Good morning. It's Greg Melich. I cover the retail broad lines and hard lines here at Evercore ISI. It's my great pleasure to have with us John David Rainey, Executive Vice President and CFO of Walmart, along with Steph and Kary who, I think, a lot of you know well from the investor relations team. So, John David, it's a pleasure to have you with us. We've got 35 minutes. I would love to jump right into questions if you're okay with that. Well, let's do it. I'm happy to do this, Greg. Great. So first, Walmart's had a lot of success on the top line with traffic accelerating to 3%+ 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's coming from and how you keep it going? Sure. We've been really pleased with the progress that we've seen. In an overall macro environment where pricing is contributing less to the top line, we've been able to push units through. If you look at the composition of our revenue growth in the first quarter, almost entirely driven by units. So really pleased with that. That's indicative of how consumers are thinking about us. They're coming to us not just for value, but also for convenience. Within each geography, the unit growth is more pronounced within Sam's and the U.S. It'd be a little less so internationally. Really pleased with what we're seeing there. I think it's also important to note that a lot of that growth is coming through e-commerce. That's probably fairly obvious. But when the e-commerce opportunity for us is growing at 20% year-over-year consistently, we're just seeing a lot more customers that are coming to us in a manner that they haven't historically, where maybe historically we were more of a brick-and-mortar business. We're continuing to move more and more to e-commerce. I think this speaks to how convenience is resonating with customers. 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 how Walmart+ and delivery could be putting that whole omnichannel linkage together to keep it going? Yeah. We noted, I think on the last earnings call, that about 20% of our operating income is coming from or growth is coming from Walmart+ and advertising. Those obviously all kind of work together. What's great about Walmart+ is the behaviors that we see of those customers. Notably, they spend about twice as much as an average customer. So we want more and more of our customers to use us in that way. They also, as maybe this is intuitive, but they tend to shop more frequently and also have smaller baskets. They're using us for those one and two items also sometimes that maybe they historically would have thought about using another retailer for. And so as we continue to improve our offering there, getting better at providing the merchandise assortment, the offering the customers want, and improving our ability to deliver that to them when they expect it, we're continuing to see growth there. One important aspect that I talked about on the last earnings call was this metric that we have internally that we refer to as Perfect Order. And what this is, is when a customer member comes to our website, are they able to find the items that they're searching for? When they put those in the basket, we fill it. Do we have to substitute an item because maybe we didn't have it even though we offered it? And are we able to deliver to them within the time frame that we talked about? That Perfect Order Score for us increased almost 900 basis points year-over-year. And so this just really indicates how we're progressing, how we're improving here, and our customers are responding to that. We're just getting much better at this e-commerce offering. Just 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? It sounds like they get a nice lift regardless of how many you have. Yeah. I'll pass on that. But I'll say this. Our success is not going to be solely determined by the number of memberships that we have. It's a nice complement to the overall opportunity that we have when we think about these other lines of businesses that tend to be higher margin, faster growing. And so we want to continue to grow this, but we don't want to be solely focused on it where you've seen some others maybe outside of the retail space that get really focused on consumer metrics, growth in those areas, and as if that's the end all, be all. That's not the case for us. This is a nice complement to what we're doing. But we're not going to confirm or deny the 15 million. Okay. Maybe pivoting to something else that you have talked about, just inflation and the squeeze that there has been on the consumer. Mission Impossible deflation, I think, was the message last year to shareholders. Now that inflation's 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's sort of bottoming at 0%-1%? What's your outlook there the rest of the year? Overall price levels, to me, feel like they're in an area that will probably not change a lot in the next couple of quarters. It's different by what part of our business we're talking about. So food is up modestly in terms of inflation. Consumables is about flat, and general merchandise is down. And so very similar to what we talked about that we saw in the last quarter where the overall basket of goods was up about 40 basis points year-over-year. That feels about where I think we'll probably land for a while here. And we continue to see customers that are choiceful and discerning and not buying as much general merchandise as they have historically. What's important about this aspect, though, is that we see progress in general merchandise that I think is more Walmart-specific versus a macro trend. And that's coming through our marketplace. We have categories on our marketplace where we're seeing 20%, even 30% year-on-year growth. Being able to provide a broader assortment that's offered by third party is really bringing customers to our platform, one of the reasons that we see this growth. Well, I want to get to that, but I also want to go back on value. So value and convenience you mentioned are so critical to Walmart and 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? We like where they are today. I think this is going to be a topic of conversation probably every quarter that we have. It's dynamic. It's moving. There are certainly pockets where we think that it's prudent to invest more in those price gaps. There's other areas where we feel like we're very comfortable. This quarter, we have about 7,000 rollbacks in grocery alone. That's up 50% year-over-year. And so EDLP is a big part of who we are, and we want to continue to be a price leader there. We feel good with where they are right now overall. That's great. 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? Yeah. I'm glad you mentioned this because internally, this was something that there was a fair bit of excitement around. We've done really well in e-commerce, and that has skewed over the last few years, and that has skewed more towards pickup. In the last couple of months, we've seen delivery surpass pickup. And I believe that that's a trend that it's not going to reverse. Really speaks to how customers are thinking about this convenience factor for us. We're simply getting better at our ability to serve our customers that way. One of the areas of delivery that we're really pleased with that is impacting in a positive way the unit economics of our e-commerce business is delivery less than three hours. We continue to see customers that are availing themselves of this option. And when you get that Express Delivery, sometimes customers will be paying more for that. Maybe I thought that that would be a little more elastic than what we've seen. And so this is a big driver of some of the improvements that we've seen in the overall e-commerce profitability. And I'd love to see this with our customers and members. Well, that's great. So maybe that's the pivot to the, I'd like to talk a little bit more strategically, maybe even go around the world a little bit. How does Walmart's geographic footprint look today? I mean, there are a lot of countries that over the last five, 10 years, you've exited, but you've also leaned into India and a few others. So maybe update us on where the operations really have upside and where you're looking to invest. Yeah. The headline would be that we like our geographic footprint right now, that obviously can change in the future. Being a company that's been around for 62 years, we've experimented in a lot of markets: Brazil, Japan, Europe. We have figured out where our value proposition works really well and the reverse of that, where it doesn't. There's not necessarily white space where we think that there's a particular market that we need to go invest more in or put a physical footprint in. As I look at the international markets, two that stand out to me that I think are worth talking about are China and India. In China, half of our business there is e-commerce. Really pleased with what we're seeing, specifically with the format of our Sam's Clubs. We just continue to see great growth there. Some of our best-performing stores in terms of total revenue are in China. There's Sam's Clubs in China. India is the other one that is really exciting. We've got two formats there, if you will. One is Flipkart, the marketplace. The other is PhonePe. Incidentally, I spent the last two days with the PhonePe team. We're doing roughly INR 1.5 trillion of payment volume right there. And what I love about what that company is doing is given their user base, they see new cohorts are coming in. They're more engaged in the last cohort. Their retention is greater. Their transactions per active is greater. And so there are all these trends that are just up and to the right. And we're talking growth that is, in some cases, around 50% in many of these metrics. So I'm very excited about that. The other aspect about what makes PhonePe so compelling is they are not just processing payments. They're actually providing services to customers that give them e-commerce shopping opportunities, give them the opportunity to buy insurance and many other verticals. And given the engagement of their user base, they're seeing really great traction in this. And so PhonePe, I think, is just a real coveted asset that we're glad to have as part of our portfolio. And over the next couple of years, both Flipkart and PhonePe, you'll hear more about as they move towards probably a monetization event with an IPO. 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 in the flywheel businesses? Is it advertising? Is it Connect? Is it taking PhonePe to Mexico or now a new program in the U.S.? Maybe just walk us through the mix of business and where the investment should go. Yeah. Well, advertising is one that probably stands out because of the margin profile, also because of the response that we've seen from our customers around that. We, as a percent of GMV, are still kind of low single digits in our advertising business. I think we have the opportunity to double, triple, maybe even quadruple that over the coming years. And the margin opportunity there alone is tremendous. And so that's one that I think stands out. Fulfillment services is another one. We have a very large percentage of our third-party sellers that avail themselves of this today. Frankly, to me, if I'm a third-party seller, this is a no-brainer because of the type of service that we provide. And so we expect that to continue to grow. And then you mentioned the expansion of PhonePe internationally. That's something that we certainly talk a lot about. I think there is white space around the globe where we can take their platform and their offering and perhaps expand that internationally. There's a lot of important things that they're doing within the market of India, and that being the largest market in the world in terms of number of consumers. We don't want to lose sight of that. But financial services is probably the area of our business that, in terms of percentage growth, has the greatest opportunity over the next five years. Now, relative to the size of our overall retail business, it might be harder to kind of see that in the results, but the opportunity there in terms of growth is tremendous. Maybe to 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? Yeah. Sure. Well, because of service-level issues related to Capital One, we terminated that agreement. It did go to litigation, which we were recently that was ruled in our favor. And so now we have the opportunity to go issue a new co-brand credit card. I'm very excited about that. We're going through the RFP process right now with a number of issuers. And then that will be a complementary offering to the one joint venture that we have with Ribbit Capital within the U.S. And credit is obviously a big driver of the opportunity there with our customer base. And so we're looking forward to growing that portfolio and leaning heavily into that in a way that we really haven't at a level historically. So we were talking earlier, Greg, and you were pointing out some areas where maybe we punch below our weight. I think financial services is one of those within the U.S. And so I'm looking forward to sharing more about that progress in the coming years. 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 three years, you see it with both the Scan & G o, the e-commerce business, just overall traffic and five-year comp. So five, six years ago, we were closing clubs. Now we're opening them again. Just what's changed about Sam's Club's IRRs when you're looking at it as a CFO to now start reopening clubs again? And how do you keep driving the profitability there higher? Yeah. The resonance with members, I think, is something that stands out. Not in the most recent quarters, but if you were to go back the last three years, we saw something like 12 or 13 quarters of double-digit growth. That's very compelling when we look at that overall business. When we're adding new clubs, the response that we see from members is really strong. Part of that is our offering. Part of it is the way that we offer things. E-commerce is an important aspect of that. There are certain things that we're doing within our Sam's Club that I think are really important related to the automation. Not just automation that we're doing in our stores, but putting automation in the hands of the customer. The example that I like to provide here is Scan & Go. Our penetration among members is almost a third in terms of Scan & Go. It's roughly 30% right now, I think, if memory serves me correct. Scan & Go should be the way to shop. In fact, if you're shopping in our store and not using it, it's almost like you're shopping us the wrong way. What's important about this is it's a much better customer experience. And the NPS scores around this are 90. There are very few things that I can point to that have an NPS score of 90. There are also few examples that I can provide of a higher penetration of a digital experience in a physical store. I think our numbers are probably comparable to what Starbucks are doing. And so we're really excited about this. I think this is a glimpse into the future of how omni comes together with the merging of these digital experiences in physical stores. I guess the knock-on then is that now you see more spots where you can put Sam's Clubs because you can basically underwrite an extra 10 or 20,000 members per club. Is that the way to think about it? It's very much membership-driven. That's exactly right, Greg. That's fantastic. I guess I want to go back to something that you talked a lot about or we've touched on, but data. It is a competitive advantage. It's true for all companies. I guess, where 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? Yeah. Advertising is certainly one that I like to talk about because of the margin profile on that. But I think there's opportunities certainly within merchandising, providing data to our vendors. We have a data aspect of our business that actually grew 100% in the last quarter. And I think it shows that the type of information that we have is really compelling to our vendors. But advertising maybe is the one I want to focus on here because this is where the benefit of having both a digital and a physical presence really helps. So imagine if we surface an ad to someone online. And when they purchase something online, you've got the lineage of surfacing that advertisement and seeing that transaction. What we have the ability to do with 5,000 stores in the U.S. is actually also see when they go to a store and they buy something, and we can connect that. That's really compelling to an advertiser. I think that's one of the things, one of the reasons why we're seeing some of the growth that we are in this category because advertisers are recognizing that they have that lineage between the transaction, whether it's offline or online, and there's really high fidelity around the advertising dollars that are spent. And so that's something that I'm really looking forward to. The Vizio acquisition is just an extension of that. It provides us another channel to serve ads to our customers and then be able to observe what their behaviors are that follow the serving of those ads. I don't want to put words in your mouth, but 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. Well, there are a couple of things to point out here. One is we, as a% of GMV, are low single digits right now. And I do think that we have the opportunity to improve that dramatically. Amazon's, the composition of their business is more general merchandise versus food. And so it stands to reason that you're going to see more advertising dollars flow through to general merchandise versus food. It's better to advertise for a pair of sneakers versus a head of broccoli. And so the composition of their business might give them the ability to have that number be a little bit higher. On an apples-to-apples basis, though, if you normalize for the categories, I think that we have the right to be every bit as big as what they are. So really excited about that. Got it. We really shouldn't focus just on your digital sales. We should focus on your GMV as well. Correct. Got it. Maybe that's a nice pivot to margin. 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? Well, certainly, there's no cap that we have internally. Where we say, "Okay, we're going to get the 6%, 7%, 8%, cap it there, and then everything gets reinvested in the business," margins can go as high as they will be capable of. But I think what's important here is that we don't want to find ourselves in a situation where two, three, five years from now, we recognize that we've underinvested in some aspect of our business. We like where our price gaps are today. We like the level of overall associated compensation and benefits. We're going to have to continue to invest in those over time. But it's such that the margin profile or the opportunity in our business is such that we have the ability to continue and invest in those areas and see our margins grow over time. And so those aren't really concerns for me when I look at the opportunity in front of us. What's challenging, I think, for any management team is when you look at margins growing like that, how much of that should you be reinvesting in the business for margin returns in the future? And there's no perfect formula around that. But we think that not only do we have an opportunity to grow margins, but we have a great opportunity for a company our size to just grow in general. And so we want to continue to fuel that. And so I think we have the opportunity to continue to invest in our associates, to have appropriate price gaps, invest in our future, and see margins go up. Maybe can we dig a little deeper on the rollbacks that you've 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, $1 a beer sounds pretty good to me. But help us explain the rollback strategy to 7,000 up going to 10,000. How do you use that to drive the business? Generally speaking, rollbacks are vendor-funded. As compared to normal quarters, there are slightly more this time that have been Walmart-funded. This can be a tactical pricing strategy for us where we have the opportunity to go in and see how customers respond to these rollbacks before we make a permanent price change. So we could come in later if we saw really good response in terms of units sold and that were the right economic outcome for us to then make that permanent. Overall, right now, rollbacks are roughly at 7,000. They're up 50% in the grocery category year-over-year. We think that we're appropriately investing in this area of our business to help drive unit volume. So we should expect the 7,000 to sort of stay there? Or I mean, that's an unusually high number. Is that? I think we'll have to wait and see how customers respond to this. If we like the outcome, it may stay there. If we're not seeing the type of response, we can certainly change that. Got it. I'd like to. There's no way to get margin than to sort of earn it on everyday low cost, I guess, sustainably. So I'd love to dig a little deeper back on automation efficiency. Could you sort of update us on how many RDCs have been converted, where we are in that multi-year process to get that? I think you talked about a 20% increase in unit velocity. Yeah. We've got 15 of our 42 DCs that have been converted at some level to automation at this point in time. Roughly 1,700 of our stores in the U.S. are being served by this automation. So really like the progress here. But just because I say 15 of the 42 DCs, that doesn't mean that's 100% automation. So that probably overstates the amount of volume that is fully automated at this point in time. We're really pleased with the progress that we're seeing there. Excited to have our full network converted to automation at some point in time. We're also really pleased with what we're doing within our stores. VizPick is something we've talked about before, but digital shelf labels is something that really saves a lot of time among associates where they don't have to manually change the prices on items. It also gives us better accuracy of what we sell. Within the stores themselves, we also are automating many of these super centers at the end. We've called this historically a market fulfillment center, an MFC. That's probably slower in terms of its progression than some of what we're doing in our DCs and FCs, but really excited about what that can mean for the future. Maybe. I'll point out just real quickly, Greg, for the audience members that maybe don't know this, when we automate one of these DCs, we see roughly twice the throughput they're going through with half the headcount. And so the math on this is very, very compelling. 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? That's true. And largely, that's not manifesting in our results today because we're still very early on in this in terms of the overall volume that's flowing through automation. So to me, this is an opportunity that investors have still yet to see. 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? When does that happen? Great question. Well, when you think about increasing the capacity of roughly 2X in some of these fulfillment centers, it gives us the opportunity to use that space for our third-party providers. And I think a very exciting part of what's changed in our business over the recent quarters is the number of 3P sellers that are availing themselves of Walmart Fulfillment Services. It's roughly a third to half order of magnitude here of those sellers. And what a great and compelling value proposition for that third-party seller. And we can provide this in a way that many, many others can't. And so to me, it's a no-brainer for your third-party seller to be able to do this and to continue to improve how we're fulfilling. I hope you're still there, Greg. I'm still here. Okay. All right. How we're fulfilling these orders for our customers, I think it's just another growth opportunity for us in the future. 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. I think on 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? Yeah. Let me talk about that. That is something that I look at each quarter. What are the incremental margins in our business overall, brick and mortar, and e-commerce? I talked about it in this most recent quarter because that's the best that I've seen since I've been here. So a 13% improvement or incremental margin on our e-commerce business. Not every quarter is going to be that year. That's not what we're planning for the back half of the year. It's a lower number than that. But it really speaks to the incremental improvement that we've made in the unit economics of delivering something to one of our customers. A big part of that improvement is coming through lower delivery costs. And it's not just lower delivery. Lower delivery costs can come through the form of more density, so delivering multiple packages when you go to a cul-de-sac versus one. It also comes through revenue opportunities around delivery. An example of that would be, I think I mentioned earlier, the Express Delivery, less than three hours. We're seeing more customers that are availing themselves of that. That has a way of muting the costs related to this overall. So I mentioned last week at our shareholders meeting that profitability in e-commerce in the U.S. is probably within the next couple of years. We're getting close. It's month-to-month sometimes. We've not done it yet, but excited about that opportunity. And we saw the results in the most recent quarter with these incremental margins where we're just driving really strong improvements year-over-year. So we've said all along that this is not something that we feel like we have to squint our eyes to see out into the distant future. We have clear insight into how to get there and the steps that we need to take. You're seeing that in our results. Just to be clear, I want to make sure the break-even or profitability in e-commerce the next couple of years, that includes advertising and the holistic 3P. Yes, it includes advertising, fulfillment services, data modernization. That's correct. That said, we actually want to get to e-commerce profitability without the subsidization of those other areas. Got it. But that's further out. That's further out. That's further out. That might be four or five years, not a couple. Potentially. Yep. We've got five minutes left. I want to get put on the strategic hat, but also the CFO hat. It's great to see Walmart driving top line and margin expansion. 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 are we going to see a lot more capital having to be thrown in to keep up the momentum? Yeah. I feel like as a CFO with investors, I need to be able to continue to show progress and return on investment going increasing each year to have the license to spend this capital. I don't want to ask investors to wait five years for return on invested capital to go up. And so internally, the way that we're managing this is that we are spending more CapEx. We think that's the right thing to drive the growth, the margin expansion of our business. But we're doing so while seeing return on investment go up each year. I think last year went up a couple hundred basis points. Maybe it's not that large this year, but we should see ROI go up each year into the future. We'd like to get back to some of the ROI levels that you've seen historically back when we were doing massive expansion of stores. We think we have that kind of opportunity. Great. And you mentioned earlier Flipkart and potential IPO. I think the last funding rounds put it at $45 billion-$50 billion. What would be the main goals of the IPO? 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? Yeah. I think the goals are a monetization opportunity for some of those stocks. I believe the value of those is not properly reflected in our overall valuation today. I've spent the last two days at PhonePe board meetings. I could not be more excited about that business. In fact, in my 25-ish year career, there have been few companies that I have found to be so strong, so compelling in terms of what they're doing and their capabilities. I can say some of the same things about Flipkart. So that's the monetization opportunity that we think gets the value more properly reflected. In terms of the key things that we need to see, we want to continue to move on this path to profitability with each of these entities. We'll share more there in the back half of this year about that specifically and some of the progress that these companies are making. But I think for investors, you want to be able to know when you do an IPO where the economics are going and that you're getting to a point of profitability. And so I think timing that will really influence the timing of the IPO. Yeah. And like to that a little bit is how would you balance current M&A opportunities versus dividends versus buybacks as you think about the cash coming in? Yeah. Balance is important to me. I want to be able to have dry powder to do appropriate acquisitions with M&A. I also want to continue to buy back stock. We have a lot of conviction in where our stock price can go. And so we want to make sure that we have ample dry powder for that. And as you know, we recently increased our dividend 9% this last year, which is the largest dividend increase we've had in 10 or 12 years. We're at a 37.5% payout ratio right now. Perhaps over time, we can see that grow even more. When you look at the margin expansion opportunity that we have, it translates into a tremendous amount of generation of free cash flow. And so I think it gives us opportunities to do all of those. We're not going to overly skew towards one. Well, that's great. I think we've taken up all of our time. So John David, Steph, 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. Thank you, Greg. It's always a pleasure.