Walmart(US:WMT)2024-05-16 14:55Financial Data and Key Metrics - Total net sales grew 5.7% on a constant currency basis, exceeding guidance of 4% to 5% growth [20] - Adjusted operating income grew 12.9% in constant currency, more than 700 basis points higher than sales growth [23] - Consolidated gross margin expanded 42 basis points, driven by lower markdowns and favorable business mix [23] - Global e-commerce growth was 21% in Q1, with e-commerce losses narrowing, particularly in the U.S. where net delivery cost per order improved nearly 40% [26] - Adjusted EPS of $0.60 per share, compared favorably to guidance of $0.49 to $0.52 [32] Business Line Performance - Walmart U.S. comp sales grew 3.8%, with e-commerce growth of 22% led by store-fulfilled pickup and delivery, marketplace, and advertising [22] - Sam's Club U.S. comp sales, excluding fuel, grew 4.4%, with Member's Mark private brand driving high-single-digit growth [22] - Walmart International sales grew 10.7% in constant currency, with e-commerce sales up 19% [21] - Global advertising grew 24%, led by 26% growth in Walmart Connect U.S. and 27% growth internationally [29] - Membership income grew over 13% at Sam's Club U.S., with Walmart Plus also growing double-digits [29] Market Performance - International markets led by Walmex, China, and Flipkart, with strong seasonal events and early improvements in general merchandise sales [21] - In India, Flipkart same-day delivery expanded to 20 cities, with orders growing over 150% [17] - In China, one-hour delivery grew to 55 million orders during Chinese New Year [17] - In Chile, 60% of e-commerce orders were delivered same day [17] Strategy and Industry Competition - Company is focused on improving customer and member experiences, being great merchants, building newer businesses, and improving returns [18] - Investments in automation, store remodels, and digital tools are widening competitive advantages [19] - Expansion of Walmart Luminate into Mexico and Canada to enhance data analytics and insights [12] - Closure of U.S. health care clinics due to profitability challenges, with continued focus on pharmacy and optical businesses [14][15] Management Commentary on Operating Environment and Future Outlook - Consumer economic conditions have been relatively consistent since the start of the year, with value-seeking behaviors continuing [33] - Company expects Q2 sales to increase between 3.5% and 4.5%, with operating income growth in line at roughly 3% to 4.5% [34] - Full-year guidance will be revisited after Q2, with early momentum recognized but prudence maintained due to macro uncertainty [35] Other Important Information - Company closed 51 Walmart Health Centers, resulting in a charge of $0.02 per share in Q1 [32] - Rollback counts in grocery increased 45% year-over-year in April, driving customer engagement and volume growth [25] - Private brand sales showed strong momentum, with grocery penetration at 30 basis points in Q1 [26] Q&A Session Summary Question: Lower-end consumer trends and contribution to comps [38] - Consumer spending has been consistent across income groups, with more growth from high-end consumers [40] - Rollbacks in food categories and a shift towards eating at home are expected to benefit Walmart for the remainder of the year [41] Question: Consumer environment and investment flexibility [43] - Company remains disciplined in managing price gaps and has flexibility to make further price investments if needed [45] - Investments in associates and technology continue to be part of the plan [45] Question: Gross margin strength and deflation impact [47] - Gross margin improvement driven by newer businesses like advertising and membership, not price increases [49] - Inventory management improvements and reduced markdowns also contributed to gross margin expansion [50] Question: Sustainability of performance and key metrics [53] - Company focuses on execution and customer experience, with a 900 basis point improvement in perfect order scores in Q1 [56] - Convenience and value are key drivers of growth, regardless of the external environment [54] Question: International EBIT structure and Flipkart contribution [64] - International operating income grew 27%, with strong performance in Walmex, China, and Flipkart [65] - Flipkart achieved EBITDA positivity for the last two quarters, with growth in premiumization [68] Question: General merchandise categories and AI opportunities [69] - Strong growth in general merchandise categories like apparel, home, and electronics, driven by value and innovation [70] - Progress in AI-driven search and marketplace expansion are key opportunities for growth [74] Question: Operating expenses and Q2 investment plans [76] - Q2 will see planned technology investments and higher depreciation, with some seasonal benefits from Q1 unlikely to repeat [77] Question: Marketplace growth and general merchandise comps [80] - Marketplace growth is providing customers with more options, particularly in categories like pets, beauty, and furniture [81] - General merchandise mix impacted by food inflation, but share gains are strong [83] Question: Higher income household engagement [85] - Higher income households are increasingly engaging with Walmart due to convenience and value, with delivery growth exceeding pickup [86] - Fresh food quality improvements and private brands like Better Goods are resonating across income groups [87] Question: General merchandise trends and monthly performance [91] - Consumer spending has been consistent, with strong performance in March due to Easter and favorable weather [92] - Inventory management and value focus are key to managing mix and margins [93] Question: Walmart Plus value proposition [95] - Walmart Plus is growing double-digits, driven by convenience and improved order fulfillment [96] Question: Inflation outlook for the year [98] - Inflation is expected to remain close to Q1 levels, with general merchandise deflationary and food/consumables slightly inflationary [99]