Walmart Inc (WMT) — Q1 2026 Earnings Call Transcript

Thank you. Welcome, everyone. We appreciate you joining us and your interest in Walmart. Joining me today from our home office in Bentonville are Walmart's CEO, Doug McMillon; and CFO, John David Rainey. Doug and John David will first share their views on the quarter, and then we'll open up the line for your questions. During the question-and-answer portion, we will be joined by our segment CEOs, John Furner from Walmart U.S., Kath McLay from Walmart International, and Chris Nicholas from Sam's Club. For additional detail on our results, including highlights by segment, please see our earnings release and accompanying presentation on our website. We will make every effort to answer as many of your questions as we can in the hour we have scheduled for this call. As a courtesy to others, please limit yourself to one question. Today's call is being recorded, and management may make forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Please review our press release and accompanying slide presentation for a cautionary statement regarding forward-looking statements, as well as our entire safe harbor and non-GAAP reconciliations on our website at stock.walmart.com. Doug, that concludes my intro. We're ready to begin.

Good morning, and thanks for joining us. I'll start today by thanking our associates. They continue to drive results for today, while changing to strengthen our business for tomorrow. We have more than 475,000 associates participating in our Walmart Share Purchase Plan, and 81% of them are hourly. For all those associates that are listening, nice job, everybody. For our first quarter, we grew sales 4% and profit by 3% in constant currency. We grew International sales by 7.8%. We drove a Sam's U.S. comp of 6.7%, excluding fuel, and a Walmart U.S. comp of 4.5%. Though strong Q1 results were not driven by inflation, transactions and units drove our top line. Globally, we grew eCommerce 22% with each segment delivering growth of at least 20%. Inventory is in good shape. So the first quarter was what we expected on the top line and better than what we expected on the bottom line. It was a good first quarter. There's a lot to like about how we're changing and where we are. We feel great about our team, our strategy and our stores and clubs. We feel great about how we're driving eCommerce growth in a way that not only serves customers and members better, but reshapes our business model, resulting in a more profitable business with higher returns over time. Delivery speed continues to help drive our business. We'll soon reach 95% of the population in the U.S. with delivery options of three hours or less. For Walmart U.S., the number of deliveries in less than three hours grew by 91% for Q1 versus a year ago. And in China and India, we're frequently talking about delivery times that happen in minutes. We're confident in our ability to strengthen this business even as we navigate cost of goods changes. Our short and longer-term opportunities are clear. The immediate challenge is obviously navigating the impact of tariffs here in the U.S. Our mindset and approach haven't changed since our investor conference last month in Dallas. I want to thank President Trump and Secretary Bessent for the progress made recently. We're hopeful that it leads to a longer term agreement between the U.S. and China that would result in even lower tariffs. 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 aren't able to absorb all the pressure given the reality of narrow retail margins. In retail, managing inventory is always important. In this situation, it's even more important and even more challenging. It's helpful that we're entering the second quarter with well-managed inventory. It's helpful that we're crossing the threshold of profitability with eCommerce globally and that we have these newer, higher margin businesses growing like membership and advertising. It's helpful that we sell a broad assortment that includes food, consumables and general merchandise. It's helpful that so much of our assortment is replenishable, which means we can flow it. We don't have to make a one-time call on a quantity. Instead we can adjust a forecast and partner with our suppliers to adjust quantities over time as we navigate tariff impacts on costs. It's helpful that we have so many talented and experienced merchants and replenishment associates. Treating our suppliers well is a priority. We've worked with most of these companies for many years, and we'll be doing business together for many years to come, so we'll have that longer term mindset as we work together through this year. It's helpful that more than two-thirds of what we sell in the U.S. is made, assembled or grown here. In recent years, our U.S. percentage has grown. 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. 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. You might be surprised to know that nearly 60% of our suppliers in the U.S. are small businesses. We'll 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. The merchandise that we import comes from all over the world from dozens of countries. Other than the U.S., the other large markets are China, Mexico, Vietnam, India, and Canada. China in particular represents a lot of volume in certain categories like electronics and toys. All of the tariffs create cost pressure for us, but the larger tariffs on China have the biggest impact. The cost pressure from all the tariff impacted markets started in late April and it accelerated in May. Let me describe how we think about that and what we're doing about it. First, we want 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. We won't let tariff-related cost pressure on some general merchandise items put pressure on food prices. As it relates to food tariffs on countries like Costa Rica, Peru, and Colombia are pressuring imported items like bananas, avocados, coffee, and roses. We'll do our best to control what we can control in order to keep food prices as low as possible. An example would be controlling the amount of fresh food waste. In some cases, we're holding our retails where they are despite the tariff cost pressure. Flowers for Mother's Day at Sam's Club U.S. is a good example. When it comes to the general merchandise categories that are impacted, we'll move production where that's possible. That isn't easy or fast, but we've been working on that for years, so it's not like we've just started to make adjustments. 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. We'll be managing mix across items, categories, and businesses. We also have suppliers shifting materials from tariff impacted components like aluminum to fiberglass, where there is no tariff. Our merchants, sourcing team, and suppliers are being creative. It's been impressive to watch our team identify opportunities and adjust. As we continue to diversify our profit streams through our eCommerce offering, our marketplace, and membership and advertising, we have some room to absorb costs. 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. In summary, the takeaways from my remarks today are, one, we delivered a good first quarter. Two, our strategy and omnichannel capabilities are strong. We'll keep getting better in terms of assortment, delivery speed and we'll keep scaling our newer businesses. We'll keep driving growth and we'll control what we can control. We continue to be confident in our ability to strengthen this business even as we navigate cost of goods changes. Our short and longer-term opportunities are clear. 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. The timing of the tariffs and 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. I'll wrap up my remarks today the same way I opened, by thanking our associates. Our store club and supply chain associates are working hard and learning new capabilities. Our home office and tech associates are partnering to manage the short-term, while building for the long term. We've been operating in challenging environments for years now, and we'll come through this one stronger than ever just as we have before. We have Associates and 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. John David, I'll turn it over to you.

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. I'm pleased with the continued sales momentum across the company and it speaks to the competitive advantages that set us apart in the retail marketplace. Our commitment to delivering value and convenience to our customers is resonating more than ever. At the same time, we're driving progress in high growth areas like advertising, membership, and marketplace services. 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. Consolidated revenue increased 4% in constant currency, despite lapping last year's leap day, driven by strong growth in eCommerce of 22%. Currency headwinds reduced reported sales results by $2.4 billion or 150 basis points of growth. Walmart U.S. comp sales grew 4.5%, aided by strong eCommerce sales growth of 21%. Momentum in grocery sales continued with a mid-single digit comp and ongoing share gains. 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. 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 5,000 price rollbacks across our assortment and we've seen private brand sales outperform with grocery private brand penetration, up 60 basis points versus last year. Our international business grew sales 7.8% in constant currency, reflecting strength in China and Flipkart. eCommerce was strong with double-digit growth across markets led by pickup and delivery in marketplace. We're increasing speed of delivery for customers. In international, items delivered same or next day increased by 35% with about 45% of those items delivered in under three hours. At Walmex, 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. We're encouraged by the pickup in business more recently with sales back in line with our expectations. Sam's Club U.S. comp sales ex-fuel increased nearly 7% with strong growth in transactions, including strength in Member's Mark. eCommerce grew 27% led by triple-digit growth in Club fulfilled delivery and double-digit growth in pickup. Members value the convenience of Scan & Go, and their usage of this tool continues to grow with penetration increasing 600 basis points versus last year. Over 50% of our members now transact digitally in some form with Sam's, online or using digital solutions in Club. From a margin standpoint, consolidated gross margin increased 12 basis points due to better than expected results at Walmart U.S., partially offset by lower than expected results in international, which saw increased pressure from channel and format mix changes. 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. As our business model evolves, contributions to profitability are increasingly influenced by a diverse set of drivers, including improved eCommerce economics and business mix. 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. In the U.S., eCommerce net delivery costs have declined as we've continued to densify our last-mile deliveries and as customers pay fees for faster delivery. Business mix, most notably from higher-margin areas like advertising and membership fees also contributed to the improvement in Q1 profitability. 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 Flipkart. Membership fee income was up nearly 15% across the enterprise. In the U.S., Sam's Club continued to see steady growth in member counts, renewal rates, and increased penetration of plus members, resulting in membership income growth of 9.6%, while Walmart+ membership income grew double-digits. Within International, membership income from Sam's Club China grew more than 40% as member counts continue to increase. SG&A expenses deleveraged 6 basis points, including the benefit from lapping last year's business reorganization cost. As expected, International and Sam's Club U.S. expense deleverage reflects planned investments in associate wages. Walmart U.S. deleverage reflected increased depreciation expense as well as VIZIO operating cost post-acquisition. As we previewed at our Investor Day, we experienced higher-than-expected casualty claims expense. We're accruing a higher rate for claims cost based on the industry trends that point to higher risk adjustment factors. We expect this trend to persist for at least a few quarters. Adjusted operating income was better than expected with growth of 3% in constant currency and adjusted EPS of $0.61 was higher than our guided range. Importantly, our inventory is at a healthy level, up 3.8%. 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. This is a highly fluid situation and we'll need to manage quantity decisions as we measure the price elasticity of impacted items. I'm grateful that we have a team of experienced merchants, various levers we can pull, and the tools available to manage this in a thoughtful and proactive way. 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, and tech. In April, we completed an approximately $4 billion debt issuance at attractive terms. We continue to expect FY '26 CapEx to be in the range of 3% to 3.5% of sales. During Q1, we repurchased $4.6 billion in stock, an amount equivalent to our share repurchases for the entire year last year. We have a lot of confidence in our business, and we'll continue to be opportunistic with buybacks if share price dislocations occur. 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. 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 than sales. We've seen during periods of economic uncertainty in the past, we tend to gain share and come out of the other side in an even stronger position. We expect this period to be no different. We'll play offense and may opportunistically invest in areas to improve our value proposition. But we're not fully immune from the financial impacts in the short term. We've done work internally to model various scenarios related to the ongoing trade policy discussions. These scenarios involve making assumptions about how long tariffs persist at certain levels versus coming down to some lower level once bilateral trade deals are completed. We also must make assumptions about the elasticity of demand as well as the overall macro backdrop in this environment. 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, in 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. These scenarios involve 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, 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. In any case, we're comfortable with our ability to grow sales in the range we've guided for the year, though the mix of AUR versus units may be much different in these scenarios. 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. Should more progress on trade in the next several weeks be favorable, there could be upside. If elevated tariffs remain in place for an elongated period, there would be downside risk. We will know a lot more in a couple of months, but we are equipped to manage this as well or better than other retailers. Turning to the second quarter. 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 is more extreme than in normal periods. The U.S. is by far our number one market for sourcing. 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. As Doug noted, we're 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. 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. 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 RIM in Walmart U.S. It's not new for us, and it's a common method of accounting in the retail industry. RIM accounting implies a ratio of the actual cost of the inventory to its retail price to calculate ending inventory and therefore, derive cost of goods sold. 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 need to be recorded, it can have an offsetting effect. The magnitude of these swings, both positive and negative, given the level of additional costs 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. 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 '24. We currently expect that sales growth on a constant currency basis will be in the range of 3.5% to 4.5% for the second quarter, though the composition of sales through AUR versus units may be different than what we expect today. 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. For operating income, the range of outcomes for the quarter is much wider. The information related to the trade discussions taking place is changing by the week and in some cases by the day. Importantly, we also want to provide flexibility for us to play offense in this environment. And lastly, our method of accounting for inventory could have a larger impact on our earnings than in normal quarters. 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. 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. This 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 income guidance for the year. In closing, as we look ahead, while operating conditions are expected to remain dynamic, our strategy is clear. Our top line momentum is strong, and we're flexing into our advantages to protect margins as we grow. 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.

Hi, thank you, guys. Thanks for all the details on your pricing philosophy tied to tariffs, very helpful. My question is on eComm, a big milestone for the company, achieving profitability in the eComm business. Just curious what finally got you over the hump? 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 to eComm profitability from here? Thanks.

Paul, thank you for your question. This is John David. Let me start with just giving a little bit more detail on the global eComm profitability. We noted that we achieved it on an enterprise basis globally as well as for the U.S. segment. And so if you break that down by segment, the U.S. was profitable, Sam's was profitable, and the international was slightly 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 eCommerce offerings, we're able to spread those deliveries over multiple households. So think about the opportunity to deliver a package to five houses on a street versus one house on a street. And so as we grow, we continue to spread those costs over more volume. The second is delivery cost, and this is where John and his team have made a tremendous amount of progress 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 or within three hours. We noted in the last quarter that fully a third 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, but to me those are a couple things that stand out to help improve the profitability.

Thank you, John David. Paul, looking back over the past few years, I believe it's a result of the investments we've made over the last decade. These investments include consolidating our applications into a single app, constructing new fulfillment centers, and incorporating stores into our omni-solution. The speed of delivery has been promising this past year, with sub-three-hour deliveries seeing a 91% year-on-year increase. As John David pointed out, the scale of our operations has taken time to develop, but we are pleased with the progress and growth. We have maintained a 21% growth rate over several consecutive quarters. What impresses me most about the team's work is their ability to offer customers flexibility in how and when they want to be served. Customers can shop at the counter, opt for curbside pickup, or utilize in-home delivery. Our first and third-party delivery options, along with fulfillment services for our sellers, have experienced strong growth over the past few years, leading to lower delivery costs due to increased density and frequency. All of this has contributed to a blend of our business areas, including advertising and data services. I am proud of the team for achieving profitability this quarter, as we discussed just a month ago in Dallas, and importantly, we finished the quarter with positive momentum. April was strong, and we had a successful Easter. Our omni capabilities allowed us to deliver floral arrangements and other last-minute items for the Easter holiday and Mother's Day. We will continue to find better ways to serve customers, enhance speed, improve density, and operate efficiently across all channels.

Thank you, guys. Good luck.

Hi, good morning, everyone, and good quarter. 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 at the same time. I've asked you in the past about toggling that balance and I kind of heard some of the prepared remarks on this. I'll push back and say why not toggle it in favor of investments even more in this environment. We know how much or how important it is getting more gross profit dollars, especially in Jan-March. Why not lean into this? And you said it yourselves, Walmart should be better positioned than most to navigate this environment. Thanks.

Yes. Thanks, Simeon. This is Doug. I'll go first, and then John David can comment. I think with our guidance where it is for the year, we positioned ourselves to be appropriately aggressive. I think as the quarters play out, 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 we'll also watch what customers are telling us and the response that we get from them and the pressure that they're feeling. 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 if we can navigate this in a way as we balance all the interests between customers, shareholders, and everyone else, such that we can keep prices low enough to help people and grow profit faster than sales, that's what winning looks like to me.

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 that, we are hopeful to be able to grow profits faster than sales 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 and 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 20%. So you're 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 that we have right now is the right one for us.

Thanks. Good luck.

Thanks. Good morning, everybody. So I 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 lower-end consumer is getting weaker and seeing some incremental pressure and perhaps leading to some bottom-of-funnel loss where they're trading out of Walmart to lower sort of unit, lower average cost locations, and doing smaller shops. So can you talk about what you're seeing on both sides in terms of the health as well as the share performance? Thank you.

Christopher, it's John. I want to start by referencing comments made by John David earlier today regarding customer behavior. We have noticed some concerns among customers, but they continue to be selective and consistent, prioritizing value and speed of delivery. I’m happy to report that we experienced growth across all income groups in the quarter. In April, we welcomed a number of new customers. It's also worth noting the structure of the quarter, considering last year was a leap year and we had a late Easter. This resulted in a softer February than anticipated, but March returned to normal and we ended the quarter strongly, especially in April, with a successful Easter holiday. Customers are focusing on celebrating seasonal events and enjoying meals at home. We aim to be adaptable for our customers; if they prefer in-store shopping, we strive to provide an excellent experience. Our remodel program has been successful, yielding positive results and high customer satisfaction scores. Our fast delivery performance is among the best in the company, and we plan to enhance our capacity and capability for quick deliveries, including same day, next day, and two-day options. We are on track to grow our fast delivery services by nearly 100% year-on-year, as highlighted by the 91% growth reported this morning. Our commitment remains on delivering value with quality products across categories like meat and produce, and we're proud of our advancements in apparel and toys. We will continue to be flexible for our customers throughout the year.

From a Sam's Club perspective, I completely agree with what John just said. Currently, we are fully embracing the effectiveness of the membership warehouse retail model. Our prices are exceptional because we carefully select items for our members. This approach appeals to everyone, whether they have a high income or are budgeting carefully at the end of the pay period. We are experiencing growth in convenience, which resonates with all customers. By simplifying processes for our members, we give them the gift of time, which is incredibly valuable. In closing, I want to highlight that our membership growth, which is between 5% and 10%, is driven by more renewals, an influx of new members, and an increase in higher-tier membership participation. We are observing this trend across all income groups.

Hi, good morning, guys. Thanks for taking the question. So mine is kind of on capital allocation. You talked about CapEx 3% to 3.5% of sales. It sounds like that probably trends toward 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 front. Should we be thinking CapEx in dollars as kind of at a peakish level here at least for the intermediate term? And then on the buyback, great 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 way we should be thinking about that going forward and your willingness to commit more to buyback? Thanks so much.

Thank you for the question, Peter. Regarding capital allocation, I want to address our CapEx. The appropriate level for our business is between 3% to 3.5% of sales, which should increase with revenue over time. While there may be slight variations within that range, we are committed to pursuing investment opportunities that can enhance returns. We maintain a long-term view, even amid rising costs in the current operating environment. Each dollar we allocate must deliver the highest return possible, and investment in this area is one of the most effective ways to do so. This quarter, we experienced significant price fluctuations as market uncertainties arose, and we have been very proactive with our share buyback, exceeding the total from last year already. We'll continue this approach during periods of price dislocation as we have strong confidence in our strategy and believe in the potential for shareholder value creation. Therefore, expect us to be increasingly aggressive in this area. It's reasonable to anticipate that our share buyback expenditures this year will surpass last year, especially since we've already made substantial investments in the first quarter. The total amount will depend on market conditions, and we need to balance this with raising our dividend and investing in our growth through CapEx.

Thanks. Good morning. The Walmart Connect growth was particularly impressive this quarter and showed some 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 VIZIO? Thanks.

Hi, 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're in the initial stages of integrating VIZIO. I'm excited about the plans we have for VIZIO the rest of the year. It's a great operating system, very frictionless, easy to sign up, and we're looking forward to the contributions of the VIZIO team going forward. In terms of the core advertising business, we've had strength with the growth of advertising with our marketplace sellers. Our GMV and marketplace has been very consistent in the mid to high 20s. Last quarter was in the mid-20s as well. We also have had continued strength with first-party and third-party suppliers. So it's a broad mix of capabilities. 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. But in general, we're really pleased with the progress, the momentum, and the team that we've established at Walmart Connect.

Good morning. Thank you for allowing me to ask a question. John David, in your comments, you mentioned that prolonged elevated tariffs could pose downside risks. While I understand you may not specify exactly what elevated tariff rates are, do you consider the current tariff levels to be elevated enough to suggest there could be downside risk if they don't decrease? More importantly, in the long term, could this tariff situation have a significant impact on Walmart's margins, or do you believe that with time and flexibility, you will be able to fully address any challenges and maintain margin rates in line with your long-term expectations? Thank you.

Thank you for your question, Michael. I'll address the second part first. We do not see anything that alters our long-term perspective on our business in relation to the current environment, and we believe we can manage through this. The primary focus, particularly for the Fed, is to ensure these are one-time price increases rather than factors that could persist and influence wage growth and other long-term consequences. Regarding the first part of your question, I was referring to the level of tariffs announced in early April. Just a week ago, we faced 145% tariffs in China. As you might know, a lot of preparation goes into this day for us, and when we began preparing for earnings, we were operating under that high tariff scenario. A 145% tariff and tariffs approaching 50% for other countries create a difficult situation for retailers and the economy. We are grateful for the progress the administration has made in reducing tariffs. The full-year guidance we provided today is based on these current tariff levels, but I want to stress that we still consider them to be too high. Certain items and categories of merchandise that we rely on importing will see their prices rise, which is not favorable for consumers.

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. Tariffs, obviously, a moving target, I think uncertainty around elasticities. So against that backdrop, how are you thinking about the planning of the inventory? Do you stay lean hoping that 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, can you avoid the risk of another '22 scenario given the dynamic backdrop? Do you think that's a risk for retail? Thank you.

Yes. Thanks for the question, Edward. This is Doug, and you guys can chime in if you 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 marketing driven model where we're focused on features in the actionality and end caps, for example. So on replenishable goods, we have the opportunity to partner with our suppliers to see what happens with sales as costs and then eventually retails adjust and then manage that through the weeks and months ahead. So that's a great position to be in, and our merchants and our replenishment team are really good at that, and they're managing that on a daily basis. As tariff numbers have changed, they've done a great job of pivoting, recalculating quantities and thinking through it again. Where it can get more challenging is, we make decisions related to things like Halloween and Christmas farther out. And how do you make a quantity call? And what 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 then we'll partner with our suppliers to flow that. And if we need to chase goods, chase some goods. And the bottom line is, yes, we want to avoid what happened back in 2022, and by paying close attention to our unit decisions, that's how we'll do it.

Hi. Good morning. Thanks for taking our question. We wondered if you could talk about how the tariff situation is impacting your 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?

Hi, Kate. It's John. In terms of overall inventory management, Walmart, along with our capability to serve sellers, we've built a number of tools in the last three years that are particularly helpful. 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 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 is flowing through. I did mention earlier that our GMV growth rates in the marketplace in particular have been consistent over the last few quarters. You saw that in the release. We're also seeing that again as you exit the quarter. So we had a strong April in eCommerce, and this is a big contributor to the overall health of the eCommerce business with the 21% growth rate that has been in place for some time, which is we are pleased to see. 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 have enabled us to have this ad business and data business, which has helped us mix out to achieve our first quarter of profitability in the United States.

Good morning, everyone. 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 eComm has turned positive, can you provide any color on the magnitude of losses you had incurred over the last, call it, year or two, just so we can better understand the size of the profit improvement? Thanks.

Sure, I'll take the question. First on advertising, we’re really pleased with the growth we’ve seen. This period, the figures were boosted by including VIZIO, compared to a previous period without it. On a like-for-like basis, our advertising grew by 27%, which is very encouraging. Regarding membership, we’re also happy with the progress. Internationally, we saw over 20% growth, while both Sam's and U.S. experienced double-digit increases. The membership and other line in our P&L includes items like sustainability income, such as recycling revenue, which might be a larger figure than some expect. That's part of what explains the 4% number you mentioned. Overall, membership is actually one of the highlights of this quarter, and we’re doing really well there. As for eCommerce losses, I prefer not to specify the extent of historical losses. However, we have consistently seen improvements over the years. Looking back, you’d have to go several years to see the peak of the losses, but John and his team have made positive changes across all segments. For instance, what Flipkart is doing in India and what Sam's has achieved show that we’ve maintained positive contribution profit. Growing a digital platform with positive contribution profit ultimately leads to overall profitability, which we’ve reached today. This is a significant milestone for us as a company. We hope to move past this conversation in future quarters, but it’s worth noting that we’ve achieved this level of profit, and we’re excited to continue growing it moving forward.

Hi, good morning. Thank you for taking my question. I would like to know if you could provide more information on general merchandise. You experienced deflation in general merchandise in the first quarter. Can you help us understand how deflation compares to inflation and tariffs for the outlook over the next three quarters? Additionally, are there significant differences in the mix of general merchandise between in-store and your eCommerce efforts?

Robby, thanks for the question. I'll start, and some of the others may want to jump in. General merchandise has been deflationary for over a year right now, and we've seen the impact of that and think of it as deflationary and low single digits in the quarter. Importantly, though, we grew units in the quarter, so we continue to see progress there. But the consumer is 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 the assortment that we have and really advancing general merchandise there. John, you want to?

Sure. Robby, good morning. We did see strong growth in categories like toys, kids' apparel, and our baby categories and others across the business. We do have stronger growth rates in eCommerce in total. You can see that as well with 21% growth rates, which would reflect really a strong mix across categories. And 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 Southeast and on beaches across the Southeast. So we had unusual weather in February. Mentioned this earlier. March felt more like a normalized month closer to what we expected given the flip in leap year and a much later Easter. And then as we got to the Easter holiday, the units strengthened pretty significantly and we reported this morning that we were slightly negative in general merchandise with deflation, but was really encouraged by the results that we had from the Easter holiday until the end of the quarter.

Yes. And in Sam's Club, we hit almost positive quarter of GM sales back to back in a deflated environment. So units are the driver of that performance.

Good morning, and thanks for taking my question. So I just want to go back to a strong momentum in the health and wellness category. Just want 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 it's driving new customer acquisition at this point?

Hi, Rupesh, thanks for the question. When we look at the pharmacy business and you saw in the reported results this morning, growth in the mid-20s, when you strip out the impact of GLP-1s, 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 compliment our pharmacists, our 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 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 in our eCommerce business. So we've had a digital business with text messages for some time, where you could renew. Now that you can deliver, we see people signing up for an account on walmart.com, in our app, and we're looking forward to being able to serve them in more ways across categories.

I think it's worth mentioning that Sam's once again for the ninth year in a row won the J.D. Power Pharmacy Company of the Year, and the ex-GLP growth is still double digits, so it's over 10%. So we're feeling really good about that business.

Hi, good morning. Thanks for the question. First one, just on understanding outcomes for Q2 are 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 the full-year guide? Why are you still confident to keep that range? Do you expect these wide swings you talked about on margins and operating income, could those be contained within the combined Q2 and Q3 timeframe? And just secondly, anything on the international and the momentum you're seeing there, especially on the operating income side? Thank you.

I will begin with the first part of your question and then turn it over to Kath to discuss international aspects. It's difficult to predict the situation. We are unsure about the tariff levels and how the bilateral agreements will finalize. We anticipate that in the second quarter, markups will be higher than usual. That is why Doug and others have emphasized the importance of managing inventory in this environment, as it helps minimize the risk of markdowns in the third quarter and possibly into the fourth. The elasticity of demand remains uncertain; it could be 30% higher or in some cases 10% higher for certain items. We will need to observe that. We have an excellent team of merchants, and we are very confident in their ability to navigate this situation. Fortunately or unfortunately, we have some experience from a couple of years ago that will aid us in managing this. As Doug mentioned, I feel good about our position here. I believe we can handle this as well as or better than anyone else. However, there is significant uncertainty and volatility. It is a dynamic and fluid environment, and we are confident we can finish the year within the range we discussed, but the fluctuations from quarter to quarter are more challenging to predict, and we will have to see how that unfolds.

If I continue from there, I mentioned earlier that we experience fluctuations by quarter in the International segment during our meeting in Dallas. To describe the quarter, I would say it was a positive outcome, but I believe we can still improve. I'm sure my team would not be surprised to hear me express that sentiment, as it's our usual mindset. Looking at the market composition, we had a few areas, particularly Mexico and Canada, that faced challenges. However, we have made strategic investments in high-growth markets like India. You heard our Flipkart CEO, Kalyan, discuss this at ICM. Additionally, we experienced some irregular results due to the Leap year and Easter. Overall, when I assess our performance, I feel positive about our presence in high-growth markets, where we have robust businesses and a leading omnichannel position. Thus, I remain optimistic about steering the organization towards growth and achieving a profit growth rate that exceeds sales growth for the entire year.

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 it at that price. So you could get a situation where Q2 earnings look unusually high, and the range of outcomes is wider, which is why we're not providing guidance for the quarter. Then think about Q3 and Q4. Can you sell it at the price that you marked it up to? Yes or no, what do the resulting margins look like? How do you manage markdowns, and how do you manage inventory effectively through the Q3 and Q4 period? And there may be more markups in Q3 and Q4. We don't know right now because this environment is so fluid. I hope that helps everybody. Just I 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.

Hi, thanks for all the detail on the tariffs. And I guess, Doug, I just want to follow up on that last point. Given where we are today with the tariff rates, the 30% incremental China and then the 10% seems to be the baseline, what's the time lag that you would expect to see that show up on the shelf? Is it three months, six months is when the peak effect would be? And as another question that, what's the sort of magnitude? Are we talking 50 bps or 100 bps if it had to pass through at current rates?

Yes, 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 have an imported item, you pay the tariff at the time it comes through customs. And so the cost is higher. Even if the tariff rate comes down later, the cost has been elevated. So I wouldn't think of this as a moment-in-time necessarily, except when you think about seasonal things like back-to-school. So I think it will feel more gradual. 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. 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 very much on our mind. And as it relates to GM, it will vary by category, which country it's from. If it's from China, obviously, it will have a higher amount and this reset of costs will play out through the year. We'll have seasonal items that will be higher than they would have been otherwise. So I think what we're looking at is upward pressure that began in April and plays throughout 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, creating a more flexible supply chain, and we've made progress on that. And I think relative to others, we're well-positioned.

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 as it relates to seller additions, 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.

Hi, Krisztina, it's John. I think the first thing that is important to note is we want to be flexible for our customers and deliver what they want, when they want it, however they want it to be delivered. And so what you'll see in the coming months, quarters, and years is 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 or going to another location. 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. Second, we want to ensure that we have the right suite of services available to our sellers. Our sellers need to know where their inventory is, their rate of sale. We have an application they can look at on their phone that tells them a lot of the critical information that they're going to need. And then third, our sellers who are launching brands, developing brands, or selling someone else's product, they're looking 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 our sellers are going to need. In terms of elasticity, we watch elasticity and we are constantly reforecasting 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 it's moving. And then we'll continue to ensure that as just as we talked about earlier, our supply chains continue to flow. We're in stock for our customers in the store at the counter. We have great quality produce and fresh. And then finally, our fulfillment center inventory is 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.

From an international viewpoint, we are very proud of the progress at Flipkart. Focusing on our other marketplace businesses in Canada, Chile, and Mexico, our total marketplace GMV increased over 30% year-on-year. This growth can be attributed to the addition of over 4,000 new sellers in Mexico and Canada this quarter. We also introduced Walmart Connect for our marketplace sellers in Canada, and engagement has been remarkably high. Additionally, our SKU count grew over 80% in Canada and Mexico during the last quarter. There is considerable potential for further growth and momentum in our international marketplace business.

Thanks again for dialing in and asking great questions. We have momentum and that momentum continues. We feel good about our ability 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 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, we think 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 low. That's really important in an environment like this and it'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.