Walmart Inc Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Lasser - UBS - Analyst : Good morning. Thank you so much for taking my question. Over the last several quarters, as Walmart was in the early stages of generating returns from the longer term investments that it's been making. It appeared that the company was more insulated to the macro as it was gaining significant market share. Now is Walmart entering a phase where there's just simply more economic sensitivity to the model or perhaps even less of a countercyclical benefit? And how is this factored into the sales and EPS guidance for 2026? And if this macroeconomic sensitivity results in a sales shortfall, what would be the course of action? It may be helpful to frame this with some insight into how the exit rate for fiscal 2025 unfolded. Thank you very much.

Question: Kate McShane - Goldman Sachs - Analyst : Hi, good morning. Thanks for taking our question. Like you had mentioned in the prepared comments that gross margins are still being impacted by mix. How should we think about the mix impact to gross margin in this upcoming fiscal year, especially as general merchandise growth continues to improve? And just as a second question to that, for your alternative revenue businesses. Have any of those businesses now reached scale? And if not, would you expect them to reach scale in fiscal year '25? Thank you.

Question: Simeon Gutman - Morgan Stanley - Analyst : Hey, good morning. My question is on reinvesting and growing the business faster. It was mentioned that the e-commerce incremental margins were 11%. It looks like the enterprise in Q4 was 7%. And if we think there's upward pressure on this over time. So the idea of reinvesting at a healthy rate and growing earnings faster, you can clearly do both, which Doug called out a couple of years ago. The question is, why not invest faster? Because if incremental margins are rising, then top of funnel things like marketing and plus and anything related to e-commerce should be even more profitable and higher returns. And I think John David said, we're leading in a little bit, if you could speak to that and then talk about this debate of investing at a faster rate. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, WMT.N - Q4 2025 Walmart Inc Earnings Call

Question: Kelly Bania - BMO Capital Markets - Analyst : Good morning. Thanks for taking our questions. Doug and John David, you framed the 5% to 7% constant currency EBIT growth kind of excluding the noise from the VIZIO and leap year. And it is consistent or maybe even slightly better than the past few years originally, but it does seem a little conservative relative to what you achieved this year and to the momentum you have in the business. So I was wondering if you could just touch on two factors -- a couple of factors. One, the tariffs and just what you're assuming and how the consumer responds to that, how you're planning on passing that through and if that is assumed to be any sort of headwind to earnings this year? And then also the demand for expedited orders that you're seeing that continues, I think to be helping the e-commerce profitability. Are you assuming that, that continues at the same pace or any changes there on that front?

Question: Chuck Grom - Gordon Haskett - Analyst : Thanks. Good morning. Congrats on a great quarter and a great year. I was hoping you could discuss what you're seeing in Walmart Plus membership and whether that's accelerated or held steady in recent quarters? And then how much of the growth in Walmart Plus is being driven by Walmart Plus Assist? And then separately, can you talk about the underlying assumptions you have in the next year for like-for-like inflation, both in grocery and within general merchandise? Thank you.

Question: Mike Baker - DA Davidson - Analyst : Great. Thanks. I just wanted to ask about the overall consumer environment, what you're seeing? I think after last call, it was right after the election you had said that there was a little bit more consumer confidence after the election. Doug, in December, you had said something about storm clouds lifting or something along those lines. Are you still seeing that? Has anything changed in the last couple of months? It seems like the environment maybe has gotten a little bit more volatile. And related to that, I know this is asked a lot, but I'll ask it again. The rollback number of 5,800 seemed to be a little bit less than it was in the last few quarters. Remind us how we think about that? I don't think it's that you're investing less in price, but love to hear that explanation again. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, WMT.N - Q4 2025 Walmart Inc Earnings Call

Question: Paul Lejuez - Citigroup - Analyst : Hey, thanks, guys. You mentioned seeing lower markdowns in the fourth quarter. Curious how that came in relative to your plan and also what you assume about the promotional landscape of '26, whether you build in significant price investment into your guidance? And just remind us how that will shake out this year versus what you thought coming into the year? And then just a bigger picture question. You mentioned some increased investment in Canada a few weeks back. Just curious how you view the long term opportunity of that market? Thanks.

Question: Seth Sigman - Barclays - Analyst : Hey, good morning, everyone. I wanted to ask about VIZIO. Could you talk about some of the details around the dilution that you've embedded here and then perhaps discuss plans to integrate that, how do you expect to leverage their platform? And in general, as you think about Walmart Connect, pretty incredible momentum there. You've been really disciplined in building that out. I'm just curious how do you think about the growth outlook? Thanks so much.

Question: Zhihan Ma - Bernstein - Analyst : Hi, thank you very much for taking my question. I guess I wanted to follow up on the e-commerce side. If you could just help us understand what are the top three drivers of you improving e-commerce profitability between the alternative revenue streams and also reducing core e-commerce cost? And you mentioned retail media membership kind of driving more than 50% of EBIT growth. Are you able to share what proportion of EBIT dollars for now coming from the high-margin alternative revenue streams? Thank you.

Question: Edward Kelly - Wells Fargo - Analyst : Hi, good morning, everyone. I wanted to start just with a follow-up on that question around e-com economics. So incremental margin of around 11%, obviously, good margin. But what does that look like over time? Does that grow? How do we think about e-com overall returning to profitability or I should say, attaining profitability? And then as we look out over time, in addition to that, just kind of curious, issues like immigration, does that -- how are you thinking about that? Any impact that you think that might have this year?

Question: Robbie Ohmes - Bank of America - Analyst : Oh hey, thanks for taking my question. I think this might be for John David Rainey. Just operating expenses delevered. I think it was 50-plus basis points in the fourth quarter, excluding the opioid settlement. Can you just help us -- tell us how we should think about the SG&A ratio for Walmart, the puts and takes for opportunities to be better than expected this year versus worse, but also the sort of way we should think about that long term for Walmart?

Question: Corey Tarlowe - Jefferies - Analyst : Hi, good morning and thank you for taking my question. Doug, you had mentioned some exciting news regarding PhonePe. I was wondering if you could share any details around the business, around the growth or profitability today? And then just as another question. John David in your prepared remarks, you mentioned that ROI is an interesting stat that I think it's the highest it's been since 2016. Is there a way to maybe put into context just how high you think your ROI can go, and where some of these newer investments rank as you think about the trajectory for your return on investment? Thank you so much.

Question: Rupesh Parikh - Oppenheimer - Analyst : Good morning and thanks for taking my question. I'll be quick here. Just as we look forward this year, I think free cash flow was down versus last year. I just want to get a sense if we're getting closer to a positive free cash flow inflection? And then we did see an increase in dividends, so just any updated thoughts on capital allocation going forward?