Walmart (NASDAQ:WMT) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

Walmart Inc reported strong sales growth in the first quarter, with e-commerce sales increasing by 26% and marketplace sales in the US growing almost 50%.

The company is focusing on strategic initiatives such as expanding its omnichannel capabilities, scaling tech-powered businesses like advertising and fulfillment services, and enhancing its AI applications.

Walmart Inc reiterated its full-year guidance, expecting constant currency sales growth between 3.5% and 4.5% and operating income growth of 6% to 8% despite higher fuel costs.

Operational highlights include the expansion of marketplace cross-border into Canada and Mexico, and significant improvements in delivery speed and efficiency, with 36% of US store-fulfilled deliveries completed in under three hours.

Management emphasized the importance of maintaining low prices and investing in customer value, particularly amid economic pressures like rising fuel costs.

Full Transcript

OPERATOR

Greetings. Welcome to Walmart's first quarter fiscal 2027 earnings call. At this time, all participants are in listen only mode. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. I'll now turn the conference over to Steph Wisting, Senior Vice President, Investor Relations. Thank you Steph. You may begin.

Steph Wisting (Senior Vice President, Investor Relations)

Welcome everyone. Joining me today from our home office in Bentonville are CEO John Furner and CFO John David Rainey. We'll begin with highlights of the previous quarter and our outlook for the year. Then we'll open the line for your questions during the question and answer portion. We've invited Seth Delaire, our Chief Growth Officer, as well as segment Leadership to join Dave Gugina from Walmart U.S., Chris Nicholas from Walmart International, and Latrice Watkins from Sam's Club U.S. so we can address as many of your questions as possible. Please limit yourself to one question. For additional detail on our results, including highlights by segment, please see our earnings release and supplemental presentation on our website. Today's call is being recorded and management may make forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Please review our press release and slide presentation for a cautionary statement regarding forward looking statements as well as our entire safe harbor statement and non GAAP reconciliations on our website at stock.walmart.com that concludes my introduction. John, over to you.

John Furner (Chief Executive Officer)

Good morning and thanks for joining us today. The team delivered strong sales growth for the quarter and I want to thank our associates for the work they're doing and getting into stores, clubs and our supply chain, is one of the best parts of my job, whether that's here in the U.S. or places like China and India where I got to spend time recently. Running an omnichannel business through great stores and clubs requires the best technology and people that embrace innovation while executing the basics. Every day, no matter where I am in the world, I'm reminded that customers are more alike than not. They want value for their money, a broad assortment and great experiences, and I love how Walmart delivers across each of these. When I look at the consumer, especially here in the U.S. they're telling us they're feeling some pressure and they're looking to Walmart for value. We're continuing to invest in prices, extending the rollbacks. We started in the second half of last year and we now have about 7200 rollbacks in place. We're also finding ways to help families stretch their dollars as outdoor summer activities get underway. We recently launched a basket of grilling essentials that feeds eight people at under $5 per person. Now, when I look at the business overall, it's performing how we expect it to. We saw strong growth in eCommerce, including advertising and marketplace. We're gaining market share and growth in transactions and units is driving the top line. Transaction growth in the US was the strongest we've seen in six quarters, so I feel great about the way we're executing our strategy. John David will talk more in detail about our results for the quarter, including the impact of higher fuel costs on our operations. And we're pleased to reiterate our outlook for this year. So I'll spend the rest of my time this morning providing some context for how we think about our business. The pace of change is accelerating and we're moving more quickly to realize the benefits of the business model we've built. We're investing in areas that strengthen our competitive position, including pricing and wages and benefits for our associates. And we're doing this while driving long term value for our shareholders. One way we're doing this is by taking an enterprise approach to platforms, scaling tech powered businesses like advertising, marketplace and fulfillment services and membership alongside our core retail operations to drive growth and at a lower marginal cost. We've seen the power of these businesses in the US and that's reflected in our financial performance over the last few years. We're now taking these learnings and applying them in Canada and Mexico. We're also becoming AI native. Using AI, we can now serve customer needs that previous technologies could not meet, from making shopping easier and more personalized to to expanding the range of shopping occasions and interactions we have with our customers and members. And Sparky, our AI shopping agent, is making this possible. Weekly active users are up over 100% just in the last quarter and our investments in AI have increased Sparky intelligence and response quality by 40% this year. Sparky is becoming more useful by the day. You can now use Sparky in stores and automatically reorder items you have on repeat. Sparky even speaks Spanish these days. And as we've mentioned before, customers using Sparky have an average order value that's about 35% higher than non Sparky customers. As a merchant, I'm really excited about the growth we see in our assortment. We're expanding choice for our customers and members by improving our first party assortment, especially in areas of trend and fashion. And we're Growing our Marketplace we recently launched Marketplace Cross Border into Canada and Mexico and we like the early results. This is a good example of the benefits we're seeing from building platforms and extending them across markets. We can broaden our assortment, bring on new sellers and drive incremental profit without the proportional capital investment. And sales on our Marketplace in the US grew almost 50% for the quarter. I like how we're partnering with sellers to help them grow their business with us. And this isn't just about Marketplace. Through services like advertising and fulfillment, they're leveraging the tools we built to make their businesses even stronger. And now that we're expanding our reach to more countries, we're offering an even better proposition for them. We're also getting faster and more reliable in how we fulfill orders. For the quarter, we delivered more than 3.5 billion units same or next day globally. Investments in our supply chain and the application of AI are improving how we position inventory, make fulfillment decisions and serve customers and members in real time. Enterprise eCommerce sales grew 26% and within Walmart U.S. delivery grew 45%. More than 36% of all US store fulfilled deliveries in the quarter were delivered in less than three hours at Sam's Club. U.S. delivery from club grew more than 90% and sales mix from eCommerce is now at an all time high. And I'm so impressed by what the teams are doing to speed up delivery solutions in markets that are already high speed. In India, Flipkart now operates more than 800 micro fulfillment centers used for fast delivery, something we call Flipkart Minutes and they're delivering items in less than 13 minutes on average. And the team in China delivered over a half billion units in Q1, with about 75% of those arriving in under one hour. Our store and club network, more than 10,900 locations continues to be a key advantage. It serves as the physical infrastructure that enables speed at a cost structure that is both attractive and improving. As the economics continue to improve, speed becomes an engine of operating leverage, not just a better experience for customers and members. And at the same time, we're making our operations more productive and efficient. Automation across our supply chain in the US continues to scale. Approximately half of our eCommerce fulfillment center volume in Walmart US is automated. And more than 60% of our stores are receiving some level of freight from automated distribution centers. And more than half of our regional distribution centers are in various stages of being retrofitted. As we deploy these capabilities, we're also upskilling associates and creating new opportunities as technology changes how work gets done. We're also strengthening our business mix by scaling higher margin businesses or what we call commerce solutions. These are areas like advertising, membership and marketplace which are becoming more meaningful contributors to our overall profitability. These businesses complement our omnichannel model and support more durable long term value creation. For the quarter, our advertising business grew more than 30% for each segment, including 36% for Walmart US. Membership fee revenue grew 17% for the enterprise led by Walmart US. Together, these profit streams represented approximately one third of operating income. Another way we're mixing up profits better is by improving the performance of general merchandise. This is a priority for us globally. Comps for GM were positive in the US for the quarter, Fashion was a standout again in international growth in general merchandise outpaced that of food and consumables overall with help from successful Lunar New Year events. With that, I'll close by saying our business is strong, we have momentum and a clear strategy. We'll continue to reinforce a unique value proposition by focusing on serving customers and members better while improving the economics of our business and positioning us for sustained long term growth. I'll hand the call over to John David Thanks John.

John David Rainey (Chief Financial Officer)

I'd like to start by thanking our associates for their continued focus on serving our customers and members. Our value proposition continues to resonate with customers, particularly as higher fuel prices are putting pressure on household budgets. In the first quarter we delivered constant currency sales growth of nearly 6%, exceeding the top end of our guidance range by 120 basis points, and we continue to gain share across our business. Strong e commerce Momentum continued with 26% growth, highlighting the advantages of our omnichannel model as customers and members increasingly utilize our fast delivery capabilities from stores and clubs. Customers and members are also shopping deeper into our catalog as 3P marketplace sales growth in the US reached the highest level in two and a half years. In addition, our advertising business had one of its best quarters, growing 37% globally. First quarter adjusted operating income growth in constant currency of approximately 5% was in line with our guidance. Despite higher than anticipated fuel cost, we absorbed approximately $175 million or about 250 basis points of operating income growth from higher than planned fuel cost. In our global distribution and fulfillment operations. We continue to play offense despite the short term pressure on profits. We're confident this was the right approach to reinforce customer trust and support share gains over the long term. We're always focused on providing low prices for customers. Every Day Low Price (EDLP) is core to who we are. That said, these are real impacts to cost of goods sold for us and our suppliers. And if the current elevated cost environment persists, we'd expect somewhat higher retail price inflation in Q2 and the second half of the year. Importantly, we're reiterating our original full year guidance that we provided in February before the significant increases in fuel cost. We said at that time that we believed the first quarter operating income growth would be the lowest of any quarter and profitability would improve thereafter. We still believe that to be the case. Our long term growth strategy is clear and we continue to execute while also maintaining flexibility to take advantage of the short term share gain opportunities as they emerge. I'll now share some more detail on the quarter Consolidated revenue in constant currency increased nearly $10 billion led by Walmart. US comp sales which were up 4.1% despite a 100 basis point headwind from maximum fair pricing legislation and pharmacy fashion performed very well driven by assortment improvements and expanded third party offerings leading to the category's strongest share growth in five years. E Commerce sales were strong across each of our segments with delivery speed a key catalyst for growth around the world. We're accelerating by using our unique assets, stores and clubs, DCs and FCs and last mile delivery networks to get orders to customers faster and more efficiently. In the US Sales utilizing store fulfilled delivery have more than doubled over the past two years. Over 36% of these orders were delivered in under three hours in Q1, an improvement of 800 basis points over the past two years. And our under one hour and under 30 minute solutions are growing the fastest. We can now reach approximately 60% of the US population in 30 minutes or less and customer satisfaction with our delivery offering reached record highs in China. E Commerce grew over 30% as we use our cloud network to make deliveries within minutes. Flipkart delivered orders in less than 13 minutes on average across more than 30 cities in India and Sam's Club US club fulfilled delivery sales grew more than 90% in Q1. We're also encouraged by the performance of our US marketplace with nearly 50% net sales growth aided by increased engagement with higher income households. Marketplace is an area that we invested in last year and the momentum is building. General merchandise categories performed especially well as expanded assortment contributed to strong results in areas like patio and garden, sporting goods, furniture and toys. In addition, we're seeing incremental growth as we've accelerated the speed of delivery promise through our Walmart fulfillment services. Units shipped same day or next day through WFS grew nearly 150% in Q1. Now we're deploying these global marketplace capabilities outside the US including Walmax and Canada. We achieved these sales results while continuing to improve underlying E commerce economics, most notably in the international segment where performance in our Asia businesses led to more than 10% operating income growth in the segment. We feel like we're just getting started in learning about what the future state of quick commerce and marketplace could look like in the Americas. Enterprise business mix is also continuing to improve with strong growth in higher margin areas like advertising and membership fees. Momentum in our advertising business continued in Q1, led by strength in Walmart U.S. which grew 36%. This performance reflected strong engagement with marketplace sellers who grew their advertising spend by over 50% and saw a corresponding lift in sales. We continue to enhance our toolkit for ad buyers, including AI features that help to dynamically adjust content mix to optimize campaign performance while expanding reach and surfaces with Visio's Connected platform. Consolidated membership fee revenue increased over 17% including strength in our Sam's Club format in select international markets in the U.S. Walmart Plus membership fee revenue growth accelerated with net adds reaching a new Q1 high. This growth is encouraging as Walmart plus members generally spend four times more than non members overall with seven times more E commerce visits each year. And in this period of elevated gas prices, members are tapping into their fuel savings benefits even more today, reinforcing the value of membership beyond free shipping, Sam's Club US membership revenue grew 5.6%. As members gravitate toward our omnichannel capabilities and fuel savings, we're continuing to enhance the value and convenience of the membership. We launched Dynamic Express Delivery so members can get their favorite club items in under one hour. These types of ongoing investments in the member value proposition at Sam's supported the membership fee increase that became effective on May 1st. Lastly, we're making progress on improving merchandise category mix, particularly in Walmart US. Q1 marked the first time in 18 quarters that merchandise mix contributed to favorably to Walmart US gross margin expansion of 29 basis points. This reflects broad based improvement in general merchandise sales with growth up mid single digits for the quarter. In Q1 we saw the highest level of general merchandise share gains in five years. We're continuing to lean into rollbacks in seasonal value programs to reinforce our price leadership and we're seeing a strong response from customers through increased unit volumes. We have approximately 7,200 rollbacks across our assortment which is up more than 20% versus last year. Now I'll discuss guidance. While there are certainly pressures on the consumer, let me reiterate Our business is strong, we are executing on the important strategic initiatives that are critical to our future sales and earnings growth. Our delivery speed and capabilities continue to get faster and reach more customers and members, and our value proposition of low prices with convenience continues to resonate with customers and is the primary reason new customers shop with us. We are reiterating our full year guidance of constant currency sales growth between 3.5% and 4.5%. Based on Q1 performance at 5.7% and our Q2 outlook of 4 to 5% growth, we'd expect full year sales growth to be toward the upper end of that initial range. For Q2 operating income in constant currency, we expect growth of 7 to 10% and we're reiterating our full year guidance of 6 to 8% growth. For Q2, we expect EPS of $0.72 to $0.74 and full year EPS in the range of $2.75 to to $2.85. Recall that we guide on a constant currency basis. If current exchange rates were to stay where they are right now, we would expect an approximate 90 basis point benefit to reported sales growth and an approximate 130 basis point benefit to operating income growth for Q2. We'd also like to note that our guidance does not assume any impact from IEPA tariff refunds. We felt it best to provide guidance that reflects our expectations for the underlying business excluding any recovery of tariffs paid. We are participating in the process and we believe that the maximum refunds we may be eligible to receive as the importer of record represent less than half of 1% of our U.S. annual sales. In closing, we're excited about the momentum in the business, which is an endorsement from our customers and members that we offer an increasingly compelling omnichannel value proposition rooted in our long standing purpose to help people save money and live better. We continue to make measurable progress in reshaping our profit mix to reinforce customer and associate value while improving returns to shareholders and our full year financial framework to grow operating income faster than sales remains intact and we look forward to sharing an update following Q2 that reflects continued progress on our strategic growth initiatives. We're now ready to take your questions.

OPERATOR

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press Star one on your telephone keypad and a confirmation tone indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question is from the line of Simeon Gutman from Morgan Stanley. Please proceed with your question.

Simeon Gutman (Equity Analyst)

Good morning. It looks like your incremental margins both at the enterprise level and within Walmart U.S. eCommerce are consistent with the high single digit and low double digit ranges that you've delivered over the last couple of years. Also outside of fuel,, what are the gating factors that can allow you to dial these up, the incrementals up and what changes over time, especially if fuel stays elevated this year?

John David Rainey (Chief Financial Officer)

Hey, morning, Simeon. Thanks for the question. First, let me just say thanks again to our associates for delivering a great quarter. They've done a really nice job serving in the environment. And let me just start with on your question in particular, the strategy that we're operating under just continues to deliver. We're positioned well, we're serving customers well around the market. You heard the comments about speed and delivery and we made some investments the quarter in in stock, and other things that are making the customer experience better. As far as the the business mix that that you're asking about, it does start with our core business. If our core business is performing well and we're growing share like we did in the first quarter, then we have the opportunity to expand those businesses. And in particular eCommerce growth of 26% around the world. Marketplace growth of nearly 50% in Walmart US is a very important driver that allows for things like advertising and membership to continue the momentum that they've had. The team's made a lot of progress with marketplace in particular in the quarter. We launched cross border in a couple countries in North America. We think that's exciting and we're building a great seller proposition that I think is going to help us in the short-run for serving customers and over the long-run continue to improve our business model overall. Simeon, I'd just add that you're right on the numbers on the incremental margins. U.S. eCommerce incremental margins in particular were about 12% in the quarter. So we're really pleased with that. What we're seeing across the entirety of our formats is the improvements that come from better speed. Speed just continues to be something that we see our customers are valuing. As I noted in my prepared remarks, this was a bit of a milestone quarter insofar as 60% of U.S. households we can now serve within 30 minutes and the importance of speed. The reason to highlight that is fast fuels frequency. When we see that we are able to deliver to customers in the timeframes that they expect, we see a much greater engagement with our customers. And why that's important to investors is with that increased engagement it improves the utility of our membership programs. And as we noted in the prepared comments, 17.5% growth in our membership programs are really strong for the quarter. And so when you take categories like membership categories like advertising, those two combined comprise roughly a third of our earnings today. That's very different from Walmart of 10 years ago. And with that more sort of subscription based recurring revenue stream that we have, it actually insulates us from some of the whims in the economy and things like higher fuel prices. So we think that we're positioned really well. We like where we are right now as we're going into the second quarter, of the year. And again the incremental margins in our business are strong.

OPERATOR

Our next question is from the line of Greg Melick from Evercore ISI. Please proceed with your question.

Greg Melick (Equity Analyst)

Hi, thanks. I'd love to dive deeper into the traffic acceleration Both at Walmart US and at Sam's Club Club. I guess the up 3% at Walmart U.S. and 6% at Sam's Club. What can you do going forward to continue that momentum because it is such an inflection upwards and maybe linked to it? How are you thinking about any potential tariff rebates as a way to maybe keep up that momentum versus potentially offset rising energy costs?

John Furner (Chief Executive Officer)

Yeah, morning Greg. Traffic was a strong result in both the businesses as you mentioned and I've just reiterated. Starts with merchandising, starts with everyday low prices. We had a really strong quarter in general merchandise. I'm really proud of the work that the fashion team has done in Walmart U.S.. Another category that was a standout in the quarter was beauty. There have been a number of investments in the experience both online and in stores that are making a difference. And then the third thing is the improvements. You heard about the improvements with Sparky. We can talk about those a bit throughout the call, but in E commerce in general, being able to deliver Walmart prices at an everyday low price value with over 7,000 rollbacks in as little as 30 minutes in so many markets is really helpful in terms of the way our customers are telling us they want to live their lives. So I'm excited about E Commerce. That was our ninth quarter in the US of growth over 20% and the team continues to innovate and help make the experience go faster for customers.

John David Rainey (Chief Financial Officer)

Greg on tariffs, we are availing ourselves of the process to get refunds. We would definitely bias and try to prioritize price investment with that. Given what we've seen, both in terms of the pressure on consumers from fuel prices, but importantly as well as the retention and the share gains that we've had, we think the single best return that we can have on a dollar capital right now is to invest in the customer and invest in price. So that's, you know, we talked about the number of rollbacks that we have right now. We'll continue to lean in and try to be there for our members and customers in this environment.

OPERATOR

The next question is from the line of Kate McShane from Goldman Sachs. Please proceed with your question.

Kate McShane (Equity Analyst)

Hi, Good morning. Thanks for taking our question. With the launch of some of the alternative revenue platforms into Canada and Mexico, when can we expect to see a contribution to the enterprise margins as a result?

John Furner (Chief Executive Officer)

First, we're excited about platforms. We have built a number of capabilities in a variety of markets, not just the U.S., but a large number of these platforms have been put together in the U.S. and we're excited about the ability for those market, those platforms to be able to transfer into markets around North America and at the right time in other markets. We have a saying we've been talking about a lot in the company. You build once and you scale globally. And we have a long history of our very best ideas coming from our associates. And when those ideas work, we transfer them quickly. We have a lot of momentum in commerce solutions, which includes our advertising business membership and our data ventures businesses. And we think that those are set up well to be able to transfer around. So I'll let Chris add on to that. For both the markets you asked about,

Chris Nicholas

I think it's really fair to say that we're really excited.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.