Walmart(WMT) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated Q2 revenue increased by 5.6% in constant currency, outperforming expectations with each business segment showing stronger sequential sales growth than in Q1 [26][27] - Adjusted operating income grew by 0.4% in constant currency, despite absorbing a headwind of 560 basis points from expenses related to general liability claims [10][41] - Adjusted EPS increased by 1.5% to $0.68, with discrete charges related to legal matters and restructuring adjusted out for comparison purposes [41][42] Business Line Data and Key Metrics Changes - E-commerce sales grew by 25% globally, with all segments exceeding 20% growth, led by Walmart U.S. and Sam's Club U.S. at 26% [6][27] - Walmart U.S. comp sales grew by 4.6%, with strength in general merchandise across categories, particularly in apparel, media, gaming, and automotive [8][27] - Sam's Club U.S. comp sales, excluding fuel, increased nearly 6%, driven entirely by unit growth [31][33] Market Data and Key Metrics Changes - International sales increased by 10.5% in constant currency, with significant contributions from China, Walmex, and Flipkart [7][30] - Sales in China grew by 30%, while Walmex saw over 6% growth, with e-commerce growth in international markets exceeding 20% [30][31] - Global advertising revenue increased by 46%, with Walmart Connect in the U.S. up 31% excluding VIZIO [9][37] Company Strategy and Development Direction - The company is focused on maintaining price leadership while investing in associates, supply chain automation, and AI technology [25][48] - The introduction of AI roles aims to enhance customer service, improve associate experience, and increase productivity [17][18] - The company is optimistic about the upcoming holiday season and is preparing for strong performance in the back half of the year [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainty and expects to gain market share during this period [24][25] - The company is raising its full-year sales growth guidance in constant currency by 75 basis points to a range of 3.75% to 4.75% [43][44] - Management remains focused on balancing short-term share gains with long-term investments in technology and associates [25][48] Other Important Information - The company has approximately 7,400 price rollbacks across its assortment, with a 30% increase in grocery rollbacks compared to last year [15][39] - Inventory levels are healthy, with a global increase of 3.8% and a 2.2% increase in Walmart U.S. [12][43] - The company is closely monitoring customer demand and managing inventory in response to tariff impacts [14][43] Q&A Session Summary Question: Can you discuss the underlying profitability and AI's impact on sales? - Management indicated that AI is not yet lifting top-line sales but is optimistic about future productivity improvements [52][53] - The business mix remains strong, with no significant concerns about underlying profitability [55][56] Question: How does recent competitor activity affect Walmart's strategy? - Management acknowledged that competition is improving but emphasized the focus on customer needs and maintaining price and assortment [60][62] Question: How does Walmart address concerns about gross margin performance? - Management highlighted the importance of long-term trends over short-term fluctuations and expressed confidence in navigating unexpected expenses [66][67] Question: What is the current state of inventory management? - Management reported strong inventory levels and effective management practices, with a focus on supporting unit growth [71][75] Question: Can you elaborate on pricing strategies and consumer response? - Management noted that customers are making rational trade-offs in response to price changes, and the company is leveraging its business model for flexibility [82][85] Question: What are the strategic priorities for international markets? - Management discussed the focus on e-commerce growth and technology integration in Canada, Mexico, and India, with significant investments in QuickCommerce capabilities [90][91] Question: How is e-commerce profitability evolving globally? - Management reported progress in e-commerce profitability, with significant contributions from advertising and membership, and emphasized the diversified profit streams [95][96]