Summary of Conference Call on China Sourcing Exposure Industry Overview - **Industry**: Hardline/Broadline/Food Retail in North America [1][7] - **Context**: Ongoing discussions regarding U.S. tariffs on Chinese imports and recent changes in sourcing strategies due to tariffs and export curbs on rare earth minerals from China [2][3] Key Points on China Sourcing Exposure - **Diversification Efforts**: Most companies in the coverage have made efforts to diversify their supply chains away from China, but significant exposure remains [1][3] - **Updated Estimates**: The estimates of goods sourced from China have been updated to reflect the latest changes in sourcing strategies [1][3] Company-Specific Sourcing Exposure - **FIVE**: 45% sourced from China, reduced by 10 percentage points for the latter half of the year [10] - **AZO**: 35% sourced from China, down from 55% in March 2025 [10] - **BBY**: 32% sourced from China, with tariffs affecting half of these products [10] - **W**: 30% sourced from China, indicating continued flow of goods [10] - **ORLY**: 25% sourced from China, with ongoing reductions [10] - **TGT**: 25% sourced from China, down from 60% in 2017, aiming for below 25% by next year [10] - **DLTR**: 25% sourced from China [10] - **HD**: 20% sourced from China, with diversification efforts noted [10] - **LOW**: 20% sourced from China, with 60% sourced from the U.S. [10] - **TSCO**: 18% sourced from China [10] - **DKS**: 15% sourced from China, with significant diversification noted [10] - **ASO**: 15% sourced from China, reduced from 9% to 6% by year-end [10] - **OLLI**: 10% sourced from China, down from 15% [10] - **AAP**: 10% sourced from China, with plans to reduce further [10] - **WSM**: 10% sourced from China, actively resourcing to lower tariff countries [10] - **ULTA**: 10% sourced from China, with low tariff risk [10] - **DG**: 9% sourced from China [10] - **WMT**: 8% sourced from China [10] - **GOLF**: 6% sourced from China [10] - **COST**: 6% sourced from China [10] - **FND**: 5% sourced from China, with expectations to reduce further [10] - **ARHS**: 5% sourced from China, projecting closer to 5% by year-end [10] - **MODG**: 4% sourced from China [10] - **BJ**: 2% sourced from China [10] - **RH**: 2% sourced from China, down from 16% [10] - **KR**: 1% sourced from China [10] - **ACI**: 0% sourced from China [10] Additional Insights - **Tariff Changes**: The current Reciprocal Tariff of 10% is set to increase to 34% unless suspended [2] - **Sourcing Trends**: Companies are actively seeking to lower their exposure to China due to tariff implications and geopolitical factors [1][3][10] Conclusion - The conference call highlighted the ongoing challenges and strategies of companies in the Hardline/Broadline/Food Retail sector regarding their sourcing from China amidst changing tariff landscapes and geopolitical tensions. The data indicates a significant shift towards diversification, although many companies still maintain substantial exposure to Chinese goods.

Investment Rating - Industry View: In-Line [5] Core Insights - Dollar Stores are experiencing significant momentum, with an expected acceleration in share gains throughout 2025, potentially driving an incremental comp growth of approximately 200-250 basis points [3][18][22] - The combined share of Dollar Stores (DG, DLTR, FIVE, OLLI) nearly doubled in Q1'25, reaching around 3% of incremental retail sales, compared to 1.6% in Q4'24 [2][13] - Major retailers like AMZN, WMT, and COST continue to dominate the market, capturing approximately 43% of every incremental dollar of retail sales, making it challenging for other retailers to gain market share [4][7] Summary by Sections Dollar Store Performance - Dollar Stores benefited from a heightened degree of share donation in Q1'25, with an estimated $3 billion of donated share, significantly higher than the previous quarter [15][18] - The share gains for Dollar Stores are attributed to bankruptcies and store closures among competitors, as well as tariff impacts on certain retailers [3][18] Major Retailers' Market Share - In Q1'25, AMZN's share of incremental retail sales decreased to 20.7%, while WMT and COST gained shares, with WMT at 11.1% and COST at 11.3% [4][9] - COST's share of incremental retail sales has shown a steady increase since 2022, reaching 11.3% in Q1'25, indicating strong momentum [9][10] Future Projections - The analysis suggests that Dollar Stores will continue to see outsized incremental sales through the end of 2025, driven by ongoing share donations from competitors [18][22] - The expected decline in Temu's sales is projected to significantly impact the market dynamics, with a forecasted 37% year-over-year decline in Q2'25 [18][22]

Summary of Walmart Inc. Conference Call Company Overview - **Company**: Walmart Inc. (WMT) - **Industry**: Hardline/Broadline/Food Retail - **Market Cap**: $780.843 billion - **Current Stock Price**: $96.83 - **Price Target**: $115.00 - **Fiscal Year Ending**: January 2026 Key Points and Arguments Financial Performance - **Comps and Earnings**: Walmart's U.S. comps increased by +4.6%, outperforming consensus expectations of +3.7% [1][9] - **Adjusted Operating Income Growth**: Reported growth of +3.0% year-over-year, but underlying growth, excluding discrete items, was +9.0% [2][17] - **Revenue Guidance**: Fiscal year 2026 guidance remains unchanged at +3% to +4% net sales growth and +3.5% to +5.5% adjusted operating income growth, reflecting caution due to macroeconomic uncertainties [1][17] E-commerce and Alternative Revenue - **E-commerce Growth**: Walmart U.S. eCommerce sales grew by +21% year-over-year in the first fiscal quarter of 2026, up from +20% in the previous quarter [9] - **Incremental Margins**: E-commerce's incremental margins were estimated at 13%, marking the first quarter of standalone profitability for this segment [13] - **Advertising Revenue**: Continued acceleration in advertising revenue growth, contributing to overall profitability [1] Market Share and Competitive Position - **Market Share Gains**: Walmart's share of incremental retail sales was 8.5% in the first fiscal quarter of 2026, slightly down from 10.8% in the previous quarter but still strong [9][10] - **Competitive Dynamics**: Walmart's performance contrasts with Amazon's deceleration in North America, highlighting Walmart's competitive strength in eCommerce [9] Inventory and Accounting Dynamics - **Retail Inventory Method**: The accounting method will create uneven quarterly earnings due to higher-cost inventory being marked up, which may lead to a one-time gain in the second fiscal quarter of 2026 [15] - **Demand Trends**: Demand improved sequentially from February through April, indicating a recovery in consumer spending [15] Risk and Guidance - **Conservative Guidance**: The unchanged guidance is viewed as conservative, given the resilient consumer behavior and intrinsic profit drivers that could lead to upside surprises [17] - **Potential Risks**: Risks include macroeconomic uncertainties and trade policy impacts that could affect future performance [17] Additional Important Insights - **Earnings Estimates**: For fiscal year 2026, EPS estimates are $2.62, with a projected P/E ratio of 37.0 [7][33] - **Long-term Outlook**: The company is expected to balance long-term investments with near-term returns, aiming for sales growth of +LSD% to +MSD% and EBIT growth of +MSD to +HSD% over the next few years [25][26] - **Valuation Metrics**: The price target reflects a blended P/E multiple of ~40.2x on estimated EPS of $2.86 for fiscal year 2027, indicating a premium valuation due to Walmart's transformation into an eCommerce disruptor [18][24] This summary encapsulates the key financial metrics, strategic insights, and market positioning of Walmart Inc. as discussed in the conference call, providing a comprehensive overview for potential investors.