businesses and we're in a leading omnichannel position in this market.

Speaker Change: Can you help us think about deflation versus inflation and tariffs.

Speaker Change: And so I think holistically still feel really good about leading the enterprise from a growth perspective, and growing profit faster than south across the full year.

Speaker Change: This is Doug it's probably worth just repeating one more time the point about retail accounting as it relates to the timing between Q2 Q3 Q4 in Q2, if we have a markup we take it on all the inventory we have on hand, even if we don't sell it in that quarter and even if we don't ultimately sell at that price. So you could get a situation where Q2.

Speaker Change: E Commerce.

Speaker Change: Robbie Thanks for the question I'll start and some of the others may want to jump in.

Speaker Change: General merchandise has been deflationary for over a year right now and we've seen.

Speaker Change: <unk> earnings look unusually high in the range of outcomes is wider which is why we're not providing guidance for the quarter Didnt think about Q3 and Q4 can you sell it at the price that you marked it up too, yes, or no what are the resulting margins look like how do you manage markdowns, how do you manage inventory effectively through the Q3 and Q4 period and there may be more markups in Q3 and Q4.

Speaker Change: The impact of that and think of it as deflationary in low single digits.

Speaker Change: In the quarter importantly, though we grew units in the quarter. So we continue to see progress there.

Speaker Change: But the consumer has pressured we've seen for a couple of years now a shift in the baskets away from general merchandise to those items that are more necessities versus discretionary. So people are spending more on food. So we'll continue to monitor that going forward, but the team in particular has made really good progress on those assortment that we have and.

Speaker Change: We don't know right now because this environment. So fluid I hope that helps everybody just want to make sure that you. All understand this is an accounting issue a timing issue, but it ultimately boils down to how well do we forecast sales manage inventory and make quantity decisions.

Speaker Change: And run.

Speaker Change: Okay.

John David: Advancing general merchandise or John you want to sure sure.

Speaker Change: Our next question is from the line of Greg Melick with Evercore ISI. Please proceed with your question.

Ravi: Ravi Good morning, we did see strong growth in categories like toys, kids' apparel, and our baby categories and others.

Greg Melick: Hi, Thanks for all the detail on the tariffs I guess, Doug I just wanted to follow up on that last point and given where we are today with the tariff rate, 30% incremental China and in the 10% seems to be the baseline. What's the time lag that you would expect to see that show up.

Ravi: Across the business, we do have stronger growth rates in E Commerce and the total you can see that as well with 21% growth rates, which would reflect really a strong mix across categories.

Ravi: And as we as we look at where we ended the quarter. We were softer in February just a reminder, we had really tough weather. It was lapping leap year, we had snow across the country, including the south east and on beaches across the southeast So had unusual weather in February.

Greg Melick: On the shelf is it three months six months is when the peak effect would be and as another question on that what's the sort of magnitude are we talking 50 or 100 bps. If it had the pass through at current rates.

Doug Mcmillon: Yeah, Greg It happens gradually and as we mentioned earlier, we started to see increases happen in April and through May we've been really focused on back to school receipts. When you. When you have an imported item you pay the tariff at the time it comes through through customs and so the cost is higher even if the if the tariff rate comes down late.

Ravi: I mentioned this earlier March was felt like more of a normalized month closer to what we expected given the flip and leap year and a much later Easter and then as we got these Easter holiday other units Street is pretty significantly and we reported this morning that we were slightly negative in general merchandise with deflation.

Greg Melick: The cost has been.

Greg Melick: Has been elevated so I wouldn't think of this says Ah Ah moment in time necessarily except when you think about seasonal things like back to school. So I think it will feel more gradual.

Ravi: But was really encouraged by the results that we had from the Easter holiday until the end of the quarter.

Ravi: Again at Sam's club.

Ravi: Positive quarter of G. M sales back to back and then deflated environments of units of the driver of that performance.

Greg Melick: And as we've been saying to everyone. The first thing that goes through my mind is food inflation, we've been through a number of years here where prices have gone up on food and our customers have felt that and they don't want any more food inflation.

Speaker Change: Our next question comes from the line of <unk> <unk> with Oppenheimer. Please proceed with your question.

Greg Melick: And so what we hope happens is that there are changes from a policy point of view that help us get prices back ex tariffs on bananas and things that we don't grow here. So food inflation is pretty much on our mind and as it relates to G. M. It'll vary by category, which country is it if it's if it's from China, obviously, you'll have a higher amount and this reset of course.

Speaker Change: Good morning, and thanks for taking my question. So just wanted to go back to a strong momentum in the health and wellness category just wanted to get a sense of how you guys feel about the sustainability of the momentum and then as you look at the pharmacy rollout how is that trending versus expectation and any sense as whether whether it's driving new customer acquisition at this point.

Greg Melick: <unk> will play out through the year, we'll will have seasonal items it'll be higher than they would've been otherwise. So I think what we're looking at is upward pressure that began in April in place through the entire year on things that are imported and again, we've been working for years to try and make sure that we've got surety of supply we're sourcing from the right places.

Speaker Change: <unk>. Thanks for the question when we look at the pharmacy business and you saw in the reported results. This morning.

Growth in the mid twenties, when you strip out the impact of G. O P ones, we saw prescription growth over 10% growth in the quarter, which is very encouraging that result is inclusive of market share gains and it's driven by a few things first I would just like to complement our pharmacists are pharmacy techs.

Greg Melick: Create a more flexible supply chain and we've made progress on that and I think relative to others, we're well positioned.

Speaker Change: The team in the field, who do such a great job, helping customers and patients with whatever they need help with and then and then the second was the initiative of pharmacy delivery, which we launched in the first quarter, which has been helpful. Not only for customers to receive their prescriptions the way they want to receive them, but it has resulted in growth of new digital users.

Speaker Change: Our next question comes from the line of Cristina <unk> with Deutsche Bank. Please go ahead.

Speaker Change: With your question.

Cristina: Hi, Good morning, and thank you for taking my question I wanted to ask about the evolution of marketplace and specifically what your strategic priorities are for the current fiscal year.

Speaker Change: Stellar additions.

Speaker Change: Where you are looking to expand the depth or breadth of the assortment and just given the cost of tariffs. How are you thinking about general merchandise elasticity for the in store business versus marketplace in the back half of the year. Thank you.

Speaker Change: Our ecommerce business. So we've had a digital business with text message for some time, where you could renew now that you can deliver we see people signing up for an account on Walmart dot com and our App and we're looking forward to being able to serve them in more ways across categories.

John David: Hey, Kristina its John I think the first thing that is important to note.

Speaker Change: I think it's worth mentioning that Sam's once again for the ninth year in a row when the J D power pharmacy company of the year and the X J L. P growth is still double digit double digit so it's over 10%. So we're feeling really good about that business.

John David: As we want to be flexible for our customers and deliver what they want when they want it however, they want it to be delivered in <unk>.

John David: So what youll see in the coming months quarters and years as a continued focus on expanding our assortment to be able to deliver our customers what they're looking for without the need of looking at another app are going to another location.

Speaker Change: Our next question is from the line of David Bellinger with Mizuho Securities. Please proceed with your question.

John David: Our supply chain capabilities that include our new next generation fulfillment centers, our ability to use our stores for delivery in a very dense local low cost way are all parts of the solution to be able to serve customers flexibly. So assortment would be first.

David Bellinger: Hey, good morning, Thanks for the questions.

David Bellinger: First one just on understanding outcomes for Q2, or so wide on the guidance right now and you can't give us a definitive range. There on profitability can you just walk us through your positioning on a full year guide.

David Bellinger: Are you still confident that keep that range.

John David: We want to ensure that we have the right suite of services available to our sellers or sellers need to know where their inventory is the rate of sale. We have an application. They can look at on their phone that tells them a lot of the critical information that theyre going to need and then third our sellers, who are launching brands developing brands or selling someone else's product there look.

David Bellinger: These wide swings you talked about margins and operating income could those be contained within the combined Q2 and Q3 timeframe.

David Bellinger: Anything on the international.

David Bellinger: The momentum you're seeing there, especially on the operating income side. Thank you.

Speaker Change: I'll start with the first part of your answer then kick it over to Kathy to talk about international.

John David: King for ways to connect to relevant customer cohorts that are interested in their products, so being able to use our data to help them access cohorts, who are interested in their categories and then advertise through Walmart connect is a big part of the solution that all of our sellers are going to need in terms of elasticity, we watch elasticity and we will.

Speaker Change: It's hard to predict we don't know the level of tariffs, where the bilateral bilateral agreements are going to find.

Speaker Change: Finalize that we.

Speaker Change: We do know that we're probably going to be in a period in the second quarter were gonna see more markups the normal.

John David: We are constantly re forecasting quantities placement. This is something that we do each and every day every week every month every quarter. So there'll be a period here, where we'll be watching this and we are watching this very closely with much better tools and visibility to know what we own where it is and where its moving and then we'll continue to ensure that as just as we talked about.

Speaker Change: It remains to be seen what the elasticity of demand is that something that's 30% higher or in other cases.

Speaker Change: 10% higher in certain items. So we'll have to see that we've got a really really good team of merchants and we have a lot of confidence in their ability to navigate this environment and fortunately or unfortunately, depending upon how you look at it. We've we've got some experience here from a couple of years ago, and so we'll try to navigate this and as <unk>.

Earlier, the supply chains continue to flow for in stock for our customers in the store at the counter we have great quality produce and fresh and then finally, our fulfillment center inventories placed well so that if a customer places an order, we'll be able to deliver it in a very fast manner and meet the promise that we told them and if I can just chime in for my International perspective, we're very.

Speaker Change: Doug said.

Speaker Change: I like our hand here I think we can navigate this as well or better than anyone.

John David: Proud of the progress, we're making flip cart, but if I focus on other marketplace businesses in Canada, Chile, Mexico at title marketplace Janvey grew over 30% year on year and a lot of that is because we have in this quarter, we signed up over 4000, new sellers and Mexico and Canada. We also launched Walmart connect alright.

Speaker Change: There's a lot of uncertainty a lot of volatility, it's a dynamic and fluid environment and and we feel confident that we can land the year in the range that we've talked about but the swings from quarter to quarter are a little harder to predict and we will have to see how that comes.

Speaker Change: And if I pick it up from there because definitely full share that we have swings by quarter in international when we were together in Dallas.

John David: Play Seles, and Canada, I've seen really high engagement with that and ask you Kat grew over 80% in Canada and Mexico over this last quarter. So a lot of upside and a lot of growth and momentum in our marketplace business across international.

Speaker Change: To characterize the quarter I would say it was a good result, but I think we can still do better and I think my team would be surprised to hear me say that because I think that's the constant posture, we typically have.

When I look across the composition of the market. We had a couple that had a wake of backdrop, which should be more Mexico, and Canada. I think we made strategic investments in high growth markets like India, you had kellyanne assay out flip cart talk about that when we were together at ICM.

John David: Thank you.

John David: At this time, we've reached the end of the question and answer session I will now turn the call over to Doug Mcmillon for closing remarks, thanks again for dialing in and asking great questions. We have momentum and that momentum continues we feel good about our ability to to win with customers to serve them. How they want to be served we're encouraged by the fact that ecommerce growth across all three segments continues to be.

Speaker Change: But if I and then I think we also had some choppy calendar results.

John David: Strong all three segments growing more than 20% secondary.

Speaker Change: Slip here, a star et cetera, so when.

John David: Secondarily, we're strengthening our business model, playing that through regardless of what's happening with tariffs the 50% growth in advertising the 15% growth in membership I think are really encouraging and then thirdly as it relates to the short term environment, where things, where we are positioned to manage this as well or better than anybody we will do our best to serve our customers well to help keep prices.

Speaker Change: When I look step back and kind of look at the overall results.

Speaker Change: I think we're in high growth markets, we've got really strong businesses and we're in a leading omnichannel position in this market.

Speaker Change: And so I think holistically still feel really good about leading the enterprise from a growth perspective, and growing profit faster than south across the full year.

John David: Low that's really important in an environment like this and that's our purpose. That's what we're here to do but we believe we can do that while continuing to execute the strategy changed the business model and grow profit faster than sales. So that's our consistent message and we're confident in our plan.

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

Speaker Change: [music].

Speaker Change: Our next question is from the line of Greg Melick with Evercore ISI. Please proceed with your question.

Speaker Change: Everyone and welcome to the huddle, it's really great to be with you again, it's been a little while but we have a really cold yesterday. This is Ethan Martine and I want to talk about her in just a second.

Speaker Change: Hi, Thanks for all the detail on the tariffs I guess, Doug I just wanted to follow up on that last point and given where we are today with the tariff rate, 30% incremental China and in the 10% it seems to be the baseline. What's the time lag that you would expect to see that show up.

Speaker Change: But the subject today is artificial intelligence all of the new capabilities products. The things that we're seeing around the world that are changing AI and AI is changing so much of what all of US do and what we will do in the future that thought that it would be a great time to have a need to hear us either as an executive at Nvidia who is.

Speaker Change: On the shelf is it three months six months is when the peak effect would be and there is another question that what's the sort of magnitude are we talking 50 or 100 bps. If it had the pass through at current rates.

Doug: Yeah, Greg It happens gradually and as we mentioned earlier, we started to see increases happen in April and through May we've been really focused on back to school receipts. When you. When you have an imported item you pay the tariff at the time it comes through through customs and so the cost is higher even if the if the tariff rate comes down later.

Speaker Change: All over the space and AI and chips and started in gaming and his work their way all the way to what we know today and what we will get to that as well.

Speaker Change: First thank you for doing this of course, we got to speak to an audience together in January in New York at the National Retail Federation Big show and after doing that it went so well I thought the best next step would be for you to come here and talk to all of US about the things you talked about while we were in Newark, New York together, absolutely happy to be a walk on the bendel.

Speaker Change: The cost has been.

Has been elevated so I wouldn't think of this says Ah Ah moment in time necessarily except when you think about seasonal things like back to school. So I think it will feel more gradual.

Speaker Change: Good to have you here first let's start with you talk about who you are your career and how you got from growing up and I know, you'll say, where where you started and how you got into artificial intelligence yeah absolutely.

Speaker Change: And as we've been saying to everyone. The first thing that goes through my mind is food inflation, we've been through a number of years here where prices have gone up on food and our customers have felt that and they don't want any more food inflation.

Speaker Change: I actually lived in a lot of different places in the world.

Speaker Change: And so what we hope happens is that there are changes from a policy point of view that help us get prices back ex tariffs on bananas and things that we don't grow here. So food inflation is pretty much on our mind and as it relates to G. M. It'll vary by category, which country is it if it's if it's from China, obviously, you'll have a higher amount and this reset of course.

Speaker Change: We went to high school in <unk>.

Speaker Change: Beautiful island in Spain in Majorca.

Speaker Change: And when.

Speaker Change: And I was as a kid I was really good at math and physics and my father was an engineer or a natural thing for me to do is.

Speaker Change: To become an engineer.

Speaker Change: I came to the U S. At the age of 17 to go to college.

Speaker Change: <unk> will play out through the year, we'll will have seasonal items it'll be higher than they would've been otherwise. So I think what we're looking at is upward pressure that began in April in place through the entire year on things that are imported and again, we've been working for years to try and make sure that we've got surety of supply we're sourcing from the right places.

Speaker Change: And became an aerospace engineer and actually work.

Speaker Change: The old address.

Speaker Change: On commercial aircraft for about seven years.

Speaker Change: And then kind of realize that.

Speaker Change: Sitting in front of a computer and finite element analysis wasn't exactly something I wanted to do for the rest of our lives.

Speaker Change: Create a more flexible supply chain and we've made progress on that and I think relative to others, we're well positioned.

Speaker Change: I decided to go to.

Speaker Change: At school.

Speaker Change: And getting a warm wall.

Speaker Change: And at the time all of a sudden how pork and Silicon Valley was a tremendous interest.

Speaker Change: Our next question comes from the line of Cristina <unk> with Deutsche Bank.

Speaker Change: With your question.

Speaker Change: Hi, Good morning, and thank you for taking my question I wanted to ask about the evolution of marketplace and specifically what your strategic priorities are for the current fiscal year.

Speaker Change: And so I ended up Amy really hot and there was a company at the time in the early nineties.

Speaker Change: Scott.

Speaker Change: Stellar additions.

John David: Hey, Kristina its John I think the first thing that is important to note.

John David: As we want to be flexible for our customers and deliver what they want when they want it however, they want it to be delivered in.

John David: Our our supply chain capabilities that include our new next generation fulfillment centers, our ability to use our stores for delivery in a very dense local low cost way are all parts of the solution to be able to serve customers flexibly. So assortment would be first.

John David: King for ways to connect to relevant customer cohorts that are interested in their products, so being able to use our data to help them access cohorts, who are interested in their categories and then advertise their Walmart connect is a big part of the solution that all of our sellers are going to need in terms of elasticity, we watch elasticity and we.

John David: To about earlier the supply chains continue to flow where in stock for our customers in the store at the counter we have great quality produce and fresh and then finally, our fulfillment center inventories placed well so that if a customer places an order, we'll be able to deliver it in a very fast manner and meet the promise that we told them and if I can just chime into my international perspective.

Speaker Change: Im proud of the progress, we're making flip cart, but if I focus on other marketplace businesses in Canada, Chile, Mexico at title marketplace Janvey grew over 30% year on year and a lot of that is because we have in this quarter, we signed up over 4000, new sellers in Mexico, and Canada. We also launched Walmart connect alright.

Speaker Change: Marketplace sellers, and Canada, I've seen really high engagement with that and ask you Kat grew over 80% in Canada and Mexico over this last quarter. So a lot of upside and a lot of growth and momentum in our marketplace business across international.

Speaker Change: Thank you.

At this time, we've reached the end of the question and answer session I will now turn the call over to Doug Mcmillon for closing remarks, thanks again for dialing in and asking great questions. We have momentum and that momentum continues we feel good about our ability to to win with customers to serve them. How they want to be served we're encouraged by the fact that ecommerce growth across all three segments continues to be.

Speaker Change: Strong all three segments growing more than 20% secondarily, we're strengthening our business model playing that through regardless of what's happening with tariffs the 50% growth in advertising the 15% growth in membership I think are really encouraging and then thirdly as it relates to the short term environment, where things, where we are positioned to manage this as well or better than anybody.

Speaker Change: We will do our best to serve our customers well to help keep prices low that's really important in an environment like this and that's our purpose. That's what we're here to do but we believe we can do that while continuing to execute the strategy change the business model and grow profit faster than sales. So that's our consistent message and we're confident in our plan.

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

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: But the subject today is artificial intelligence all of the new capabilities products. The things that we're seeing around the world that are changing AI and AI is changing so much of what all of US do and what we will do in the future that thought that it would be a great time to have a Z to hear us either as an executive at Nvidia who is.

Speaker Change: All over the space and AI and chips.

Speaker Change: Started in.

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