Walmart Inc Q2 2024 Earnings Conference Call Insights

Key highlights from Walmart Inc (WMT) Q2 2024 Earnings Concall

Management Update:

• [00:07:07] WMT is seeing strong growth in its omnichannel business, with curbside pickup and store-fulfilled delivery growing faster than pickup.

• [00:08:30] For the remainder of the year, WMT’s immediate focus is on getting product costs and retails down to fight inflation, improving execution of pickup and delivery orders, expense management, and inventory management by item and category.

• [00:09:27] WMT is focused on executing well in all of its markets, and is seeing strong growth in international markets like Walmex and China.

Q&A Highlights:

• [00:30:31] Robby Ohmes with Bank of America asked what are the positive trends in general merchandise that make WMT optimistic about 2H24, and have high-income customers broadened out into the rest of the store? Doug McMillon CEO said that back-to-school sales are strong, which bodes well for Halloween, Christmas, and GM in the back half. GM is holding up better than expected, and we are optimistic about the back half.

• [00:34:30] Kate McShane of Goldman Sachs asked to quantify the contribution of higher-margin businesses and mix from stronger grocery to the 50 bp GM expansion, and update WMT’s mix assumptions for 2H24. John David Rainey CFO answered that the biggest contributor to GM expansion was lapping of markdowns, but the company is also making progress in diversifying and expanding higher-margin initiatives like advertising.

• [00:36:12] Oliver Chen with TD Cowen asked how WMT is planning ticket and traffic for the next quarter, and what are some highlights of the holiday inventory price point assortment. John David Rainey CFO replied that WMT expects ticket to be slightly lower in 2H24, but is encouraged by the strength in units and share gains. Consumers are being discerning in their spending, but are still willing to spend on holidays.

• [00:36:40] Oliver Chen with TD Cowen enquired how generative AI and LLMs can be used to improve the customer experience in Walmart+. Doug McMillon CEO said WMT is excited about the possibilities of using large language models to personalize the customer experience, improve efficiency, and grow top line.

• [00:40:35] Rupesh Parikh with Oppenheimer enquired about the performance of WMT’s international business in China, which has been the standout performer despite weaker macro data points. Judith McKenna answered that WMT’s international business had a strong quarter, led by China. Sam’s Club and hypermarket formats are both gaining market share, driven by the combination of value, quality, and trust. The company is also investing in its stores and associates.

• [00:45:47] Simeon Gutman from Morgan Stanley asked about the key drivers of EBIT dollar growth in fiscal 2025, and what are the levers that WMT can control to achieve this growth. John David Rainey CFO replied that WMT is confident that it can continue to grow operating income at a rate that is faster than sales, thanks to its diversified earnings streams and automated supply chain.

• [00:49:49] Kelly Bania at BMO Capital asked for an update on the growth of WMT’s e-commerce business, including Marketplace and 3P, and how it is impacting the profitability of advertising? Doug McMillon CEO answered that WMT is pleased with the growth of its e-commerce business, particularly in the areas of pickup and delivery and Marketplace. The company is also seeing strong growth in its advertising business, which is being driven by the expansion of its ecosystem.

• [00:54:34] Edward Yruma of Piper Sandler queried about the key factors that contributed to the success of Walmart+, and how has the data collected from Walmart+ customers been used to improve the business? Doug McMillon CEO answered that Walmart+ has been successful because it offers unlimited free deliveries and the company has improved its ability to deliver orders correctly and on time.

• [00:56:28] Seth Sigman with Barclays asked how is WMT managing private label differently today to drive market share and create a sustainable competitive advantage in a changing pricing environment. Doug McMillon CEO said that WMT is focused on providing a wide range of assortment for its customers, regardless of their location or budget. The company does not set targets for private label sales, but it is pleased with the recent acceleration in customer demand for its private brands. Walmart will continue to focus on quality and value in its private label offerings.

• [00:59:12] Corey Tarlowe at Jefferies enquired how WMT assess the health of the overall customer in the U.S. and internationally, and how it will evolve in the remainder of the year? Doug McMillon CEO replied that WMT is optimistic about its ability to grow sales and market share in a tough economy, thanks to its broad product assortment, convenient shopping options, and value proposition.

• [00:59:28] Corey Tarlowe at Jefferies also asked about WMT’s current view on shrink and how does the company expect it to evolve in the future. John Furner said that WMT is aware of the increase in shrink, and is taking steps to manage it, including pricing as low as possible and taking action to protect people from crime. However, shrink is a complex issue with many factors, and WMT is focused on the controllable aspects of it.

• [01:02:32] Krisztina Katai with Deutsche Bank asked for an update on Sam’s Club’s membership gains, renewal rate, and how the company is positioning its membership value proposition in the face of moderating food inflation. Kathryn McLay said Sam’s Club has seen historic growth in its membership base in recent years, with continued growth in absolute member numbers. WMT is also working to introduce new members to the value of a Sam’s Club membership through initiatives.

• [01:02:47] Krisztina Katai with Deutsche Bank also asked how WMT anticipate the volumes of its private label brands and national brands to play out in the back half of the year as rollbacks are increasing. John Furner said Walmart+ has seen consistent growth in recent quarters, and private brand volume has also been consistent. Walmart is focused on quality and value, and is offering rollbacks on popular items like Great Value mustard.