Walmart Inc at Evercore ISI Consumer & Retail Conference Transcript

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

Question: Gregory Melich - Evercore ISI - Analyst : Great. So first, Walmart's had a lot of success on the top line with traffic accelerating the 3%-plus growth in a world where it's been hard to get volume and traffic growth. Help us understand at a category and a geographic customer level, where the most traction is coming from and how you keep it going.

Question: Gregory Melich - Evercore ISI - Analyst : That's great. And so maybe to double-click on that a little bit, e-commerce invigorated with 3P building. Could you also add in on how Walmart+ and delivery could be putting that whole omnichannel linkage together to keep it going? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 2:15PM, WMT.N - Walmart Inc at Evercore ISI Consumer & Retail Conference

Question: Gregory Melich - Evercore ISI - Analyst : And such a shameless plug on our own stuff. We have a survey work that suggests we're about 15 million Walmart+ members, care to confirm whether that's true or not? And it sounds like they get a nice lift regardless of how many you have.

Question: Gregory Melich - Evercore ISI - Analyst : Okay. Maybe pivoting to something else that you have talked about. Just inflation and the squeeze of that has been on the consumer. And mission impossible deflation, I think, was the message last year at shareholders. Now that inflation is kind of just down to zero, right? Maybe give us an outlook as to where if that could actually go negative? Or do we think that inflation is sort of bottoming at zero to one? What's your outlook there for the rest of the year?

Question: Gregory Melich - Evercore ISI - Analyst : Well, I want to get to that, but I also want to make -- I want to go back on value. So value and convenience, you mentioned, are so critical to Walmart in winning customers. Sticking on the value side, how do you see your price gaps today? Our recent work says it's sort of low to mid-teens. Do you feel like there's more opportunity there? Or do you like them where they are?

Question: Gregory Melich - Evercore ISI - Analyst : That's great. And you mentioned the convenience point being a big one. Could you maybe dive in a little bit more into how delivery, I think it got up to like half of e-commerce in the first quarter. Maybe sort of update us on what's driving that and where that goes from here?

Question: Gregory Melich - Evercore ISI - Analyst : Well, that's great. So maybe that's the pivot to the -- I'd like to talk a little bit more strategically, maybe can go around the world a little bit. How do you -- how does Walmart's geographic footprint look today? I mean there are a lot of countries that years -- over the last 5, 10 years, you've exited, but you've also been to India and a few others. So maybe update us on where the operations really have upside and where you're looking to invest?

Question: Gregory Melich - Evercore ISI - Analyst : So that goes right to my next question, which is if you look at the mix of businesses, not just the geographic area, where do you want to lean into investing more on the flywheel businesses? Is it advertising? Is it connect? Is it taking PhonePe to Mexico or a new program in the US? So maybe walk us through the mix of business and where the investment should go.

Question: Gregory Melich - Evercore ISI - Analyst : And maybe just double-click on the last point there. You just recently ended the Capital One relationship. What can you now do that, that relationship has ended differently to accelerate?

Question: Gregory Melich - Evercore ISI - Analyst : I don't want to say they're punching below their weight. In fact, there's been a lot of momentum. But Sam's Club, the last few years, you see it with

Question: Gregory Melich - Evercore ISI - Analyst : So I guess then the knock on that is that now you see more spots where you can put Sam's Clubs, because you can basically underwrite an extra 10,000 or 20,000 members per Club. Is that the way to think about it?

Question: Gregory Melich - Evercore ISI - Analyst : That's fantastic. I guess I want to go back to something that you talked a lot about, or we touched on with data. It is a competitive advantage. It's true for all companies. And I guess what are you best placed to win when it comes to using data and the scale that you have and all the data that you have? Is it in merchandising? Is it in quadrupling that advertising business? Where do you see the biggest opportunity from data?

Question: Gregory Melich - Evercore ISI - Analyst : I don't want to put words in your mouth, but if I -- I'll try. If Amazon gets to 6% or 7% of their GMV as advertising. Should we think of it as a reasonable goal for Walmart? If you've got $100 billion of digital sales that it could also be 6% or 7%? Or it sounds like you think it could be more than that? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 2:15PM, WMT.N - Walmart Inc at Evercore ISI Consumer & Retail Conference

Question: Gregory Melich - Evercore ISI - Analyst : Got it. So we really shouldn't focus just on your digital sales, we should focus on your GMV as well.

Question: Gregory Melich - Evercore ISI - Analyst : Got it. Maybe that's a nice pivot to margins. So we've heard pretty consistently now your confidence in the ability to get the EBIT margin rate higher. I guess, how comfortable is the team with allowing EBIT margins to surpass 6% over time as you get this traction in different areas?

Question: Gregory Melich - Evercore ISI - Analyst : Maybe can we dig a little deeper on the rollbacks that you talked about on the price gap? So we're up to 7,000. I guess, mostly vendor funded, but you talked about how you're funding some of those yourself. I think the Modelo one, a $1 a beer, sounds pretty good to me. But help us explain the rollback strategy, the 7,000 going to 10,000? How do you use that to drive the business?

Question: Gregory Melich - Evercore ISI - Analyst : So we should expect the 7,000 to sort of stay there? Or -- I mean that's an unusually high number. Is that --?

Question: Gregory Melich - Evercore ISI - Analyst : Got it. I'd like to -- there's no way to get margin and sort of earning on an everyday low cost, I guess, sustainably. So I'd love to dig a little deeper back on automation and efficiency. Could you sort of update us on how many of our DCs have been converted, where we are in that multiyear process to get that -- I think you talked about a 20% increase in unit velocity?

Question: Gregory Melich - Evercore ISI - Analyst : And if I remember correctly, the unit velocity was going to be 20%. Again, it takes years to roll this out, but 20%, that could still be a point or more of margin benefit, right?

Question: Gregory Melich - Evercore ISI - Analyst : Maybe to double-click on that a little bit. 3P growth and getting Walmart fulfillment, how is getting the automation rate help getting 3P fulfillment, just unlock the opportunity to do that for folks? Where is that -- when does that happen?

Question: Gregory Melich - Evercore ISI - Analyst : I'm still here.

Question: Gregory Melich - Evercore ISI - Analyst : That's great to hear. The last thing I want to make sure I tie it back to on is e-commerce. Just in the first quarter, you had a variable margin of 12.5%, extremely strong. By my math, it implies a $400 million year-over-year profit improvement. Can you keep up that kind of year-over-year improvement through the rest of this year and into next year? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 2:15PM, WMT.N - Walmart Inc at Evercore ISI Consumer & Retail Conference

Question: Gregory Melich - Evercore ISI - Analyst : And just to be clear, I want to make sure the breakeven or profitability in e-commerce the next couple of years. That includes advertising and the holistic 3P?

Question: Gregory Melich - Evercore ISI - Analyst : Got it.

Question: Gregory Melich - Evercore ISI - Analyst : That's further out. That might be four or five years, not a couple there.

Question: Gregory Melich - Evercore ISI - Analyst : So I think we've got five minutes left. So I want to get put on the strategic cap, but also the CFO hat. It's great to see Walmart driving top line and margin expansion, but CapEx has also crept up to get there over the last few years. Do we expect return on investment to make a turn now going forward? Or do we -- are we going to see a lot more capital having to be thrown in to keep up the momentum?

Question: Gregory Melich - Evercore ISI - Analyst : Got it. Great. And you mentioned earlier, Flipkart and potential IPO. I think the last funding rounds put it at $45 billion or $50 billion. What would be the main goals of the IPO? Like why are we doing it? And then what should be we watching as outsiders to get a better sense of the timing or the things that have to happen before these businesses could be independent?

Question: Gregory Melich - Evercore ISI - Analyst : I'd like to add a little bit is how would you balance current M&A opportunities versus dividends versus buybacks as you think about the cash coming in? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 2:15PM, WMT.N - Walmart Inc at Evercore ISI Consumer & Retail Conference

Question: Gregory Melich - Evercore ISI - Analyst : Well, that's great. I think we've taken up all of our time. So John David, Steph, and Kary, it's a pleasure having you with us. Really appreciate it. We got through a lot and look forward to seeing you again soon.