Walmart Inc. · Q2 FY2027 call

This is a good quarter for Walmart, and shows once again that our strategy is proving out. We've been investing against it for years, and I'm even more bullish today as we see the pieces increasingly powering each other.

The math isn't simply one plus one equals two. The value comes from how these businesses work together, with each one strengthening the others and expanding what the company can do as a whole.

We delivered another quarter of strong eCommerce growth, up 23% globally, including the 10th consecutive quarter of growth over 20% for Walmart U.S.

This includes the benefit from the receipt of tariff refunds in the quarter. And as we suggested on the last call, our intent was to deploy much of that back into price, and that's what we're doing. Importantly, our underlying profit growth was where we thought it would be, excluding this benefit.

The Walmart U.S. team delivered more than 11,000 rollbacks during the quarter, up from 7,200 rollbacks at the end of the first quarter, demonstrating our commitment to price investment.

And speed isn't simply a fulfillment metric, it's an acquisition strategy. Customers who use fast delivery shop with us more frequently, they deepen engagement with us, and they're more likely to become Walmart+ members.

The number of customers using Sparky is up 70% from last year, and the customers and members who use Sparky for shopping spend 40% more per order than others who don't.

Operating income growth included a net benefit of approximately 750 basis points related to tariff refunds received in Q2. Setting aside this benefit, underlying operating income growth was at the top end of our 7% to 10% guidance.

Our outlook reflects the continued prioritization of the remaining tariff refunds and the customer experience and price investments in the second half. For this reason, I encourage you to consider Q2 and Q3 performance together to assess the underlying growth of the business.

Our Walmart U.S. eCommerce business achieved double-digit incremental margins for the first half of the year.

sales of core merchandise categories have been consistent, but at the total US comp level, we've had nearly a 200 basis point net swing in comp sales growth from the trailing two-year pace to this year, entirely tied to our health and wellness category. It's important to note that this unfavorable impact is to the top line only.

The more omni we become, the more important our stores become, not less important, more important. Between in-store shopping and digital fulfillment, we have more unit volumes transacted through our stores than ever before, as they are the last mile fulfillment nodes for 80% of our eCommerce orders and 100% of our fast deliveries.

As we shared with you in May, we were eligible for approximately $2.9 billion of tariff refunds, amounting to about 0.5% of annual US net sales. To-date, we've received substantially all of these tariff refunds.

we're raising in the face of more than $2 billion of incremental cost tied to higher fuel prices in arguably a softer consumer environment than in February when we introduced our initial outlook. As such, we feel it's prudent to remain cautious by only raising the guide modestly.

We now expect slightly higher CapEx for the year at approximately 4% of annual net sales. Even with this increase, we expect to generate double-digit growth in free cash flow this year.

There was an impact in pharmacies we talked about, from MFP. Putting that aside, the second quarter for Walmart U.S. is the best second quarter we've had in the last three years.

As you go through month-by-month in the last quarter, you can tell when fuel prices increase and got above $4, and perhaps there's a psychological impact to that, that there are choices that consumers are making. So June was a little more obvious as we look at the quarter in terms of customers making trade-offs. And it's why we have lean so heavily into lower prices.

there is a lag to this. There is a bit of a cumulative benefit that comes when you lower prices. And so you don't necessarily expect to have that offsetting benefit to the lower prices in the immediate period.

Our hope and intention always is that, rollbacks can become permanent price increases wherever possible. We have a line of sight to those. And for any that we see that we aren't getting a return on, we'll manage them carefully.

at 2.5% US comp, we grew operating income 10% ex-tariffs, that's 4x the level of revenue growth. We haven't done that level of profit growth relative to the US comp in two decades. Our business is fundamentally changing.

if you look at the profit drivers of our business, almost half of the growth came from areas like membership, advertising, marketplace, and we expect this to continue.

When someone becomes a health and wellness customer, they spend on average 3 times more than the average Walmart customer. And when they begin using pharmacy delivery, in addition to being a health and wellness customer, that almost doubles yet again.

Lapping 19% EPS growth next year will be a challenge.

what do you have to believe to have incremental margins go higher, well, advertising growth would need to outpace our eCommerce growth, and that's actually what we've been seeing, and not by a small margin, by a large margin on a larger base.

We have a list of 14 key items that are priced less than what we saw in 2019. Great examples are Pen+Gear Crayons for $0.25, or our Pen+Gear #2 pencils for $0.92.

we used some of the investments, refunds that we've got to invest into the grilling basket this summer, which fed eight people for under $40, with 13 of those items priced 16% below last year.