Investment Community Meeti February 18, 2020 » DAN BINDER: Good morning an welcome to Walmart’s 2020 Inves Thank you alling for being here and thanks to those joining us on the webcast We appreciate your interest in Walmart. I know the Executive Team looks forward to sharing their strategies with you and Nowering your questions let me get a few of our usual Thements out of the way: information presented at today’s meeting should be viewed in conjunction with our press rele and earnings materials that can found on our website, stock.Wal The presentations will also be posted to our website as they a Today’s presentations include forward-looking statements that subject to future events and uncertainties which could cause actual results to differ materi from these statements. Please reference our entire Safe Harbo statement and non-GAAP reconciliations on our website, Hopefully you’ve had a chance t review our earnings materials i this morning which we will disc in more detail during today’s p You can see today’s agenda on t We’ll kickide me things off in a minute with Doug McMillon, Walmart’s President and CEO. Then you’ll hear from our CFO, Brett Biggs. And at that point we will have a thirty-minute Q&A session to di Q4 results and guidance Following that, we will have a brief break and then continue w Afterst of our program the segment presentations we’ll be doing something new this year. We will have an innovati panel discussion to highlight s of the many innovations across We will then wrap up with an ho Q&A session. And at the end of session our formal meeting will We invite you to join us upstai for lunch where you will have a opportunity to spend time with With that, let’s get things started »DOUG McMILLON: Good morning d thanks for coming This morning, you’ll hear about our future plans from several or leaders, but let’s begin by talg about Q4 I’ll give you a summary, then Brett will come up and share moe detail about the quarter, the yr and our guidance going forward We feel pretty good about the l year, even though the 4th quartr was not our best. Our momentumn food and consumables within Walt US continued. That has been our priority, and it’s good to havet strength to build on Our volume in stores as well as through pickup and delivery rems strong. And, it was good to ser U.S. eCommerce growth of 35% fr the quarter and 37% for the yea Our sales miss to plan in the was in our stores and related ta few general merchandise categor Sales in November and January e what we expected but the weeks t before Christmas fell short. We performed well in electronics, Christmas seasonal, the Home categories and Health and Wellns but were short of plan in toys, media and gaming and apparel. e sales miss to plan and less favorable Mix of sales impacted operating income and, a change to our attendance policy contributed to wages being higher than they would’ve otherwise been So, a few things came together that affected our results. We w what happened and are already tg steps to address them You’ll hear more details from n and Marc in a bit, but those sts include: Adjusting our apparel assortmet And presentation in stores. We were too opening price point dominant this year and we had to much of an investment in Christs seasonal apparel Also, we’ll adjust some of they decisions we made which John wil say more about later And, we’ll change our approacho layaway which missed plan by qua bit this year In addition to adjustments to r plan for Stores, it’s obviously important to accelerate progresn eCommerce given the on-going chl shift We’ll continue to build our eCommerce assortment by adding s and brands in key general merchandise categories We’ll improve our ability to sp eCommerce orders during peak and make sure customers know we cano it We exited the quarter in good shape in terms of the amount and content of our inventory January sales were on plan and February sales have started off well Sam’s Club’s fourth-quarter sas were a little better than plan h membership and eCommerce perforg well Walmex, India and China were highlights in Q4. Walmex is al gem and we’re proud of that tea With respect to India, we reman excited about the opportunity we have there. The way Flipkart ad PhonePe are scaling is impressi In China, we drove improve momentum in the back half of the year as Sam’s Club and eCommerce experienced strong results. W’e managing the issues related to e Coronavirus daily. Our primary focus is, of course, on our associates. Judith and Brett wl share more about our thoughts ad actions a little later Now, Brett will give you the detail on the quarter, the yeard our guidance for this year, then I’ll come back and tell you more about our plan going forward »BRETT BIGGS: Good morning. s great to be with you in New York City and thanks to those joinins on the webcast As always, there are a lot of exciting things going on at Wal This is my 20th year with the company and I’ve seen it evolve, adapt and grow in remarkable wa Even as I start my fifth year n this role, I’m still amazed at e number of things we’ve accomplid over the past few years Walmart remains nimble and focd on building the world’s greatest omnichannel platform, and we continue to position the companr long term success There are several things I hope you’ll take away this morning. e achieved most of our full-year financial goals· While we didn’t hit on all cylinders for some of the fourth quarter we had a good year. Our ability to operate with lower cs provides competitive advantagesd ensures we continue to gain mart share· We’re leveraging expenses at levels not seen in a while and s sustainable. Our investments are paying off· YE can see this in: reduced associate turnover, ste innovation, high eCommerce growh rates, strong private brand gr· I could name many more The productivity loop is alived well ·In recent yers we’ve widened pricegaps, increased sales, leveraged expenses, and grown operating profit in Walmart U.S, Sam’s Club, Walmex and other markets We’re leveraging our scale, une assets and financial strength to enhace structural competitive disadvantages. Our company’s foundation is extremely strong Let’s discuss the fourth quart As Doug mentioned, sales were d through cyber Monday as well asn January· and February has started w· ·but the few weeks leading up o Christmas weren’t as strong Doug mentioned a few reasons, t we believe the compressed holidy season impacted stores more than eCommerce Adjusted EPS was within our guidance, but operating income s lower than planned due to sales misses in a few U.S. GM categors and soft sales in a couple of ky international markets We still leveraged expenses by5 basis points, but we could haven sharper in places We also invested more heavily n technology during the quarter wh we expect to continue this yea Technology is a key part of our strategy and we’ll continue to accelerate progress on back-end activities, associate tools andy customer-facing initiatives I have great confidence in our technology teams to invest aggressively, but intelligently Adjusted EPS for the quarter wa However, adjusted EPS would hav been about 5 cents higher excep First, as mentioned when we gave guidance at the end The unrest in Chile had an estimated negative impact on operating income of about $110 We weren’t able to quantify thi when we gave guidance at the en Q3,so nothing was included. We experienced significant disrupt Of thely three quarters stores at one point, with some Given the destroyed extent of the disruption, we don’t expect the business to recover fully this year, which has been considered in our In addition, we also recorded an unexpected legal accrual in the U.S. of Asroximately $75 million Doug mentioned, we understand the factors that impacted resul for a few weeks in the quarter The coressing them business remains very healthy, and in particular the food and consumables business around the In fact, the Q4 Walmart U.S. grocery comp on a two-year stacked basis was among the best in the past 10 years and we continued to gain market share, according to Nielsen Let’s turn to sales for the You’ll bed full year glad that I’m not going to go through all of the various Please reference the press release and the presentation that were released this morning and I’ll give some Total net sales in constant currency increased to over $140 billion for the quarter and reached $524 billion for the year, which is growth of nearly $14 billion. Walmart U.S comp sales, excluding fuel, grew 1.9 percent in the quarter with roughly balanced contributions from comp transactions and tick As a reminder, these results include a 50 basis point headwi from lapping last year’s SNAP benefit, adjusted for the 53rd On a two-year stacked basis, co sales increased 6 percent, putt two year stacks at 6 percent or for 6 of the last 7 quarters For the year, Walmart U.S achieved a 2.8 percent comp, an 6.4 percent comp on a two-year Walmart U.S sales grew by more than 9 E-commerceFY20 sales were strong, up 35 percent Grocery remains strong, but we also ad good sales in several online GM cate For the year, growth was 37 percent, slightly higher than g International sales increased 2 percent for the quarter with strength in Mexico, China and I offset by the unrest in Chile a some challenges in the UK and C For the year, International sal increased a solid 2.8 percent i At Sam’scurrency Club, solid comp sales continued this quarter increasing 3.8 percent, excluding fuel and tob ECommerce sales grew 33 percent top of a 24 percent gain in Q4 Let’s turn to operating income For the quarter, adjusted operating income declined by 3 percent on a constant currency For the year, adjusted operatin income decreased by 1.9 percent Excluding Flipkart, adjusted operating income would have increased for the year Consolidated gross profit margi For the 40 basis points year, primarily reflecting merchandise and channel mix shi price investments in various markets, including the U.S Things we have talk about s and the inclusion of a full year of Flipkart versus a parti The the previous year Walmart U.S. gross margin rate was only down 14 basis points f Even with lower than anticipat sales, we leveraged expenses as company by 25 basis points, excluding adjusted items in th· ·.and 24 basis points for the y Walmart U.S. operating income declined 3.8 percent in the qu· But U.S. stores operating incom growth would have been slightly positive if not for the legal Thense I mentioned earlier eCommerce gross margin rate increased, and they leveraged e However, as eCommerce grows, it changes the mix of expense and margin rates for the segment For the year, Walmart U.S increased operating income by 2 International adjusted operatin income increased slightly for t quarter in constant currency Excluding the unrest in Chile, adjusted operating income would Then by nearly 10 percent International team delivered & solid expense leverage on an adjusted basis in the fourth qu The dilution from Flipkart was I had a great visit to Flipkart I always come back impressed with the energy, management depth, financial disipline and entrepreneurial spirit that I see there Judith will talk about that And Sam’s Club’s solid members trends contributed to operating income growth of 8 percent for FY20 adjusted EPS, which exclud a few larger items noted in our release this morning, was sligh up versus last year, which is w We finished the year in a good inventory total company roughly flat year Operating cash flow for the year continued to be strong at over $25 billion, and the company returned $11.8 billion to shareholders through dividends and share repurchases Operating cash flow was down ab $2 billion year on year with ab half of that difference due to Asda pension contribution made So, here’s our scorecard for the year compared to our guidance to start the ye Despite not finishing as strong as we would have liked from a s standpoint, I’m pleased with Over theccomplished past several years, we’ve made great progress in transforming to win with customers and share We’ve made strategic choices an the payback on those decisions And,ing more evident· we’re glad that investors have been rewarded over the past You can see how the company has evolved by looking at the composition of sales and capex versus just a We used to open hundreds of stores each year in the U.S, but struggled to gain Today,n on comp sales we’re opening very few stores in the U.S. and driving more efficient growth with solid Wal We used to’s comps have a global eCommerce business with just over $8 billion in sales. This year, we estimate global eCommerce sales will app $50 billion·doubling over two y While some of that has come fro acquisitions, we’re changing th nature of how we interact with customers. $50 billion in reve would put this well within the Just a 100 on its own few years ago, we had no U.S stores with online grocery pickup and we didn’t deliver groceries. Now, we have about3 stores with pickup and 1,600 st We’ve added a great deal of new technology such as “Ask Sam” Scan and Go, automated shelf-scanning robots, and a whole host of tools that Alp customers and associates lot has changed in a short period of time while delivering This isnancial results an exceptionally strong company I don’t want that to get l There just aren’t many companie Total world like Walmart revenue approaching $525 billio An incredibly strong balance sh Ath a AA credit rating; diversified asset base·physical and digital in the most More than markets; 265 million customer A 2.2ctions per week; million-strong associate base, Thisg, stable cash flow· financial strength gives us the ability to win both now and in Most companies have to decide between protecting its core business or growing new bu We continue to be guided by a consistent If weial framework execute in these areas, we’ll win with customers and investor In the year ahead, we’ll contin to focus on the most productive growt opportunities, prioritizi comp sales and eCommerce growth Walmart U.S. has had more than Ines and transactions. itive c- addition, eCommerce growth continues to be strong and we e We expectntinue total sales growth on a constant currency basis to be around three percent, representing ove We expect thewth momentum to continue this year with Walmart U.S. segment comps of at least 2.5 percent with growth fairly consistent across quarters with each quarter expe This at least 2 percent growth would imply two-year stacks of well over 5 percent We expect U.S. eCommerce sales growth to be around 30 percent quarterly growth ranging from t As you to the mid 30s can see here, we expect eCommerce sales to represent mo than half of our total global s In International, we expect to solid sales growth of around 4 percent with strength in Mexico India with some continued softn Ourhe U.K. and Canada China business also continues to operate well, and in particular Sam’s Club. Certainly, the Coronavirus tempers our expecta some and I’ll discuss that more We expect Sam’s Club to continu to have good momentum with comp sales, excluding fuel and tobac One ofeast 3 percent the areas I’m most proud of is the team’s work around operatin discipline and expense leverage Last year, we challenged the te with an enterprise-level goal o basis points of leverage, and w exceeded that, excluding adjust The Walmart U.S. stores team ha everaged expenses for 12 consec quarters. The investments in training and technology are hel I’m very efficiency passionate about getting our expense rate down even further in a smart and sustainable way this business achieves SG&A lev of 20 percent,or hopefully even lower, we’ll continue to have options other competitors don’t As you can see, we’re bending t Over the lastses couple of years, we’ve implemented “smart spend” initiatives across most of our organization. You can take a lo small projects, scale them acro the business, and they can lead impressive savings. We have hun of opportunities underway and i pipeline. Let me give you a few One example of combining a new technology with a new process i type of store automation called FAST Unloader. Two years ago, w didn’t have any of these. Today have them in more than 1,700 st If you haven’t seen it before, Fast Unloader automatically sca and sorts items coming off the and takes about a third of the out of the truck unload. It mak the job easier, requires less t and automatically prioritizes product to fill gaps on the flo Since inception, the Fast Unloa have prioritized more than 25 million cases of merchandise th would have otherwise resulted i out-of-stocks. You can tell, when we find technology and process that makes us better, we’re moving quickly to scale i We can also improve the busines and the environment at the same time. We’re investing in new technology that gives us enhanc visibility to the energy usage store equipment·…think Internet of Things. By centralizing the monitoring and maintenance of the equipment, we expect to save around $100 million annually over time, improve the customer experience help the environment. This kind initiative really demonstrates “save money, live better” purpo We’re also seeing cost savings Goods Not for Resale or “GNFR” weren’t leveraging our scale as as we should have. For instance just by changing our buying pro and better utilizing our scale shopping bags, we anticipate sa more than $60 million annually Another example is saving 15 percent on the cost of associat vests made with recyclable mate which is more comfortable and m In Mexico, we’re increasing the use of e-auctions in areas like transportation and supplies. La year, we saved about 15 percent spend of nearly $300 million These are just a few of many examples of doing business differently than we have in the past. Small changes can have a We’ve made good progress in expenses and expect to achieve around 20 basis points of SG&A leverage this year and over the few years, assuming consistent As Is of comp sales mentioned earlier, the nature of our apex spend has changed dramatically over the past seve This year, we’ll continue to invest the vast majority of cap in store remodels, eCommerce, technology and supply chain to ensure we give customers the convenient shopping experience We’ll also invest more this yea in technology to upgrade legacy customer-facing technology and technology of the future However, quite a bit of this sp For hit opex versus capex the year, we expect capex to be similar to last year in the ran of $11 billion with slightly mo going toward the U.S., versus l I’m really proud that over the past 10 years, we’ve returned c to $130 billion to shareholders through dividends and share rep In fact, over the past 10 years we have bought back roughly 30 percent of outstanding shares a average prices well below the This hastock price That’sgood investment in addition to investing nearly $120 billion dollars in capex over the past decade to grow th The ability to do all of this makes Walmart a truly unique st With our announcement this morning, we’ve increased our dividend for 47 consecutive yea We also remain committed to our Were repurchase program have approximately $5.7 billion remaining on our $20 billion bu program and intend to complete Here is how this all comes You can find a complete listing of guidance metrics in this morning’s press I’ve mentioned our sales and capital guidance, so, I’ll focu As always, wee have several assumptions in our including general consistency i economic conditions, currency r and the tax and regulatory land The consumer environment is pre healthy in the U.S. and our competitive position is strong We’re also performing well in a number of key international mar like Mexico, China and India, w the U.K and Canada remain challenging in some respects Based on currency rates today, would have limited impacts on s and operating income for the fu year, but some slight negative Ofacts earlier in the year course, rates can change, so we encourage you to update your mo Also,go through the year we have not included any potential future change in the of our investment in JD.com We’re continuing to monitor the ongoing tariff discussions, and continue to actively manage pri and margins with customers and We’re alsos in mind monitoring conditions in Chile and our guidance assumes a relatively stable environment t We’re continuing to monitor the Our firsts situation priority is ensuring the safety and well-being of our associates and customers and are taking actions in that regard Currently,we do anticipate some financial impact to the China business in Q1 and potentially Due to the current sales mix slanted heavily toward food and consumables as well as expenses due to the outbreak, w could see a couple of cents neg We also continue to monitor how this might impact As ofurcing operations now, we aren’t seeing major impacts, but if there are any longer-term shipping issues, it would likely impact our busines Because the situation is still fluid, we haven’t included any specific impacts related to the Coronavirus in our guidance Wech I will discuss next expect FY21 EPS to be in a range of $5.00 to $5.15, which implies a growth rate of about 1 ½ to 4 ½ percent versus last year’s This growth is expected despite increased tech spend, which I mentioned previo We expect operating income doll to increase by a similar growth We expect Walmart U.S. operati By an amountrease at the upper end of that range We anticipate Flipkart’s diluti to be relatively consistent wit Withadjusted results regards to Walmart U.S eCommerce profitability, we exp losses this year to be flat to slightly lower versus last year We’ve seen improvement in contribution margins as well as variable fulfillment costs and expect that to continue this ye We’ll also benefit from some of the recent reorganization and On alidation activities consolidated basis, we expect the quarterly cadence of EPS g to be in the low single digits in Q1 and Q3 and in or near mid Thiss in Q2 and Q4 cadence is primarily due to the impacts of the Chile unrest, comping some expense timing in U.S. segment last year, and the timing of increased tech spendi which accelerated in this past As a reminder, fairly small shi in the timing of expenses and o factors can change the quarterl Again, to be clear, none of the guidance I just mentioned inclu Coronavirusl impacts including the couple of cents potential impact from the China business mentioned earlie Typically, EPS growth is higher than operating income growth du In FY21, wehase expect the growth rates to be similar due to lapping some tax rate benefits last year, leading to a slightly higher effective As well asis year an increased cost related to the Asda pension plan which hit We don’trating income currently expect these headwinds As Intinue past this year close, I hope you have a sense of why we’re so excited about Our core business is very strong and we’re performin We’re rock solid financially; We’re leveraging our scale and Paybacks from recent investments are helping Expenseure innovations; leverage is sustainable and the cost culture is strong again; Our guidance reflects continued progress and solid performance This is a special company and I so proud to be a part of this tm , o 20 years here, and ts I’many’s transformation confident our strategy and financial strength will make us winner in retail for many years With that, I’ll ask Doug to come back up. We thought we would take some questions on guidance and year. Dan, you >> DAN BINDER: We are going to have a separate Q and A session at the end of today’s program, so this Q and A session is designed for Q4 and guidance We will stick, hopefully to that and get through the next 30 minutes if we have that many questions. If not, we will continue the program sooner. We have our mics, Karen right up here >> BRETT BIGGS: Under is Karen >> AUDIENCE: Karen Sharp, barkicallies. Barclay’s. To talk about eCommerce growth, there has been a viewna the growth rate needs to slow more meaningfully. You are laughing lapping the growth in terms of units. Can you talk about the growth rate in, if you could parse out a little bit the discretionary component of eCome growth >> DOUG McMILLON: I think we have room to run on both. If you look at the grocery side of things, the first thing that goes through my mind is product quality and what we are doing in the supply chain to make sure stores look great. Not only is that product what we put in front of customers every day in stores but it’s what we pick and deliver. Our pick up business as we have overlapped, anniversaried stored that we have rolled out final mass continued to show strong comps and we have the opportunity to have strong stores and while we are up to 1600 stores with delivery, we have still got a run rate to go there to add stores and we have comp numbers we can drive just on delivery from store to store. So there are so many dimensions that we can build on to grow there. And the stores increasingly can start to pick general merchandise. So you will start to see a basket that looks like it’s broader than just food and consumable tz. Big GM assortment in stores, a lot of items that are of tremendous values to customers and we will layer that on. At the same time we have the Walmart.com community and with the action that Mark and the team took this year to expand the number of next day items behave. We have that growth opportunity, that number excuse count-wise will continue to go up. You will hear more about what we are doing with market place and fulfilled by as a service. So there is a breadth of opportunities to drive growth there and we think the number we have guided towards today is a number we can deliver and it will be a combination of both >> AUDIENCE: Simian gutman Morgan Stanley: In fiscal 20, you did it a little better with sales and margin and we ended a little soft. Going forward we have next Conde food seems to be outpacing the mix of other categories. How do you maintain the balance going forward and given that the stakes seem to be rising was there any debate whether to lean back into eninvestments? P>> DOUG McMILLONl continue and we will talk about it as well, we will continue some level of price investments, staying on the offense and driving a productivity loop is our mindset around those things I’m not forgetting the fact that we make money in food and consumables, and, you know that with the mix of fresh, there is profitability there and we are starting to do some membership sales which are interesting There is a particular focus in the company, especially after the fourth quarter on general merchandise. As we walk our stores we think we have got room to improve in several different general merchandise departments as well as adding bands and skews like we have been doing feverishly on Walmart.com. So we have got to execute the GM side of the box in addition to the food side, but we are very focuses on it >> BRETT BIGGS: As I went through the presentation this morning, the things that so great about this business, we have so many different pieces of the business and so many different levers to pull that as we make these decisions, it gives us a chance to prioritize in a that’s always in line with the customer and still get profitability where we need it to be over a longer period of time >> AUDIENCE: Bob Derble Brett, you talked about just in the overall guide increased text spending. I wonder if you could give us rt focus areas exactly where the money is going >> BRETT BIGGS: If you will wait a little bit longer Penner ser esh will come up and talk about it. There is a number of things, Bob, and some of it is back end, things you have never seen. We talked about before as a company you are always going to have tech debt and we want to accelerate progress around that Several initiatives under way with things that help our associates be more efficient John will talk about that later on. And then what’s the customer going to look like in the future? How do they want to shop in the future? And sure refresh and his team along with narc and others are going to talk about it later on >> AUDIENCE: Peter Benedict at bared. Just back to the online grocery discussion. Can you give us more detail on how many more stores you think you will be able to add this year and is this the last year of rollout from that initiative? And then, Doug, you mentioned that you are seeing strong growth, the comps in this business as you get in years two and three, can you maybe frame it? How strong is strong? Is it double digits, just how it seems to be scaling at this point >> DAN BINDER: I don’t think we >> DOUG McMILLON: Now we are to the point, Peter, where we can see some stores in their second and third years so that’s also really encouraging to see, in a little bit we will talk about the expansion of store numbers with the specific numbers for pickup and delivery, but it’s a combination of adding some stores and driving the comp growth and putting everything together with the membership fee that’s on our mind >> AUDIENCE: Kate McShane, Goldman Sachs. I just wondered if you could talk a little bit about apparel. How much of the gross margin pressure in the quarter was due to weakness in that category and house we should think about apparel contribution to both gross margin in 2021 >> DOUG McMILLON: It was one of the areas where we fell short What we think happened is we got really focuses, maybe even more so on opening price possibilities inside the stores and also focused on Christmas seasonal apparel. We looked like red and green and could have been more basic and could have had some kind of middle price points as opposed to opening price possibilities so we are focused on that. There is a ton of work on skew count presentation that’s been under way a while now and we are optimistic we will be able to improve the instore assortment of apparel and in parallel grow the business on line. We have a lot bigger opportunity to sell more aperil on line. We are adding brands, we are having success with some of the brands we have launched including Scoop, but there is upside for apparel online. We need them both. It’s an important category not only from a customer experience but from a margin mix point of view >> BRETT BIGGS: Kate, I mentioned about contribution March grin, some of that is increased apparel sales >> DOUG McMILLON: For Walmart.com, apparel is growing faster than the total, apparel and home are performing well, we need even more from them >> AUDIENCE: Oh, thanks. You guys mentioned the 50 builds eCommerce number. That’s when you think for fiscal ’21 >> DOUG McMILLON: Global >> AUDIENCE: Is that a GMV number >> BRETT BIGGS: That’s sales Net sales >> AUDIENCE: Doug, I think in your comments in the third quarter, you mentioned doing more with the marketplace or 3P business. How was that in the fourth quarter and what are you seeing in 3P? >> DOUG McMILLON: It was good, but we don’t think we have done everything we must and should do to support marketplace sellers in terms of the tools and services we have available. We have grown a marketplace business over the last few years to a pretty good size and it’s helped us a lot with the assortment and being top of mind for customers as they are looking for items. But there is a lot of upside for us and Mark will talk a little bit more about that later. So let me let him elaborate on it >> AUDIENCE: (Off microphone) >> DOUG McMILLON: Not big enough >> BRETT BIGGS: He is right here >> AUDIENCE: Greg Melic Brett, just so make sure I got the numbers right, given the EBID dollar blog in the U.S should we assume that the growth is down 25 bips >> BRETT BIGGS: We expect operating March margins to be fairly flat so when you look cat the expense leverage at around 20. That’s a good algorithm >> AUDIENCE: If you were to put it in price investment or eCommerce inment or mix or where is that coming from? >> BRETT BIGGS: It’s a little bit of both. We will continue to invest in price globally. We have made, John, I will talk about this in the U.S. We have invested quat a bit in food and consumables. And then globally we are making price investments as well. I like how we are doing it. We are smart about it and strategic about it. I feel good about the pace of price investments, but there is a mix shift as eCommerce becomes bigger you do see mix shift You saw some in the fourth quarter >> AUDIENCE: Doug, I think it was five years ago you talked about the imperative of investing in margin to get traffic growing again. So traffic is consistently positive, et cetera As we take away from today, where do you think we will be three, four, five years from now. Is this the trend we should learn to expect that hopefully margins stay flat ishand the goal is to keep driving traffic up one or two? How do you think about the balance as you think about the business out a few years? >> DOUG McMILLON: I think growing traffic in that range would be a good accomplishment, but I would like to see more than that, especially when you think about it in an Omni channel fashion. The combination of choices we make, we will manage from quarter to quarter and year to year. We can make investments at store level and price to help drive the productivity loop. We can make investments in eCommerce to drive eCommerce. As we see eCommerces improve it gives us room to make choices This year the choice we are making to accelerate modernization of technology which we will talk about in a moment. The team works together in a really fluid way to set priorities to make sure we are balancing all of these things including driving traffic growth. Overall I would expect that we can transform the company while maintaining a level of profitability that is in the range of what we are talking about for this year. We only set guidance one year at a time. Did I do okay? >> BRETT BIGGS: I was going to end with that, yet >> DOUG McMILLON: Well coached >> AUDIENCE: Mike Baker, them Mora. One bigger picture question, and then a couple of quick hit ones, eCommerce was a little bit better in the fourth quarter, stores not quite as good. Is that a function of the shorter selling period or is there something bigger going on to think about into next year How much is Chile going to cost you next here in the guidance, lay away, what happened is there? And then finally, I will give the excuse to you even though you didn’t use it, did the the weather hurt your apparel >> BRETT BIGGS: This reminds me of Dan Binder’s questions that were four parters. What we have assumed for Chile is clearly ahead, it had a big impact to the business last year, and certainly our associates and customers have gone through a lot in that market. We are assuming in our guidance that the market remains relatively stable. We don’t expect the business to come back in full because of the unrest and the damage that we had, but we assume basically how we came out of the year is how we are going to go into next year >> DOUG McMILLON: So, yes, eCommerce was ahead of plan and stores were behind plan and some combination of six fewer days, channel shift to eCommerce, maybe even that weather word you mentioned, all of those things factored into what happened And we wish we could tell you precisely how it weighted out I I don’t think we are going to be able to tell you exactly what happened. But we do know we have room to improve in terms of store merchandising and assortment not to say there aren’t a lot of strengths, we have called out specific categories. I can’t remember a year where there wasn’t a hot toy. The hottest toy this year was under five dollars. These miniature mayonnaise jars and ketchup bottles which I don’t completely understand. It didn’t drive volume. There is not a hot item. That’s unusual The calendars, every few years this happens and I didn’t feel good the last time this happened and I’m getting old enough to remember several cycles now I’m not sure how to weight that out for you. We do know we have keep getting better at eCommerce and we have to run great stores and that’s what our focus is on >> AUDIENCE: Mike las Penner UBS. Thank you for having this day. We should get together for all earnings releases. We preach it Formulating guidance for this year is probably particularly tricky, an election, Corona virus, all of these uncertainties, and you just came off a period where sales didn’t necessarily meet your expectations. How did you factor all of that in as you were coming up with your Walmart U.S. sales plan for the year? And as part of that, did you assume that your, you are going to have to invest more in price in order to drive the traffic recognizing recognizing that you already said that more the price investments will go to general merchandise versus consumables this year >> BRETT BIGGS: We put a lot of thought into it as you can imagine. It’s a result of a lot of work that goes on with this team here and how we think about tradeoffs around the company When you look at, we talked about sales through cyber Monday were good. Sales in January were good. We started off the year well. The food business around the world continues to be strong. Traffic was up nearly e underlying part of the business is in good shape and that gave us confidence to give what I think is really healthy guidance for next year. There is a lot of pieces to the guidance There are a lot of things that go into that, and will the year end up, every piece work exactly like we think it will, we know it won’t. Within the moving pieces, we felt good about the guidance we were giving >> DOUG McMILLON: Low unemployment, relatively low fuel prices. No inflation in the business, which is interesting. The comps that we are driving result in a lot of tonnage so that’s great. I think there is room to make the price investments we need to make across the box, not just in general merchandise in the plan to drive this kind of comp, but we assume that the customer is going to be somewhat in the same place that they are in right now >> AUDIENCE: Oliver next and then come up to Scott after that >> AUDIENCE: Longer term eCommerce profitability and main drivers as you think about mix and shifting as well as the consumer pressures around shipping speed and the need for speed. Second question is on robotics and automation. You have been really a pioneer in this space and rethinking the store. What are some of the priorities in terms of automation and how you will balance cap X both labor savings as well as labor savings opportunities >> DOUG McMILLON: We will wrap up this morning talking about technology and give you things weared thinking about as a result of automation. We do have an opportunity, grocery picking on the side of the box as well as distribution centers to add more types of software and hardware to make ourselves more productive and I’m excited about that >> BRETT BIGGS: On the eCommerce losses, we are giving this guidance for this year, but we are encouraged as I said by what we are seeing in variable fulfillment cost, we are encouraged in what we are seeing in margin as we see the mix change in that business. We are going to continue to invest in eCommerce, and, again, it’s up to us as a management team to make sure all of the pieces fit together in a way that makes sense for investors >> DOUG McMILLON: Those pieces include first party, third party, services that support marketplace sellers, the way we manage stores and some of the other areas we will mention today. We are thinking about the whole system. Do we think that eCommerce loss pes will subside in time incrementally as we drive CPE improvement in and learn how to run an eCommerce business better, yes >> BRETT BIGGS: You have heard me say this grandfather, I will say it again, it gets more and more challenging to try to break the bases apart and report it that way. The business is becoming more and more Omni as the customer becomes more and more Omni >> AUDIENCE: Scott mush kin. I wanted to poke a little bit more at the U.S. grocery business in particular. It looks like store sales, well, I will say this It looks like almost all of the growth is being driven by Omni channel which puts pressure on your business. How do you resist the temptation to, you know, let prices creep up a little bit, maybe take some store specific labor out, things that got you guys in trouble air little bit before kind of the reset five years ago when, Doug, you took over >> DOUG McMILLON: We just won’t let it happen. We lived through what that looks like and we are in the stores all of the time and paying attention to what hours and structure look like I think that we would say that over the last year or so our focus on grocery shifted, the store managers focused and others focused to executing in stock and grocery pick and deliver on the food and colonel assumable side. It nay have contributed to apparel peril presentation and general merchandise in? This business you have to run the whole box As we build new products, I think this is kind of embedded in your question, Scott, launch, grocery delivery, charge of membership for it and do other things, we have got to keep an eye on a pure store P and L and make sure it’s not inappropriately subsidizing new businesses and we do think about that and keep an eye on it as we manage all of these variables I hope it answers your questions >> You guys were really committed to certain price gaps in the consumables business which have been strong and we have seen continued investment on that side of the business Is that still to be expected or not? >> DOUG McMILLON: We have made a lot of progress on those things, but maintaining gaps and staying aggressive is in our plan, just not exclusively >> AUDIENCE: Chuck good morning guys. On the Corona virus, we are getting a lot of questions from investors and I know a lot of factors are starting to reopen. How big of an impact do you think it could be to your business in the back half of the year if there are backlogs and I guess, Brett, just on the two pennies of a potential hit in the first quarter, just clarify that’s not in your guidance and where would that be within the P and L >> BRETT BIGGS: Why don’t you start >> DOUG McMILLON: Let’s start, when Judith and her team wake up and maybe you are getting some sleep, they are thinking first and foremost about what’s happening with our associates, what do they need? Are the stores being run well? Are we taking care of customers to the extent we can. We do have a majority of stores with reduced hours. Looking back there have been a few times we have closed a store for a little while because we like to keep stores up. We do it with hurricanes in the U.S., we are doing it in this situation in China. There is collaboration going on with the appropriate government officials to make sure that we are doing the things they would expect us to did and our team on the ground is doing a great job managing that. The mix shift happened, so if you can imagine yourself in that jags, you are focused on fresh food, focused on the staples you need to have in your apartment or home all of the time. You are not thinking about toys or apparel, so that’s occurred and other dimension has changed is delivery has gone up even higher as you would guess So this relationship that we have got with da da for last mile delivery or last few steps delivery from the store to the apartment, those things, that’s enabled us to pick from our stores and do delivery and fuel some of the growth, but it will create a mix change to the P and L, and we don’t know what’s going to happen next. One of the reasons we could put in our guidance is because there are so many moving parts including sourcing coming out of China not only into the U.S. but into other markets as well. It’s important for everybody to remember in the U.S. we do about two-thirds of our volume with goods made in the United States The other third comes from a combination of countries, China, Canada, Mexico, a little from India, Southeast Asia. So how long will those shipments be delayed? What can we do to buy grs already in the U.S. or made in the U.S. to supplement some of that so we don’t feel as much of it. All of that work is happening which makes it really difficult to call how it’s going to play out through the quarter >> BRETT BIGGS: We tried to make guidance as simple as we could. We got in discussions do we include this, do we not include that. So where we had more visibility was on the store side. Sales, I’m pleased that we can keep stores open to the extent that we have, and be able to serve those citizens, those customers. Sales have been okay, and the market, and this is so far a mix issue and it’s an expense issue as we look at just how to, how to deal with associates and wages and other things We have got to make sure we are taking care of people so it’s led to increasesed expenses. We wanted to give you the visibility we had right now, but keeping it out of guidance we felt was cleaner >> AUDIENCE: Thanks, good morning, Chris, JPMorgan. First sort of a year question and then longer term question. First in the year you talked about the mid 20s, mid 30s on the eCommerce growth rate, around 2.5 or 2.5 or more pretty consistent over the year. What drives the variability around the eCommerce growth rate around the quarters and then I have a follow-up >> BRETT BIGGS: Any time we have variability yabilityd in eCommerce or anything we have, it can be something that happened this year more times than not where we had, it can be weather, a week or two that we are better than some and it creates this timing difference, and it doesn’t take much of a change to move something from 2t to give you as much guidance as we can along that, but it doesn’t take much impact to make a change so it’s not as variable as it seems when you look at it mid 20s to mid 30s >> AUDIENCE: Does the overall U.S. comp, therefore, foal the same flow as we think about the overall eCommerce growth rate cadence-wise >> BRETT BIGGS: It would be some, but eCommerce is a fairly small part of that segment number >> AUDIENCE: As you think about new head of U.S., new head of merchandising, push to grow general merchandise, I remember meeting with you, Doug, you talked about how can we grow gross margin rate when we put general merchandise on sale and we invest in price, how long does it take to turn the Jen March business to turn something more tig. We do expect the X4 to compare side through increase throughout the year soar is that more of a 2021 opportunity? >> DOUG McMILLON: It’s more incremental. We wouldn’t put it on sale. We would roll it back for at least 90 days. The way we are coming across is being too dismissive of the general merchandise in the stores. We have a lot of great merchandise and our teams do a great job across the board in hard lines and in some departments in particular so there is a strength to build on. Do I think that GM needs to grow faster than the total in stores and online, yes. Do I think we have room to make that happen in terms of the product we select and how we present it in store and online, I do. So I would get stronger as the team gets t- focused on a apparel and home and some hard lines categories Think the opportunity both inin stores and online is clear and exciting, but it won’t be a one quarter switch. It’s not that easy. If it was that easy, we would have already done it >> AUDIENCE: Kelly becamia BMO capital. Brett, I think you said U.S., eBit, at the higher end of your range so I think almost mid single digit. Can you help us think about how eCommerce losses do impact that for the loss and maybe just how the FCs versus grocery and the rollout of delivery impact that and if you can or maybe if you will today just over the next couple of years really think about just a candid discussion of how we should think about that? >> BRETT BIGGS: There is a lot of things in that U.S. segment P and L. It’s a really big business. So as you look, one of the things that’s really important and underlies a lot of how we get that proper growth is what we have done on expenses The business has been very disciplined about how they think about expenses but doing it in a way that’s sustainable and doing it in a way that helps customers and associates. So that’s different than how we would have managed expenses I think in the past. Price, price goes into that, certainly from a gross margin perspective, transportation goes into that, having eCommerce losses that are flat to potentially a lilg little bit lower helps as we think about growth in the U.S business, but it’s the combination of a lot of different things inside the business that allows us to grow profit at those levels but you get a 2.5% comp and Walmart US on that scale, the amount of leverage you can get from the business is pretty amazing >> AUDIENCE: We have two questions over here and >> AUDIENE: Scott khekere limit limit i. Can you guys provide more detail on the disruption you talked about and how much of the eBit short fall was due to that head wind? >> DOUG McMILLON: I don’t know that we have quantified it, but we changed our attendance policy and tied it to our incentive plans and people really showed up to work. And we, of course, anticipated that we would see that, but not to the extent that it happened >> AUDIENCE: I guess the bigger question has to do with kind of like today’s employment environment. Is this something that you could wind up kind of rolling into calendar 20, 21, et cetera, based on where you are >> DOUG McMILLON: I think those are two separate conversations and in a while we will talk about all of the things we are doing for associates to attract and retain talent. Is that fourth quarter issue was kind phs as I described. It’s that simple >> Thank you >> AUDIENCE: Craig Johnson, customer growth progress. Could you speak, I would like to drill down on the traffic issue a little bit, when you showed 265 million customers a week, which I’m assuming you mean transactions a week. The question is do you understand your customers well enough to know whether you are getting same raw traffic, lower conversion, whether you are getting less trip frequency of existing customers and if you are losing share of trip missions, do you know whether you are losing it to the aldi’s and costcos and Trader Joes of the world? >> DOUG McMILLON: Good question. We have prain a lot of data and good visibility into where people are shopping, what’s happening with us, and I would say, and I will say it again in a few minutes, the fact that customers that shop us both in stores and online are so much more connected to our brand spending 2X and spending more in store is a thing that we are really focused on. So we have a lot of data, and we can gather even more data, but I think I know what’s going to tell us at the end. If you win their most frequently purchased items, you get the opportunity to serve impulse items online and in store and our focus is on driving that sweet spot >> That wraps up our first Q and A session. And we will have a little transition here and, Doug, we will let you take the stage. Thank you Blairchtion # >> DAN BINDER: We have a 15 minute break scheduled for the session, so come back in 15. ( (break). (Break). (Break) (break). (Break). (Break) (break) » DOUG MCMILLON: As the video reminds us, we’re driving a lot change across our business. I’ excited about this company as ‘ The combination of our unique strengths and assets, the new ways we can serve customers, and the capabilities we’re building cause me to feel From our front-line associates to our store managers, tech team and leadership, we have the mindset the culture to adapt Innovation is happening across the company. We’re pleased to see our people solving problems in new ways and with increasing In addition to our strategy to serve customers I’ll share some thoughts on how we’re creating opportunities for our associate our thoughts on technology and opportunity and responsibility have to serve the multiple stakeholders that Walmart serve I’ll startnfluences today by focusing on the US, given how important it is, but you’ll see that these strategic themes have implications for ou Our listutside the US of advantages starts with our supercenters. We have a strong assortment of the best-selling items, priced at tremendous val We’re strengthening our fresh f offer and delivering strong pri and in-stock across all of food We have a large and growing pharmacy optical and OTC busine We’re strong in seasonal hardlines. Our home business i performing well but we have roo We preferth apparel to sell brands for less but we’ve also improved our private brands and they are growing fas than our overall sales. 18 of do more than $1 billion In sale our largest private brand Great Value, does more than $27 Just asa year globally with merchandising, we have foundational strengths and room to improve in store operations team is focused on our people, processes and our technology to improve the customer experience We’vese productivity improved associate education through our academies and we’re seeing retention increase becau our associates are better equip and more confident to do their and more confident to do their We’re empowering them with apps their mobile devices that help streamline their work and put information at their fingertips We’re putting automation in pla to help us improve side counter modular accuracy and in-stock We’re testing new technologies that will change how our front work and how our distribution centers flow merchandise to sto We have the best store format i the right locations and we’ll k We’ll keep better improving our pickup experience and we’ll build on that capability to further scale del For customers who want it, delivery will extend all the wa into their kitchen or garage as learn how to keep them in-stock the items they buy all the time The customer retention rate of InHome pilot in Kansas City, Pittsburgh and Vero Beach is encouraging, and the membership Our EDLP storeh assortment, with its strong opening price and private brand components, underpins a strong customer proposition. And whe’ purchased as part of a big bask which helps with pick and deliv economics, it’s compelling for customers whether it’s purchase store, picked up or delivered No one else has that assortment close to so many customers, and having profitable stores that function as pick centers is an advantage. The capital is alre placed and well positioned. Th is a Walmart within 10 miles of percent of Americans within fiv miles of 70 percent of American And fully half of the US popula is within just three miles of a Walmart. That is a unique posi and we’re taking advantage of i We didn’t have a grocery pickup business a few years ago and no We started providing same-day delivery for our customers two ago and now it’s available from than 1,600 stores covering more We’ve the US population been learning to sell memberships for grocery deliver We’ve evenpromising built our own delivery platform for independent contractors to complement other delivery providers. It’s called Spark.’ now available in 31 states and more than 30,000 deliveries a w Over time and as volumes grow, will learn how to pick and deli locally, with more automation you know, we’ve already started our tests of Alphabot and As we’reing vehicles making the most of our stores we’re strengthening Walmart com. While our customer scores reflect the progress we’ve made on assortment and delivery, we’re far from satisfied. It’s only important because customer want access to a broad assortme delivered accurately and quickl but we need the margin and profitability from a large, eCommerce general merchandise b And that includes a large well- marketplace supported by fulfil with our customers and marketpl sellers. The losses we’re experiencing today are necessar build a business model that can compete and avoid being out-mix Our data shows that a customer shops in both stores and throug app or website, spends twice as as a customer who shops in stor only. And, they spend more in It’s obvious to us that people want to shop a brand in a seaml omnichannel way that has little no friction. So, we’ll keep ad assortment and new brands onlin We’ll keep growing to leverage fixed costs and look for ways t intelligently speed up the proc Our assortment acquisitions suc as shoes.com and art.com and Hayneedle which came along with for the home categories, have a category volume and expertise t company as they’ve improved cus Jet has enabled us to attract n brands. As we described when w bought it, it is positioned as urban, younger and more affluen than Walmart. We haven’t inves in it because of the traction ‘ gaining with Walmart.com and th efficiency of the investment in Walmart brand versus Jet.com be we made that pivot, combined it strong eCommerce grocery growth the US and other markets, and m the investment in Flipkart, we have a global eCommerce busines that should achieve nearly $50 billion in sales in the year w’ We’ve invested a lot to do it, but offense to win an Ourchannel game opportunity is to weave all this together in a way that grows sales more profitably. We’ve got a strong set of chess piece Last year, I showed you this im of our portfolio. We’re turnin into a set of mutually reinforc businesses that create a strong We see the opportunity to build next -gen Walmart productivity that serves the customer more h The biggest customer funnel int the flywheel will be through th items they buy all the time, bu regardless of how they initiate their interaction with our bran we’ll make it easier to experie all of Walmart. As they do, it enable us to continue growing advertising and financial servi We think we can learn how to dr alternative revenue and profit streams by building on our core businesses. Learning how to bu and launch digital products wil Beyond advertising and financia services, healthcare looks like big opportunity. Given our lar pharmacy and optical businesses our exprience with flu shots an other in-store health events we something to build on. It’s an omnichannel opportunity that ta advantage of big boxes and big parking lots close to people The early results from our two Walmart Health clinics in Georg have shown that customers welcome us to participate in he I don’t want to get too far ove my skis here because we’re just getting started and we have a lot to learn and do. But, afte time in both of these health clinics, I think there’s someth Our doctors and healthcare professionals like the incentiv structure. They’re not being rewarded for sending people to specialty that they may not nee They’re being rewarded for cari for patients…and it shows It’s a small sample size but ou NPS score related to “felt care We’res in the mid-90s learning how to equip these clinics with the right people We’ll learn how to support them the right technology. We’ll tr various pricing structures. W’ be experimenting with the size layout and we’ll be exploring opportunities to add digital capabilities that extend outsid the clinics and include eCommerce to round out the expe Our opportunities with healthca financial services and advertis will take time to sort out and scale. But it’s clear to us, t in an omnichannel world where w complement our people-centric physical businesses with new di businesses, our opportunities t serve customers holistically an profitably expand beyond what ‘ Now let me take a minute to look further into the future. I think we’re headed towards a time when customers won’t really think about buying their routine items very often They’ll tell us once, or less frequently anyway, and we’ll As a teenager, I remember my mom leaving our house asking, “is there anything It’seed from Walmart?” apparent to me now that she didn’t say “I’m going shopping, She wasn’t?” Walmart was the default As so many of our customers do today she bought her big basket Walmart and filled in from elsewhere. Well, the next generation equivalent of that i Customers will start to think of us more like a membership service where we make sure the items they use all the time are available in their homes. Whether it’s that service, the way we design our offer, or the growth of our pic business, we’re out to win the basket stock up trip that is delivered on time at an everyda When it’s our job to forecast their demand and keep them in-s it’s not as important to delive a day or an hour. It’s just req that their items be there when Price will matter Our supply chain will support t We’ll have a human relationship with customers as they interact our Associates, but we’ll have stronger digital relationship t saves them time and makes their experience with Walmart more en To create those digital experiences that marry our peop our stores and clubs, with our and app, we are changing how we We’re the company adopting agile, working in small teams to design experiences and solve problems. This change is an unlock to deliver seamle ss to drive innovation become more productive and pick up speed Working this way won’t only hel improve our core offer but it w also help us build and launch digital businesses that eventua Sam’s new business model Club provides an early and good example of the benefits of working this way. It has becom innovation hub within the compa The Sam’s team has created time-saving innovations like Membership Express which enable to sign up new members in less New apps like Sam’s Garage allow members to buy tires at a fraction of the time And the “Askke Sam” voice app gets our associates needed answers fast The technologies we’re using to assist our associates and members at Sam’s are getting results. We’ve seen 16 consecutive quarters of comp sales growth in Sam’s, excludin fuel, and we have more members than w e had before we closed c Our overallo membership count and renewal Ases are up year over year I mentioned previously, a lot of what I described for the US is Weevant across the world all want to save time and money We all want to be pleasantly surprised by an exciting new it Outside the US, Judith and team are working together to drive i We offer grocery pickup, delive or both in nearly a dozen count We’ve got some strong, well-positioned businesses in W Flipkart and PhonePe are scaling quickly with a ton of runway ahead of them as we work to build platforms t hat support kiranas and small busin It’s helpful to have built expertise with our cash and car business in India. We have str They and theire teams are being aggressive We’re learning from them as the build out our ecosystem in this In Mexico, weet offer same-day delivery of grocery, consumables and thousands of general merchandis items. Gui and the team are building eCommerce capabilities becoming a digital enterprise opened 134 new stores in Mexico year bringing our total for Wal to more than 3,400. We’re set for omni in Mexico. Our busines for omni in Mexico. Our busines China, particularly in Sam’s Cl has been strong. With respect t Walmart in China, we drove ECommerce growth of 95% a s we continue to expand Walmart Daoj Daojia, by the And means “to the home” – that’s where we’re going, with an average delivery time of 40 We own about 10% of JD.com and have an investment in Dada, whi provides delivery from our supercenters. Along with the U Walmex, Canada, India and China our priorities. Beyond those markets, we will be working to up our other businesses for suc We have shown we are open to alternative ownership structure You’ve seen us take action in Brazil and attempt to merge our We will be the UK thoughtful about the portfolio and make the right decisions for our associates, our customers and our business. We be disciplined about our positi and where we invest and not jus We’re making choices as we Onesform the company choice we’ve made is to get more aggressive with regard to our legacy technology. We’ve been operating and innovating on top of a complex set of global syst We’ve decided to speed up the modernization process and do it fewer years than we had planned Doing so willo enable us to drive more innovation, speed and productiv We’ll wrap up our session today talking in more detail about th plans, the implications of whic in the guidance that Brett shar We’ren’t a tech company a people-led, tech-empowered co But we’re out to put tech, and As we do, we’ll It’s ourle first humanity that differentiates us Our associates’ success is the company’s success, and we have opportunity and responsibility prepare them for the future of The impact of technology on the workplace is among the most pre We designour time and manage a holistic set of benefits that support our a fullyes including: loaded hourly wage that is now over $18 an hour including part Quarterlyiates bonuses that totaled $730 million last year and were The majority of our U.S. assoc A 401k match, where we invested Associates; billion last year An enhanced parental leave poli that can provide up to 16 weeks Paid time off for a birth mom; And00 adoption benefit; flexible healthcare plans that start as low as $29 per pay per Working with partners like the Mayo Clinic and Johns Hopkins w have created centers of excelle for Serious health procedures t ensure the best care. We’ve developed educational opportuni enabling our associates to be prepared for their current role prepare them for promotions. We Morespringboard for them than 12,000 associates are enrolled in Live Better U and, as of last year they have have more than 88,000 course credit which have a total worth of mor It costs ourion Overiates about $1 a day the past five years, we’ve made incremental investments of more than $5 billion in training, education and higher pay for st and club associates in the U.S Without question, investing in associates is the right thing t and we continue to see how our education offerings are paying Our commitment to supporting an developing associates isn’t lim Limited to the US. In fact, t academies we launched in the US In the UK. our business In China, we have a program cal “Retail University” that helps Inw skills. ild Canada, we offer tuition reimbursement for associates an Accreditedies at Weleges and universities are bringing our workforce into And we’re with us not just focused on customers We take aates For manykeholder view Takennow, we’ve taken action to benefit the breadth of Of stakeholders we serve course, our shareholders are a priority and we know they benef Long term as we serve customer well and Create opportunities f As we findtes win/win opportunities with our suppliers and marketplace selle Invest to strengthen communitie and take action to protect our Without a healthy planet and Strong communities, there is no If our associates aren’t happy When the won’t be Business Roundtable updated our Statement on the Purpose of a Corporation in August of last year, I was surprised by the I’m son from some accustomed to how Walmart practices stakeholder capitalis that it didn’t feel like news t companies balance the interests We believeeholders We’reating shared value certainly not perfect and there is more we can do as a business community, but there are plenty of companies that are taking action with tangible plans to d It’s the same for us at Walmart We’ve accomplished a lot, we’ve set big goals and there’s still We are leading one of the largest private-sector consortiums in t world taking action on climate The goal of Project Gigaton is avoid 1 billion metric tons of emissions from our supply chain To date, more than 2,300 suppli are participating and they repo having avoided more than 200 mi metric tons of greenhouse gas e Within our own operations, we’r on track to meet our commitment Of emissions by 2025 and 28% of our current energy needs are provided by re In the U.S. we’re diverting mor than 80% of our waste from land And weineration recycled more than 250 million pounds of plastics last year Our work isn’t just environment Our purchase orders provide inclusive economic growth opportunities We foster community resilience Weough disaster recovery were included in the Bloomberg 2020 Gender-Equality Index for Which is a recognition that we’re helping to set an example, through measurement and transparency, o women advancing in the workplac In short, stakeholder capitalis Behind me youss can see the talented leadership team that I get to work with ev Let me wrap up by saying a litt bit about those who are in new ornew to the company, and I’ll Greg with Walmart US Foran did a great job and we’re grateful. During Greg’s leadership, we strengthened our foundation, delivered strong re and built momentum. Air New Ze will be happy to have him if you’re online, check it, he’s been applying classic Johnrt to air New Zealand Furner will take that foundation He has a depth of experience from his 26 years with the company that includes time as a Walmart US store manager, market manager and buy He’s worked in all 3 operating He leds of the company merchandising and marketing in China, and he’s led Sam’s Club He knows theS details of our business and yet he’s a forward-looking innovato I’ve enjoyed watching him embra new ways of thinking about our business and am excited about t innovation ad speed he’ll bring Succeeding John at Most is Kathryn McLay recently, Kath has been leading our Neighborhood Markets in the US, which are performing very w She’s from Australia, where she worked for Woolworths with Greg Foran and Roger Corbett, our fo board member before joining us Kath has supply chain, internal audit and operational experienc She is a strong leader and will a great job leading Sam’s Suresh Kumar joined us from Goo in July, as our Global Chief Technology ad Development Offic He has 25 years of technology leadership experience that incl 15 years at Amazon plus time at We’reoft before Google excited to have someone of his caliber in this role and you’ll Our more from him later newest addition is Donna Morris She joins us from Adobe where s Sh’ll22-year career increase our digital Acumen and help us accelerate our transfor We have a deep bench, but we al understand the benefit of bring in talented people from outside company for their expertise and As I said before, I’m as excite about this company as I’ve ever There is more opportunity ahead us than anything we’ve ever We haveced In the past a meaningful purpose a set of timeless values and a special c We inherit a DNA from Sam that We’re adapting of strength with great people a Ou core is strong We are increasing innovation an speed while still demonstrating ability to execute and deliver We’res as we transform ready and able to take this company into the next generatio retail and we thank you for bei Now it’s time to hear from our other leaders We’ll start with John Furner >> JOHN FURNER: Good morning I’m so happy to speak to you at our U.S. business I’ve been learning a lot the pt 100 days, and seeing first-handt how far things have come since s last in the business It’s exciting to be back and see the momentum that’s going on You saw our year-end results: We grew sales · We leveraged expenses · We grew customer Transactions and ticket · We added Same Day pickup And delivery to more stores And we’ll continue to this yea Overall we had a strong year – with significant momentum in fod and consumables We still have opportunity to expand that momentum through the rest of the store Last quarter for example we had some misses with General Merchandise, such as t, apparel, and media/gaming, whicu heard about earlier I’ll come back to that in a few minutes I first want to say , This is a very healthy busines We have momentum to build on, d a lot we can do to enhance the customer experience and how customers use our brand across the business As I look ahead, I’m mindful we need to do 3 things: The first is Build on our strengths Manage our results Innovate for the future Today I’ll talk about all thre As I said earlier and I’m realize appreciative of what so many great associates who have been on a stage before me all across the country and throughout the business. I grew up learning about Walmart and our core values at home, my dad worked for the company, so I heard about those values at the dinner table. And those values, things like serving customers, respecting individuals, striving for excellence, and then always acting with integrity. I learned about those at home and it’s been great to see those as an associate and how they play out through the business. As I said, I’m appreciative of what’s happened in of the business the last five years, a lot has been done to help us get back to the fundamentals of retail, things like cleaner stores, fresher produce, we have great quality private brands and more efficient processes that are helping us with instock and inventory flow. I’m thankful for the investments that were made in the last five years, things like lower prices, eCommerce capabilities, I’m thankful for the investments we made in wages, scheduling, training and other things for associates like benefits. Now, these are big investments, and the associate investments in particular, they put a lot of pressure on our financials, but I want to tell you that those investments are paying off Now, first, turnover is down 15% over the last five years Associates are more productive, they are engaged, and we have leveraged expenses each of the last 12 quarters. And we have also seen 22 quarters of straight positive sales comps, and that’s getting our productivity loop turning again This is the model that the U.S business has always been based on. Growing sales, which allows us to leverage expenses, and then we can invest back in the business, grow more sales and that helps is us keep growing if profit. Throughout Walmart’s history we see when we get the productivity turning in the right way, that’s how she wet results. Now, now, regarding the everyday low price component of the model as a former merchant, I know the value of getting this ring right. So we are going to be really disciplined about EDLP. We have got more price investments planned for this year, and we will deliver E lee ELDP in a focused way. As you have heard earlier there has been progress in the last few years to help us become more efficient and leverage expenses. I still see plenty of opportunities ahead We are looking into areas like signing, outside services, and we have done some tests where we have reus dod the amount of signing in stores to give the customers a more clean view of the store and associates a more clean view of the back room You can see by this photo of what we are calling the war room we are taking a look at everything. We are putting everything in one spot, testing things in front of customers and making changes Another strength I want to talk about Is the Walmart Supercenter· As I said back and look at the supper center, I see arguably the greatest format in the history of retail. It’s a competitive advantage. We have the most productive 100,000 items ever aggregated into one locati It’s often one of the largest employers in town. It’s one of the largest grocers in town And it’s a shopping format that’s powered by one of the most extensive supply chains in the world and that includes both fresh and general merchandise Last year alone we shipped 8.3 billion cases of inventory and we did that while being named the safest large fleet in America for the sixth consecutive year. When you add in our neighborhood markets and discount stores, that’s over 4700 locations putting us within ten miles of 90 percent of the U.S. population. So that leads to how we are managing results I know we can cake this format to the next level. To me, the next level is find youing air way to serve all Americans a comprehensive end-to-end shopping experience. That’s an experience where they can come into a store, they can stop in a parking lot and pick up a pick up order. They can have anything they want delivered to their doorsteps or they can even have their refrigerator stocked For many customers we know it will be a combination of all of these things At scale that gives us a unique advantage. We serve all of America, including people who are looking for new services that can help them save not only money, but save time. And we have got an opportunity to get customers to do even more shopping with us. So while I’m committed, of course, to making our stores better, I want you to know I’m just as focused on improving our digital relationship with customers, getting the different shopping options we have to complement each other and work seamlessly, with something like same day pick up I see areas where can we can get better and make it more seamless for our customer. Just the other day my team and I decided we would try to put an order in that would reflect the way many customers shop in the super center so we tried to purchase something. With have a lot of friction and it’s hard to do and it’s hard to understand how you pick things up and we will solve those problems and we will make shopping in the super center across the box seamless for the customer. But all of that begins with the relationship with people when it comes to grocery. Grocery is essential to the customer relationship. Now, we are delivering strong sales in grocery and creating market share, but to make it a more quality experience, we are going to continue to focus on even lower prices, fresh innovation, private brands, and then convenience. Now, a love what I’m seeing in produce. We talked about the improvements over the last few years and it’s several times in the last quarter it’s exciting to hear Martin who leads the produce department talk about another record sales day. They have got momentum and you can feel the energy when you talk to the team when it comes to items and the way they are taking days out of the supply chain. We have a new deli concept where we pull the solutions up to the front of the store that makes it easy for customers to come in and get dinner for the the family. The meat department, an area where we have invested in quality Private brands, we have many brands over a billion dollars and the brands are improving. A couple of other things we have done in food in the last years we have opened a plant in the milk area and dairy. We also opened a meat plant. These are helping us think through ways that we can provide even more quality to our stores and to our ultimate consumer. Now, when I look at general merchandise, I see enhanced quality value in several places around the store We have got new private brands like Heart and electronics and their quality levels typically you only find in a specialty channel. We also heard we have a lot of strength in Home. It’s been exciting to see how our store team and eCome team and Holm in particular have worked together to bring customers the best experience, the best items, the best prices and it’s paying off. I’m particularly excited about the investments we have made in our electronic department. We have been successful with televisions and other big consumer electronics categories. What we also mentioned as the fourth quarter showed, we have got some categories where we have got to do better. I will talk about those for a second. In toys, we started the season with features that we decided were too high on price points, and then our lay away business was soft. We are thinking, rethinking about the way we go to market with lay away all across the country Then in apparel, as Doug mentioned earlier, our floors reflected too much holiday, we have got work to do with our brands in fashion basics. When I think about brands like Time and True that’s on the floor today, we have got to make sure as we have narrowed our brands that every one of our brands has a proper place for the consumer So we have done a lot of great work over of the last couple of years narrowing the brands but we have ended up pushing into the brands a wide range of quality levels, price levels and sizing and we will rethink the way we go to market to make sure brands are clear to the consumer and we have great gift items that people can guy and give as gift goods in the season coming up. Scott McCall, Scott, some of you probably know, Scott has been with the company for 25 years, and his entire career has been in the merchandising area Scott has led areas like consumables, health and wellness, home, lawn and garden, entertainment. Scott lives and breathes items. Scott can’t walk through an airport without noticing the color of people’s luggage or the accessories they are wearing and he is always thinking about what we should be doing to drive sales. Cot Scott has been a big driver of the omni channel experience. And Scott is going to help us accelerate that. Now, as I mentioned earlier, when we talked about price, we are going to continue to invest in food and consumables, but we are also going to consider places to add price investment and general merchandise categories. With both grocery and GM we want to prioritize pricing but we also want to make sure we are sourcing in the right way. We know that our customers expect us to make a difference on key global issues and they increasingly care about how items were produced. Now, as I look outside the store, Jim just going to start with curb side The U.S. team built an impressive business with the same day pick up operation They have high NPS scores. We are now in about 3200 locations and we will be expanding to about another 500 locations this year, and we will continue to see healthy comp growth not only from the new stores, but we are seeing healthy comp growth with the stores that have been open more than one year The work that’s been done in this business is what’s made same day delivery a reality It’s essentially the same process for delivery as it is for a pick uporder, it’s just the associate is putting the order in a delivery driver’s trunk instead of a customer’s trunks. We are offering it in 1600 stores and we expect that to be in about half the fleet by the end of the year. Same day delivery, it’s what a lot of customers want and we love our position there. We already have over 100,000 items forward it deployed within just a few miles of millions and millions of customers’ homes and we have different options for delivery, things like third parties, associate delivery, and we have also launched our own spark delivery network, you will here more about that from Dacona Smith later today. When we started our pick upbusiness, we made a really deliberate decision to only pick food and consumables. Most general merchandise items had to be ordered on a separate app, they have to be picked up in a tower, or they have to be shipped to home, and we are at the point where we can start to combine these experiences and pick the rest of the store and add more general merchandise selection to the pick up for curb side and same-day delivery. We know our customers are asking for that as well So as we pick more and more of the GM and the super center for same day, that’s will help us do things like expand the size of the basket. It will help us with margin picks in the bass basket and it will be great for the customer to be able to order grocery as and puck up an H HDMI cable or sweater or something that can top off the basket. It will also help our perception as a destination for general merchandise which leads to the longer tail in the eCommerce business that Marc will talk about in a few minutes. We know we can increase our market share, our wallet share on the head of the assort will the, and we can talk all the way through the assortment as we get into eCommerce As I look ahead head, I want to prepare our business for the future. A lot of time in the team we say that loyalfy and — loyalty in retail is the absence of something better so we are in a race with everyone else out there who wants to provide something better for a consumer and we want to be best positioned from now into the future to win with the customer As you have heard, the U.S team, they have built a lot of tools that have helped us reach new customers. They have helped us become more efficient. And they have moved quickly to scale a lot of these new technologies The last analyst day, for example, you heard about some of the concepts throughout just a few stores, shelf scanning robots, autonomous floor scrubbers and the FAST Unloaders earlier this year. By the end of the year we will have self scanning robots in about a thousand stores and the FAST Unloaders will be in 2,000 stores. I’m also excited about something you have heard mentioned the Alphabot technology. We are testing this in Salem, New Hampshire, this technology eliminates the need to hand pick individual items from store aisles. It’s made our associates in Salem more productive. It’s greatly increased the number of same-day orders that can be processed at a certain time and this year we will expand that to a couple more sites The last few years at Sam’s Club, I learned the power of new technology tools, and a good example that you have heard about is Ask Sam and it allows an associate open a single app, speak questions into their phone, things like what aisle, or who is working in the bakery today to get answers. It runs on voice and voice is a big idea not only for associates but also for customers. So associates in our stores today, they are working across a site that’s over four acres in size. So there is a lot of time spent going back and forth getting answers or getting something that you need to complete a task, and by using voice and mobile, we are able to get the associates the information they need to save a lot of time they spend walking back and forth And this is going to help them free up more time that they can serve our customers But I don’t want to miss the idea of voice, because voice is a big idea that could help customers and associates do everything from maps, finding items, shopping lists, all across commerce, it’s a really big idea for us. The reason that ire think Ask Sam was so successful is it was designed from the very start to serve the end customer. In serving the end customer, that’s something we want to refer, that we refer to as having a product mindset And when I say the product mindset, I don’t mean product like an item, like a soccer ball or a pair of socks, I mean product like a technology product that helps us identify points in the experience where there is friction, friction for customers, friction for associates, and then we go back and work on processes and technology and then we iterate on that so we can ensure that we are eliminating the friction and making our experiences for both of those key end users very, very seamless. This is a big opportunity for the Walmart U.S business So whether you are in our stores, the distribution centers, the corporate offices, we need to be even more customer-driven. We need to think in ways that make the end user have a better experience, so we can look at things we are prioritizing, how we are working, and even some of the cultural behaviors we have inside the business. Now, we are still going to run one great store at a time. That won’t change. But it’s clear that great stores are an important part of the solutin and we have got to expand our thinking to think about the entire solution and all of the different ways that a customer wishes to be served in today’s market And we are going to keep the customer at the center. So we will also be looking at new profit streams. Ideas like services, and things that have leveraged the popularity and the power of the Walmart super center. We are testing partnerships with Fed Ex, budget rental car, build a bear, veterinary clinics, eSports caming areas and you have seen experiments with health and wellness, the things we have done in pharmacy. We are working on our optical business to modernize the look and feel of optical and the full service health clinics in Dallas and Calhoun, ga ga. We want to learn quickly how we can deliver mental, dental, optical and mental health services at an affordable price. We think this is a specifically a good idea where healthcare is lacking and out the reach for many Finally, we can’t run a great business without our people Our associates are the key to our future and our serve yates are our competitive advantage I see that every time I’m in stores, distribution centers, corporate offices, fulfillment centers all around the country I see what an advantage our associates are for Walmart. We want our associates to have a great experience while they work, the ability to learn and grow a career, opportunities to get an education, things like live better you and academies, and in past positions I have learned the value of investing in key positions, things like senior merchants, technologists, department managers, those investments are important and we will be targeted and specific in the way we invest in our people because we have got to not only attract but retain the very best talent for our customers So that’s what I’m seeing in the first 100 days. And as I take on this responsibility with over 1.3 million associates, 4700 locations, I couldn’t be more excited about what lies ahead But we have got opportunities where we can do more. We have got opportunities to serve more customers in the way they wish to be served. We have got opportunities to bring more momentum to the entire store including delivering general merchandise same day. We have got opportunities to build technology and keep the end user in mind as we design solutions that solve their problems So I think there is a ton of upside. I’m really excited about the customer experience we intend to build and the results in the next few years and months. Thank you for your time >> We were just referencine ecommerce surge. That was the highest growth they have seen i this Massive growth, online grocery pick up and delivery has just been a massive halo effect for Walmart >> MARC LORE: Good morning an Here’sfor being here what I’d like to cover this mor First, I want to recap FY20 and share what we expect this year Next, I’ll share an update on o strategy-especially how we’re leveraging our unique assets to And finally, I’ll walk you thro a couple of projects we’re exci about that have the opportunity shape the future of retail Let’s take a look at how we did We said we’d grow sales by about 35%, and we exceeded that by growing 37%, nearly tripling the size of the business over the last three ye We also improved contribution profit margins by about 150 bas A shiftear over year in product mix toward categories like home and apparel, lower variable cost per unit, and fewer packages per order are al helping us make progress here While our 35% growth was strong Q4, we know we need to do more delivery speed and merchandisin Our topline growth was better t expected and that put pressure Thatllment and ship speed led us to back off our shipping promise at times, which left This year,e table we’ll be laser focused on delivering faster and for longe And the holiday season merchandising will continue to We’re adding a lot of brands, a we’ll grow our assortment in gi giving categories, in addition Lokingme and apparel ahead, we expect to grow eCommerce sales by about 30% th Quarterly growth is expected to range between mid-20 and mid-30 Now let’s Brett said take a look at our eCommerce st At a high-level, we continue to Nailing three areas: the fundamentals of eCommerce, leveraging our unique assets to play offense, and innovating for Over the last few years, you’ve seen how the pieces of this puzzle fit toget It’s still how we think about t We look atday nailing the fundamentals in terms of how we perform across the five bellwether metrics of We’ve made good progress across all five metrics, but I’m most proud of what we’ve done to improve Three years ago, the average Walmart.com order took 5 days to arrive. Today it’s two days, and we’ve done a We to make this happen started a few years ago by offering free 2-day shipping, a most recently, we launched Next We’re able to offer NextDay in cost efficient way by mirroring Ourntory in our warehouses cost to deliver NextDay is lower because the inventory is shipped in one box and is close to the And we can reach 75% of the U.S in one day with a broad and gro At the same time, both on-time delivery and in-stock rates hav increased dramatically over the We’ve achieved all of this by overhauling our supply chain and building out a This is why our CVI Were keeps going up increased our score by more than 20 points since FY17 which in turn has improved each element And totomer value prop keep improving the score, we’ll have to continue the progress we’re making on other fronts li expanding our first-party offer That’s really our “Have it” metric, and we’re doing a lot h Over the last three years, we added about 7,500 new brands an acquired companies like Shoes.c Moosejaw and Art.com to quickly expand our assortment on Walmart.com, and we’re adding m We now offer about three-quart of the top 500,000 items in the Inrall retail market addition to first party, we’re also expecting to improve CVI b expanding our marketplace. The assortment on Walmart.com has g to about 80 million SKUs, inclu marketplace as we remain focuse keeping the quality of items hi As a result, our marketplace ha grown by about two-and-a-half t However, this is an area as Doug mentioned, where we still have a lot more work to do. While customer AND seller NPS scores are improving, we also want to make selling easie Sellers are telling us that the But not alltions sellers have the same capabilities, especially when i comes to fulfillment. That’s w we’re introducing Walmart We shipped Services our first WFS order in August of The tech on the back-end works well, our merchants are excited, and we Sellerst we see so far want as many channels to sell as possible and WFS gives them another option. And it gives customers faster delivery, more assortment and better pricing We’re really proud of the experience we’ve built and it’s something we plan to scale over The fundamentals of our eCommer business are improving, but as you’ve heard today, it’s not en We neede basics right to leverage our unique assets Taketart playing offense our 4,700 stores. As John said, these give us a huge edge in being able to do delivery in an Our existing footprint is already within 10 miles of 90 percent of the population, and we have forward-deployed inventory whic the really expensive part. In case, stores are already operat as warehouses, and they’re profitable, so there’s a low marginal cost for someone to pi It’s our existing assets, like stores, that allow us to offer service like same-day delivery customers at such an incredible value. A customer can pay $98 dollars a year, nd get unlimite fresh, frozen, bakery, pantry staples, consumables and select general merchandise delivered t Our 1,600 for free stores that are doing delivery already reach half the U.S. pop What we’re finding is that delivery customers spend more overall with Walmart, just like Now, in termsrs of long-term growth we see an opportunity to hook customers on the convenience of services like same-day delivery. And as they come to rely on them, we expect they’ll buy more general merchandise, take advantage of health and wellness services, a more. At the same time, we’re making shopping with us even ea For example will be combining t Walmart.com and Grocery apps i one. Today, we have what we ca the “blue” app and the “orange” The blue app is the traditional Walmart.com direct-to-home eCom app, while the orange app is fo With two apps, we’re not fully able to leverage the traffic from the head of the assortment – the relationship we’ve built with the customer through grocery – to sell more Plus, we’veems been spending marketing dollars to send customers to two So later thiss year we’ll bring these two apps together, so the one Walmart Walmart is playing offense We’re leading with grocery and same-day delivery to become the primary destination for all wee We see this as a critical step win a greater share of wallet The third piece of our eCommerce strategy is about innovating for the future We’re exploring opportunities around conversational commerce, augmented reality, virtual real delivery into the refrigerator, incubating digitally-native bra As you’ve heard, we’re innovati to define the retail experience To anticipate it Take InHome Delivery It’s our latest innovation aime at giving time back to busy fam by delivering fresh groceries a everyday essentials directly in Afterkitchen or garage initial testing that proved the concept, we rolled out a larger pilot in Kansas City, Pittsburg We’rero Beach in October on the leading edge of something InHome is aere powerful and effortless experience and we want to grow We’re exploring enhancements li delivering items automatically before you even realize you’re For customers who spend an hour a week shopping for food, this could save a ton And we’re looking at ways to leverage this new in-ho relationship with customers, li no-box delivery and returns We’re all accustomed to having cut open a box when we have something delivered and then di But instead of getting a product in a cardboard box, imagine Walmart leaving the item on your kitchen table. Or, you could leave an item you want to return on the island, and we’ll pick it up when we bring No need toceries print a return label and package Needless to say, we’re just starting to unlock the possibilities of what this Customers who’ve InHomet already love it graduated from our innovation incubator, Store 8 and is Organization led by Janey White An Chief Customer Officer innovation mindset has taken And we’relmart dreaming up concepts, testing them, piloting them, and iterat We’re speeding up the time betw Now, notnd delivery all of these things are going to work, and that’s okay. We’re going to learn. We’re going to Another area where we’re invest Itconversational commerce wouldn’t surprise me if in twenty years the majority of shopping is done by text and vo But the machine needs to know t right questions to ask so you c When yought answers ask your voice assistant or send a text to order diapers, it needs to know that your preferr brand is Hello Bello and that i We began building this engine With Jetblack and tested it her We learned City that customers really responded to and loved the ability to tex In fact, members used the servi Itrly 10 times a week allowed us to understand what types of items people want to purchase by text: groceries, birthday gifts, things like tha We’re building machine learning capabilities that can understan message you send and make recommendations in 1, 2, or 3 b As we build capabilities like w have in JetBlack, we’re present Weh strategic options considered spinning it out and there was great interest in the We also community thought about investing more in But, theork offering real opportunity for customers and shareholders is when we can scale these innovations with the mothership – Walmart and Walmar Well, we’rext? going to take those insights and leverage them against the store base in a way that’s scalable We’ve infusede our learnings from Jetblack into our customer organization within Walmart U.S. And we’ll be taking these text-based learnings to Bentonville, Pittsburg and Kansas City in the coming month Think same-day shipping from a supercenter, or next day from W It’s shopping in a way that’s completely natural to customers, and it’s an Weiting opportunity for us also have a startup called Insperience dreaming up ways to integrate virtual reality into VR has the potential to transfo Imagineping experience shopping without space constraints and being able to experience products before you That’s what we call “vCommerce All it takes is a headset to instantly transport a customer to a world where they interact merchandise in a natural enviro Like being in your living room Take a look. gn it The possibilities are very exci We’re moving quickly, and you c expect to see experiences like in a few of our stores really s As retailers improve speed, assortment and price, we believ game will need to shift to orig proprietary content being one o main differentiators between re Customers want amazing products-and those products wil influence their choice of retai Earlier I mentioned how we acquired a number of brands to quickly grow our assortment, li Shoes.com, Moosejaw and Art.com Those helped us add assortment But beyond growing our assortme we also acquired a few digitally-native brands like Elloquii and Bonobos that have helped us differentiate assortm These aren’t just private label A social media following They gave us the DNA to create, digitally-native brands in hous You’ve seen us do it with the launch of Scoop in fashion and Allswell is a mattress brand th offers products at a price poin that allows us to put them on Walmart.com and in stores. We started it with a little bit of capital, and we think it will approach a $100 million brand t Weswell was an “aha” for us realized we can create these brands and incubate them in a w that they’re successful across We’re and online integrating our digitally-native brands like Allswell into the company and we’re going to keep As Ig in that direction wrap up today, there are lots of reasons to be excited about Our team at Walmart is aligned on a winning strategy and the response from customers shows that we’re making great p We’re working hard to monetize relationships with customers th a better mix and by selling mor Building categories on the momentum from FY20, we expect to grow around 30 percent We continue to improme CP margins, and as Brett mentioned, losses for this year will be flat or slightly lower We’re delivering growth and building a healthier business o I talked about a lot of Some are tests. Some are scaling Walmart is an innovative engine And all of the things I’ve talk about are included in the guida As I said earlier, we’re moving faster, gaining Therage, getting fundamentals right, and playing Destination. primary And while we’re doing this, we’ working hard to shape the futur Thank you >> DAN BINDER: That will conclude the early morning session. We’ll take a 15-minute break and be rest with the rest of the program. Thanks! (Break) (Break) >> JUDITH McKENNA: Good morning, everybody I am really pleased to have the chance to talk to you today About Walmart International I’ll briefly cover our performe last year Touch on the outlook for FY21,d then spend most of my time bring To life strong local businesses powered by Walmart by talking about four examples of just that Walmart International is a $12n dollar business Making us a top five global retailer in our own right We operate more than 6,000 stos across 26 countries Those stores are the heart of r business But like the U.S., ecommerce ad omnichannel are becoming an increasingly important part of r growth In fact, last year, eCommerce sales for the total of international were 10 beers and are expected to reach 12 Persian of our total sales this year Across our markets, we operatea variety of businesses, channels, formats and banners One size certainly does not fit all We will not be successful by thinking like a multinational business. But we will continue to be successful by thinking like a multilocal business Executing our strategy one country and one business at a time Let me reflect briefly on FY20 Our sales grew at 2.8% on a constant currency basis, representing another Solid year of growth, underpind by strong performances from Walx where the top line grew 5.2% and China with sales growth of 4.3% Now, Brett’s already mentioned somef the factors in our results And specifically Chile and its impact last year all I want to add to that is my huge aappreciation for our teams there who have done and continue to do some incredible things and an incredible job under some very challenging circumstances I was pleased to see around the world that all of our businesses displayed strong cost control And we leveraged 35 basis poins of SG&A through innovation And operational focus, with Cha and Japan leading The way Now, I’m sure that you’ll be pleased to know as you heard from Brett that Flipkart performed in line With our expectations and was within the guidance we gave you As a reminder, we have a Decemr year end and Our ownership of Flipkart only annualized last August, and that fact alone accounts for the vast majority of our YoY decline in segment profit let me turn to FY21. There is now doubt that the levels ofville tilt around the world are Myer than they have been for some time We face some tough trading environments But our EDLP position, low cost base and ability to Leverage innovation and best practices positions us well As a result, Walmart Internatil is expecting top line growth of, with profit broadly flat YoY Those numbers do include the continued cost of rebuilding and reopening stores acontrolling our dpsh across our Chile business Brett and Doug also talked abot coronavirus In addition to their comments,I can tell you that Yuen Tan our O and his team are working hard to provide customers their daily n, while at the same time taking ey precaution for our customers anr associates Today all of our stores remain open, albeit the vast majority with restricted hours and some have got restricted operations The spirit and determination of our teams across our stores Supply chain and home office is Remarkable At times like these, our people really do Make the difference In uncertain times, being a trusted retailer Is more important than ever You earn trust by standing taln difficult times but you also eat Every day by consistently delivering value Providing customers access to t they want However they want it, and by innovating to make Their lives easier. For me this comes to life at air local level, let me give you four examples of strong local businesses who are doing just that Starting with Walmex, our longt standing International business, and onf the best examples Of what a Strong Local Business looks like Walmex operates just over 3,400 stores across Mexico And five Central American countries Last year its sales were $33 billion, and it has an operating margin of over 8% Listed on the Mexican Bolsa, it has a capitalization Of just under $55bn dollars, wh is just slightly less Than Target’s market cap, or if you want to think Of international retailers, moe than the market caps Of Tesco and Carrefour combine In Mexico itself Our Walmart Supercenters and Ss Clubs Adapted for the local customer- As well as locally developed discount formats Provide inclusion and access to value For all demographics In fact, our discount Bodega stores have now reached The remarkable milesone of 2,00 units The proximity and breadth of or formats provide Unmatched accessibility For example, across Mexico’s mn cities 85% of the population lives win 10 minutes of a store That’s just one of the factors that’s enabled us to deliver comp sales growth Faster than the market for 20 quarters straight Our CEO Gui Lorreiro and the tm are continuing to find ways to w the business by leveraging our e network to increase access and h with a growing omnichannel offe I share two examples of this that I really like Firstly, in our Bodega stores,e are installing digital kiosks To serve customers who are loog for value But who may not have easy acces to the internet or the ability To pay in store A customer can shop the full Walmart online range of general merchandise from the kiosk, payh in store, and pick-up there lat The average kiosk purchase is fifteen times the average ticket instore It’s simple It’s effective And it’s true inclusivity Secondly, in supercenters we he expanded pickup and same day delivery options for online gro Last year the team trialed makg 12,000 general merchandise items Picked in store available for same day delivery commission to the 3,000 grocery items that are already available That expanded range is now live across 167 supercenters With plans to add more by the d of this year Moving forward, Walmex will bud on the foundations of its brandd assets, developing its ecosystem For example through its Cashi payments app – To expand customer access and loyalty Let me turn next to China Similar to Walmex, its foundats are built on the successful locl adaptation of the Walmart and Ss Club formats Today, Walmart China is a $10bn dollar business With over a quarter of those ss coming from Sam’s Club We are fortunate enough to hava well-established business Of 26 clubs with strong brand equity We opened three clubs last yea, and we plan to open up to 5 clus annually going forward Now, in FY20, samples club China delivered its second consecutive year of double-digit comp growt A little known fact is that our highest sales club or store In the whole of Walmart world s our Shenzhen Sam’s Club Located close to our home office Although we’re pleased with ths strong growth We recognize the need for continuous innovation to accelee accessibility And with land at a premium, wee finding asset-light ways To supplement our bricks and mortar clubs with new infrastrue that improves our ability to ene with members digitally The heart of this omnichannel expansion has been Sam’s mini-fulfilment centers, which e call “Cloud depots” Think of these as low-cost, mini-distribution nodes Located in high density urban areas, which extend online acces options to our members for aroud 1,000 of our most frequently Purchased items They are set up with our crowd-sourced Last-mile delivery partner Dad, allowing members to receive ther orders in less than an hour But the good news is that members still love viz visiting our Clubs, but the “Clouds” enable a more requent shopping mission Today we have about sixty of tm with plans for many more In the future Let me show you how this works Omnichannel is critical for Sas in China Today, 30% of our total memberp shops both online and offline, d encouragingly, renewal rates for these members Are considerably higher than average Sam’s China is a great examplef taking one of our formats And building strong local rooty tailoring it to the local consu I have covered two of our longest standing international markets. Let me move to our two most recently added Flip cart and phone pay We made our investment 18 monts ago and we continue to be impred with the businesses The teams and their strong culture I have been to India five timen the last year And the energy and entreprenel spirit of the team never ceaseso amaze me As a reminder, the Flipkart Grp consists of the Flipkart ecommee business, which includes Myntraa separate fashion platform And PhonePe, a digital platform anchored in payments. At the lat investor day I talked about Flipkart, and today I’m going to give you A brief update on that, and alo talk to you about PhonePe We have been pleased with Flipkart’s performance and Brets given me permission to share soe numbers with you at today’s eve I can tell you the health of te platform is strong Engagement with Flipkart contis to grow as Indian customers bece more and more comfortable with ecommerce and the access and affordability it provides Flipkart is now tracking to wel over 1 billion visits per month Last year monthly active custos grew around 45% and transactionr customer increased by about 30% What I really love is that Flipkart’s heritage puts the Indian customer at the heart ofs business Their strategy is to democratie shopping by offering affordabily and access They use technology and data to solve everyday customer problemn ways tailored specifically for e Indian market: they are Launching innovations such as Voice-assisted transactions and vernacular capabilities in Hind, which help drive further adoptin Tier 2 cities, which are at they heart of Middle India they are also Offering trade-in programs in which we “buy back” customers’ d devices and appliances when they purchase new ones and refurbishg for resale, creating value throughout the supply chain They also offer value-added services, including demonstratin and installation, for large appliances Only 10% of families in India n a Smart TV, washing machine Or air conditioner When they are sold on our platm we use delivery as a moment to h and give customers confidence iw to use these new products – andt gives them confidence in Flipka And to help affordability, Flipkart provides access to cre, including Buy Now Pay Later, low-cost installment credit andt July, launched a co-branded cret card with Axis Bank In addition to these customer-facing innovations Flipkart is continuing to use a and insights to find New revenue streams, such as through digital advertising, whh is showing strong year on year growth A combination of high quality data, unique customer behavioral insights, and a powerful tech platform mean that ad. placemens specific and accurate which cres value for advertisers, but very importantly, it protects the customer experience Their ambition is to serve the next 100 million customers, and Kalyan The CEO and his team continueo put the building blocks In place to do just that So, I said I would talk about PhonePe PhonePe’s ambition is to be India’s largest transaction platform, anchored in payments They build scale by offering person-to-person money transferd remittances, expanding use cases With merchant payments, and thn adding services For customers to manage and grw their money All in a single app PhonePe’s DNA is to build opend intelligent platforms; An open ecosystem for customer, merchants and banks with the teh capabilities to automate and sce efficiently This DNA is the key to PhonePes remarkable journey In just three years, PhonePe hs Grown to almost 200,000 registered users And 20 million of them use thep on a daily basis In total, those users make more than 500 million monthly transactions Today, that generates almost $0 billion dollars in annualized Total Payments Value or TPV PhonePe has also expanded to merchants Eight taken months ago, they were accepted by about 30,000 merchants in India Today, they are accepted by alt 10 million, from Kirana mom andp stores to fast food chains to re shares People like using PhonePe Well over 90% of daily customes repeat within 30 days The company is using this increased scale, combined with a science To reduce costs One example is their more than% reduction in cost per transactin Person-to-Person & Recharge categories But PhonePe doesn’t stop there The team is relentlessly innovative, in January alone they had four new product releases and one of those I really like is One that I love is PhonePe’s AM product, a revolutionary solutin that has The potential to transform accs To cash in India A customer can now request A cash withdrawal directly from their bank on their PhonePe appd go to a merchant local to them – that merchant will then give thm the cash that they’ve requested “Slide 17: Meeting Theme The service is available today in over a million stores across the phone PE network. When you think about it, there are only 200,000ATMs in the whole of India, so this product just scaled the capability to withdrw cash by 5 times This is a win for the customer, the merchants and the banks Sameer and Rahul, the CEO and O and founders of PhonePe are buig a business that continues to len as it grows You are going to hear more abt PhonePe and the creation of its Super app from Karthik — he’s e on the panel later but let me le you with this: At its core, PhonePe is a masse open transactions platform It took the business its firsto years to reach the one billion Transactions mark, and within e last year, it crossed 5 billion transactions We are excited about its futur Not only do these four business continue to grow But we continue to learn from them, and to share best practics across Our markets They are great examples of Strg Local Businesses Which earn trust by consistenty delivering value by providing customers access to what they wt tailored how they want it, and remaining at the forefront Of innovations that make customer’s lives easier Our businesses make up a strong global portfolio, and we contino be thoughtful about how to posin each to be as successful as possible This means we avoid a rigid approach to ownership And we leverage strategic partnerships wherever they maker business stronger In some cases, we are a majoriy owner, in others a minority par Our businesses could be publicr private Or part of a strategic collaboration with strong partns such as Rakuten, Advent, JD and Dada; ·and before you ask, I have nothing new to tell you today on that Success in this environment for us depends on our “multi-local” approach As you’ve seen today, our busis looks different In different markets What’s exciting as we move ford are the many ways Powered by Wat becomes reality across these mas From adapting formats to sharig best practices From developing talent to builg a culture of innovation what I can tell you is that the shae of our business is changing alog with our customers’ expectation everywhere that we operate This year, one out of every eit dollars of International revenue Will come from ecommerce In every market, our customerse pivoting To the future of retail faster than ever, and we are well positioned to make the most of s shift We are building Strong Local Businesses and are increasingly unlocking Powered by Walmart Thank you >> KATHRYN McLAY: Good mornin and thank you for being here to To talk about Sam I’m Clubd About theexcited I’vetion of our business been in role just under 100 days, and I have spent dozens o hours listening to associates a members to learn what’s working A few things came through loud and clear… first of all, our associates LOVE working at Sam’s Club. And secondly, our members are passionate about their club And we have real momentum in the But what Ibusiness also learned is our people are Our associatese want to get behind great items leverage even more technology and create the best member experience in the warehouse cha And our members’ passion for Sa Club means their expectations a higher than ever. They’ve paid shop with us and they “expect So while special.” there is work to do, I’m encouraged by where we are toda We have a strong business, and are well-positioned to win First, that in a bit let me briefly touch on our res You heard us talk earlier about fourth quarter and full-year re For the full year, comp sales, excluding fuel and tobacco, increased 3.8% and eCommerce sa I’m really proud of the team for delivering comps of 9.5% on a two-year stack basis We continue to be encouraged by trends: Plus renewals and sign- drove membership income to grow So overall, strength on the top line combined with an increase membership income resulted in a operating income growth, includ fuel, of 8.0% for the full year What that means, we achieved healthy operating income growth while strategically investing i price, people and technology Today, the business is position financially to continue providi strong value and convenience to members while transforming the shopping experience – both in c And there’s a good reason for that strength·The Sam’s Club model is pretty simple, and that’s why it works We offer great items at disrupt prices and a seamless shopping experience. That’s what drives membership, and membership is w This basics Club formula is powered by a strategic focus on people, prod and digital as well as an obses with serving our target member — a family with an income arou That000, and 2 or 3 kids strategy won’t change, because Both member counts and renewal rates are improving But you’ll see us take it up a notch and focus on how people product and digital come together to drive a great member experience – both in club and online. We have told our members to expect something special, and we will continue t Wither on that promise our people, we fundamentally changed the way work gets done our clubs to provide a better m experience and more opportuniti Last year,ociates we organized our associates into four working groups – Member, Merchandising, Fresh and Specialty — to move toward a Wemwork approach consolidated job codes, we’ve simplified the work and cross-trained to ensure every associate can complete their te For example, on the Member team, we no longer have associates solely who purely run a cash register. We have member frontline associates who know how to sell a membership, the exit or help with club pick We also moved all of our overni associates to work during the days – when our members are act shopping with us – and we’ve ra hourly wages in more than a doz key roles – like team leads, me cutters and cake decorators We’re seeing improvement in results with reduced turnover a increased employee satisfaction And we’re giving associates too to make their jobs easier. I h that loud and clear when I was North Carolina last month and asked associates what was working at their clubs.They res “technology” in unison Associates now have more information on their mobile dev at their fingertips more than e before … and now they can spe more time on the sales floor wi Let’s move to Product Sam’s Club is an item business We have limited SKUs, so it’s critical that every item feel hand-selected to delight our me while delivering quality and va Before I talk about some of our specific products, I want to br touch on our efforts to reduce SKU count even further and As clubn price merchants it is our job to find the best items and make the right choices for our members Members don’t come into Sam’s C expecting to find everything – expect to find value, quality o something they can’t find somew And our members are busier and have more choices than ever, so consider curation a bnefit of m In the past year, we have reduc SKUs in about half of our clubs It might seem kind of counter-intuitive, but our memb have given us better marks on breadth of our assortment in cl where we have reduced SKUs Members actually perceive we ha more items when we present them less. It’s good for the busine too … sales are up and we sav Looking ahead, our plan is to continue refining our SKU count The other business component of membership value We haveourse, price invested in price in a significant number of our clubs Traffic in those clubs is growi so members are responding. We continue to assess targeted pri Moving to this year We have this great opportunity to make Member’s Mark special·and we are·but before I talk about our private brand, I want to share two examples of how we’ve partnered national brands to create uniq Our item obsession has led to increased innovation with our suppliers to bring new products market. And suppliers are exci to partner because they share t Take a look at our recent collaboration with Kellogg’s that brought Baby Shark cereal to homes around th >> Baby shark started at Sam’s Club in a supply room downstairs with one of our key players, Ke It was just an ideation session where we were trying to figure out what would be next in cerea We had gone through countless concepts and none of them were It wasn’t until we said out loud what about Baby Shark and everybody knew at that moment that Part of the negotiation with that supplier that Sam’s Club would be exclusive for four weeks in the The reaction was pretty unbelie It w It was all TV over >> I media, online give I would buy up it f >> I wouldter buy >> We soldlf through that product mostly in weeks, and by the end of it, 99.5 Itrcent of it was gone was a $1.6 million item that flew It’s so shelves inspirational to be in an envir where everybody around here is trying to bring great products to m >> How does it go? >> O It goes Baby Shark, do d Baby Shark,o do d Baby Shark. >> KATHRYN McLAY: Good luck getting that song out of your h We brought another example with us: Our delicious popcorn partnership with leading candy brands. One of our merchants f discovered candy popcorn in an airport. It had no presence in retail or grocery, and we worke with a supplier to improve the formula and bring the first fla Ourerfinger, to the club members loved it and we’ve continued to innovate every qua by working with the supplier to bring Twix and our latest, Oreo market. Sam’s Club has exclusi on the series for the first 13 weeks, and we have more amazing flavors planned. We hope you en it a much as our members there’s some on your table Our Member’s Mark brand continues to produce innovative items at amazing quality and prices whil strengthening our overall assor We know members who purchase Member’s Mark are more likely t renew with us, so we’ll continu invest in the brand across the Last year alone we improved 383 item and launched 334 new produ Take our updated patio sets, fo Jon Odell is a senior merchant worked with our Member’s Mark t to completely reinvent our prod line to appeal more to our targ Jon has deep experience in the Outdoor category, and he knew o members wanted high-quality construction and fabrics at a warehouse club price. All sets handwoven by master weavers who apprentice for years to earn th The weavers take up to 15 hours complete a single chair to ensu consistency and durability of t We also upgraded to Sunbrella fabrics, which are much more resilient and resistant to wate fading. Plus, each set comes with a cover that would easily retail for hundreds of dollars The quality rivals an upscale home-furnishings store where si sets would retail for $10,000 o more. At Sam’s Club, our membe We’veay less than $2,000 also made significant improvements in Fresh, a key dr for repeat traffic across our c A lot of people are surprised t learn that you can find Prime A beef and fresh Alaskan Salmon i This year we expanded Prime Ang Beef to all clubs, and we’re no of the top retailers in the Pri We’ve been deepening our relationships with our supplier find unique items that can’ be Our Grapehere else Soda Grape is a great example Before I tell you about the product, I want to share a Phile bit about the buyer Macy is one of our senior merchants and he has been with Club for 27 years – always in For the lasts several years he has been focused on buying grapes and Phil is truly an expert in his field and he travels to Spain, Chile, Israel and walking domestically through nurseries and identify the next Thisthing for our members Phil quick process estimates the development of a new variety can take about 12 years and a lot of taste testin Phil estimates he tastes more t 500 different varieties of grapes a year. That’s A LOT of Phil was behind the creation of our Cotton Candy grape in 2017 he worked with the same nursery California to perfect the taste texture of the Grape Soda varie Sam’s Club has a trademark on t name and exclusivity with the grower. We sold the Grape Soda grapes in select clubs last sum for two weeks, and we’re planning to expand to more clubs While we are becoming known for the quirky and unexpected, our members are talking about the quality, too Our Fresh net promoter score ha improved every quarter. This ye with a 230 basis point increase Now turning our focus to digita Technology gives us the opportunity to empower our Itociates and our members simplifies work for associates, removes friction for members, a enhances the overall experience You’re probably — I hope you a — familiar with Scan & Go. I believe it’s one of the most delightful experiences we offer members at Sam’s Club. It’s a example of how we value our mem time and put control in their h Think of the typical shopping experience: As a member moves through the club, he is mentall purchasing each item that he puts in his cart. In fact, he feels like they are already his own. But then we ask him to stand in line to ring up those items. Scan & Go flips the scenario. It removes the frict and empowers our members to own their shopping experience from With Scan & end Go, members scan an item’s barcode with their phones as they shop, and then skip the checkout line and pay through t app. And members value the experience — we’re seeing a re Wege rate of 85 percent will continue to innovate with Scan and Go, and you will learn Newng the tech panel implementations of technology are great for associates, too You’ll hear more later during t tech panel about Ask Sam, but I to tell you about Sam’s Garage You heard Doug mention Sam’s Garage before, but I want to talk to you about how it’s driving sales. Sam’s Garage is a new application that’s driving our tire and battery business Associates who work in our Tire Battery Centers in the past had navigate bulky product books, a of paperwork and five systems t sell products and schedule installations for our members Sam’s Garage streamlines all of into a single app. Average transaction time has dropped fr about 20 minutes to less than 5 minutes, and it’s improving sal When we combined the convenienc Sam’s Garage with disruptive pr during a recent one-day event, saw a 55 percent increase in tr Sam’s Club continues to focus o emerging tech and pilot new way simplify the business. We are testing the use of computer vis to curb out of stocks and exit technology that can help reduce theft. We even have drones fly around some of our clubs to fig out how to better manage invent — especially items housed up h And at Sam’s Club Now in Dallas we are testing an enhancement to Scan & Go called Item Vision. Members can point their camera at a product to add it to their digital shopping carts. No searching for barcod the image of the item is all a member needs, making the shoppi experience faster than ever These innovations aren’t in all clubs yet but we think all of t have the potential to impact Sa Club and enhance the overall experience for members and asso Shopping with Sam’s should be seamless, and we have to be relentless about removing frict and providing an omnichannel ex We give our members choice and convenience no matter how they to shop with us, options like Scan & Go, same-day club pickup delivery, and direct-to-home sh And remember, direct-to-home shipping is offered free with o Plus membership with no minimum most items. Part of our members story is the huge growth we’re seeing online. Our members lov Online sales at Sam’s grew 32% last year, which includes both pick-up and direct-to-home sale We’ve successfully converted se former clubs to fulfillment cen to make our direct-to-home offe faster and more effective while Weucing the cost to ship also recently started testing ship-from-club for eCommerce or This test is currently in about We are adding membership value through our website too with features like our Travel and Entertainment and Home Improvement services that have saved our members millions since launching earlier this ye We’ve also just added a personalized perks portal, so members can see their individua Our focus onup the target member and the value of the Sam’s Club membership are working. We are seeing growth in total member count and Plus members penetration rates continue to see positive results, hitting an all-time high during FY20 and improving 170 basis points over last year. We expect more posi membership trends as we continu improve the in-club and online experience for our members whil enhancing the value of their me I want to wrap up by highlighti a few key things I hope you all First, theoday changes we have made to simplify the business have made us stronger. Our total member coun renewal rates and Plus member penetration rates are growing, our traffic numbers and comp sa excluding fuel and tobacco rema Secondly, we are an item busine and we will continue to focus o bringing innovative products at amazing quality and value to ou Thirdly, Sam’s Club remains an innovation hub driven by associ and technology. We’re developi tools to make shopping and work at Sam’s easier and more deligh And finally, the focus on the target member is working and we will continue to push toward a more omnichannel experience that empowers our me Today, Sam’s Club is a great business and we are tremendousl pleased with the progress we’ve made. But, I know we are even excited about where we are head and the opportunities we see in We tell our members to expect something special, and that is promise we know we can keep Thank you >> DAN BINDER: Great. Thank you So we’ll have a 15-minute break as we transition to our innovation panel, and that will be followed by our Q&A session Thanks (break) (Break) >> DOUG LEADS: , Doug Leads, leesdz as I mentioned earlier we have an innovation panel we are introducing to the program this year, and we will kick it off with Doug and Suresh and give you the lead on it >> DOUG LEADS: We will give you some examples of inin innovation happening across the country and we will talk about how it’s happening as well. I mentioned earlier that we have been innovating and operating on top of a legacy tech stag that you would imagine in our acquisitions and built the business historically ends up being a series of symptoms and it needs to be simplified and modernized. As we do that, we will find our okay towards more speed, more innovation and more productive and Suresh Suresh Kumar who I briefly interest introduced earlier came to us in July, came from Google, is the type of leader who can lead that type of investment and lead it well and we are excited to have you. Suresh, if you would, start off with the big picture question. Let’s talk about what it means to modernize the technology we have at Wal-Mart today >> SURESH KUMAR: Absolutely So a few pieces, having the right talent, creating the right structures and creating the right architecture that will allow us to incorporate new technologies, whether version, these are the things that will allow to us developpish no vattive solutions on behalf of customers or our associates. We have great engineers. We have great data scientists and littic technologists, we are creating structures to make them even more effective. We are cree yairting deeper expertise in areas like machine learning and the Cloud and in terms of architecture, the Cloud is the center of everything that we are doing. But we are not just taking our old legacy complex applications complications f — applications and moving them to the loud. We are rebuilding them so they can take add an available of what the Cloud has to offer. In the store associates, while building applications to be cloud native, we can put assistance in them and this is something the legacy architecture would never allow us to be able to do. These are some of the ways in which we can go faster and be more innovative >> DOUG McMILLON: I’m excited about the plan and doing it faster. Let’s go deeper into the architecture and talk about what I ahybrid cloud means, what it means at Walmart? Serb >> SURESH KUMAR: So we have built out a large and sophisticated Cloud on which we are building the modern stack and modern applications. We have got a private cloud that we have installed inside our data centers. We are partnering with public cloud providers and we are building out edge computing in our stores. So this combination is a hybrid cloud architecture that is uniquely suited for what we want. So we can take work logs and we can move them seamlessly from the private cloud to public cloud to make use of the plex capacity when we need it. This is something we did effectively last holiday season. We can make use of the specialized compute capabilities that the public cloud offers so that we can run our complex workload, whether it is training machine learning models, big data These things run very effectively on the public cloud And then finally, we can take our applications and use the edge that we are building out to move them closer to where our associates and our customers are inside the store so that we can improve the customer experience So it is three three pieces coming together that form the underpinning of the modern stack that we are building out >> DOUG McMILLON: I hope this is starting to connect some dots. We want to get faster, more innovative, we know we can use technology to be more productive and in today’s accounting world a lot of the tech we build is more than the on ex side than the cap ex side So we have this increased investment in technology that in a period of years we can position ourselves to be stronger and better. It’s one of the governors we can use as we manage earnings? How fast do we go? Does this happen in two years, three years, four years? It’s also not more than that but it is also not in a year. So it’s one of the variables you may keep in mind as you think about the guidance we gave earlier. So imagine the tech stack has been modemmized and emerging technologies are available to us to serve customers in dpirch ways and you hear about various things, Marc

mentioned some earlier today, which ones do you think are most relevant and practical to move the needle for Walmart >> SURESH KUMAR: Absolutely So we are incorporating many of the emerging and new technologies whether IOT, Internet of Things, Blockchain, voice, robotics, so on. But% there is one technology that I’m particularly excited about because it has relevance in everything we do and that’s machine learning or ML. So with ML we can improve customer experience, we can make our associates’ lives a lot easier and we can reduce cost by driving more efficiency. So let me give one example. This is a project we call Smart Substitutions. So imagine you are an associate, and you are picking items on behalf of our customers inside the store. And as you are picking items, you find that one of the items that the customer wants just went out of stock. This is occasionally So at this time, you want to go find an alternate product, a substitute, if you would, to offer to our customer so that they don’t get disappointed This used to be very error prone manual, a very difficult task In fact, our associates used to have a piece of printed paper with a bunch of rules written on them so that they could go find out what are the best cube institute for that — substitute for that particular product Well, this is where we ref lengthed the ML tool so come and help. We trained a model that extracted information about the products that we sell, inferred relationships between them, combined that with customer preferences. Now, the result is that we automatically figure out the best substitute and we direct our associates to go pick that Associates are very happy. They don’t need to stop what they are doing and go on trying to hunt for the product, but equally important our customers are very happy because the product, the machine learning algorithm picks up is unique, personalized for what the customer wants in that particular instance So this is the power of ML that we want to leverage everywhere in what we do >> DOUG McMILLON: We have a lot of focus on the accuracy of first time pick rate but when we have to do a substitution it needs to be as seamless as possible. We will try to eliminate them and the ones that we have will make better. Let’s wrap up with data. Walmart has used information for a long time to help us with in stock, replenishment, our suppliers have been helpful in helping us manage information we have had, but we have never really focused on customer data to the maximum of our capability, and there are other places where we can monetize and use data more effectively, personalize the experience for customers, et cetera. How do you view the opportunity as it related to data? >> SURESH KUMAR: Walmart is unique, we have over 260 million people walking into our stores every week around the world That gives us a huge set of information from which we can draw insight to help serve our customers even better. And that’s something that we want to do, that we are committed to doing, but we want to do that in a way that is extremely mindful of the trust that they place in us. I talked about personalization, I talked about machine learning, let me give you another example, which is online grocery pickup This is something that our customers love as a feature, because they can book a slot, drive up, and we have the product loaded into their vehicle. But nobody wants to wait for too long. They don’t want to wait for the slot and though don’t want to wait inside their cars. This is where data helps. So we looked at the data around how the slots are getting booked and we started predicting which slots are going to get filled up soon, put that in front of the customer so they could select which slot it is that would work best for them Similarly, we started looking at not just customer information, but we also started getting data around how our stores are actually functioning, what the parking lot looks like, and we combined that with information and data surrounding the stores, traffic factors, construction, so on. The result is that if we can predict very accurately when a particular customer is actually going to show up for their pickup order. Meaning now we can serve them just in time Times go down, customers are happy, but it also ends up creating a fly wheel effect, where, you know, the better we serve our customers, the more deeply engaged they are with us, and that gives us more opportunity to serve them even better

>> DOUG McMILLON: Suresh, really excited about your leadership. Glad you are here We are not going to wait to keep driving innovation until all of the work is done. These things will be happeningy parallel Suresh, thanks for coming up. I now want to ask Dacona Smith and Jamie Iannone to come up for a few minutes. Welcome, Dacona Jamie, we will start with you Jamie starts with member p, marketing, Sam’s Club.com. He works closely with the technology team. He has been with us for six years now >> JAMIE IANNONE: Yes, six years >> DOUG McMILLON: And abefore that Barnes and Noble, and at eBay leading search and other areas before making his way to join us which we are glad that you did. Lots of cool stuff happening at Sam’s, for us to be able to stand up and say that Sam’s has become a tech incubator is really cool >> JAMIE IANNONE: It’s exciting >> DOUG McMILLON: Thank you for your leadership as it relates to making that app. Kath talked about scan and go. Let’s lean into the product itself, what the future looks like for it first if you would >> JAMIE IANNONE: Scan and go started from two associates, entrepreneurs that said what if we could take one the Olympian points in shopping, the checkout lines and by giving it a point of sale on the mobile phone they are carrying. Members fell in love with the product, ininstantly a hit, very highly rated, high repeat rate so we rolled it out to the fleet quick requestly and since then nothing but good feedback from customers using scan and go. We wanted to continue to innovate, so one of the biggies it we would like to purchase adult beverages with scan and go as well >> DOUG McMILLON: Did that idea come up at 5:00 p.m. one day >> JAMIE IANNONE: All of the time. Sundays before football So that’s been a big success, and they also wanted to integrate it into the core experience. We integrated it into one sap, the Sam’s Club app. It’s 4.9 stars, members have the best things to say about it. So they continue to push the envelope on innovation What they are working on now is how do we eliminate the need to scan the actual bar code. We have talked about Sam’s Club now which is our tech innovation club in Dallas and there we are doing a test where you point the item at the item and it recognizes >> DOUG McMILLON: You don’t have to scan a bar code >> JAMIE IANNONE: No it says would you like to add the avocados and they go right to the back and people are like that’s really magic and that’s what our product and technique nem teams live for, to say you would, that’s like magic >> DOUG McMILLON: We talked about Ask Sam today but I would appreciate if you go deeper into how rt product was built Associates all over our clubs and stores running all over the place to get information and how efficient it is. It’s been fun to see how Ask Sam has taken hold at Sam’s. How do you build something like that? >> JAMIE IANNONE: Dacona and John talked about how do we make sure our associates can be on the floor helping members all the time. And how do we make it easy? So you come to work at Sam’s Club, it’s very intuitive how to work there. We thought, if we could take a voice assistant and have you talk to the phone and let it answer common questions like how do I cut a rib eye steak or how many plus members have we signed up today, that would make it easy Take a look at our z the individually >> So what does Amy Brown work today? It gives us our schedule for the day And that way we know who is coming in >> Hey, Sam, do we have vacuums? It literally gives me everything in the club that we have right there instead of having to ask the floor people all of the time for a product if we have it in stock It’s good just to have it right in front of me >> How do I make enchiladas? So it gives you the speck sheet and if you click on it, it will bring up the exact speck sheet for that specific item It saves time from going to and from the office, allows us to be on the floor much more with our associates and we can interact with them instead of having to run away from them to give a specific report and we can spend a whole lot more time with them and the members as well >> JAMIE IANNONE: We are excited about this. We talk about somehow empowered teams, engineers, product managers and designers. This was 11 engineers over five months that built this product. And what’s great is it’s a self-learning product. We tell our associates the more questions you ask it, the smarter it will get. So they started asking questions like can you print the sign for Brockically. It doesn’t have the capability, but it learned how to do it and now they are using it for things like printing signs on the floor >> DOUG McMILLON: Maybe I could ask it how to forecast sales in December. We need to work on that >> JAMIE IANNONE: Suresh talked about AI and machine learning so put it all in there >> DOUG McMILLON: Kath and I were in a Sam’s Club in Florida

and it was one section that looksed like it had too many skews so we were worning if the club had it set wrong and we asked the manager can you show the layout for this section. He pulled his phone app, asked the Sam’s Club app and sure enough he has it set just right. It was our problem not his problem and he was pleased to soibility it out to us after we got through showing to him. Thanks Jamie. How many years with the company, Dacona >> DACONA SMITH: Cart pusher >> DOUG McMILLON: When you show up at a store, what is the first thing you do? >> DACONA SMITH: Just that it >> DOUG McMILLON: You leave Walmart and go to Sam’s Club and you spend a year and see how the team is working as it relates to products like this and now you move over to Walmart U.S. to run operations, congratulations >> DACONA SMITH: Thank you >> DOUG McMILLON: Are you go going to steal the ask Sam Jamie don’t know. I am moving his tech over. No, but Ask Sam is a good example of many tech products Jamie delivered to the clubs at samples. Ask Sam puts all of the technology in an associate’s hand. So you can only imagine all of the modulars we sis the plan grams asking for plans, it all can be done by voice. Thank you, Jamie, you helped the whole company, Jamie >> DOUG McMILLON: Love to see the impact >> DOUG McMILLON: I mentioned Spark, the independent contractor platform would you tell everybody about it, what does the future look like for Spark? >> DACONA SMITH: Spark is our in-house delivery platform. It uses crowd source drivers, basically what you do is you go to drive for Spark.com, you can sign up to make deliveries. You have to pass a few checks, of course, but you pass a couple of checks and you can download the app. The Apple tell — app will tell you everything you need to do to complete a successful delivery. If you are in New Orleans or Nashville on vacation and you need to make a little extra money, we can help you out. You can go to drive for Spark and we can put you to work. But it is — it gives us a lot of flexibility. It will give us flexibility for us to understand the Indian use of delivery, more options to serve our customers, and as you know, Doug, over the last couple of years we have been expanding, we have launched and really scaled our same day grocery delivery We have used last-mile delivery partners to help us with that So if you think about Spark, it can help us provide flexibility and some learning. So that’s, it will be positive for us >> DOUG McMILLON: Just one of the ways we will solve last mile. We are working on autonomous vehicles, working with partners. In the case of in home, we wanted to be our own associates. There is a menu of ways for us to solve last mile for comrs and we are working on that. Thank you very much Appreciate you coming up. I want to invite a couple more folks to come up. Karthik Raghupathy leads strategic development and business development for phone pa and Kathleen McLaughlin is our chief sustainability partner Chargic, we have covered PhonePe to some extent, in your own words how would you describe PhonePe to this group? >> KARTHIK RAGHUPATHY: So, Doug, we are a technology company and we are on a mission to unlock the flow of money in access to services. So in behind behind Hind iphone PE means on the phone. And we used that to create the connection with everything to do with money on the phone >> DOUG McMILLON: Got it. So there is a use case that starts with payment in India, and then it expands from there. We have all seen what happened with we chat and how ten cent led that These use cases as they grow, do they result in what some people call a super app >> KARTHIK RAGHUPATHY: Let me start answering that question with a short video >> DOUG McMILLON: Anticipated that Used by every fourth Indian, trusted by 10 million merchants The platform power is staggering 500 million plus transactions a month. It enables the flow of almost $180 billion annually with PhonePe users can chat with anyone from their contact book and also send money in seconds for free. Make quick, easy payments anywhere from a street hawker to a high end store and everyone else in between. Pay for online shopping, travel, bills and mobile recharges in an instant. With PhonePe switch,

users get access to a world of apps at just one place. What is more they can use paying any payment mode of their choice PhonePe users are securing and growing money by investing in pings os like gold, mutual funds and insurance. PhonePe, fueling progress for millions in India >> KARTHIK RAGHUPATHY: So the short answer to your question, Doug, is yes, but in a much more broad and powerful sense than the traditional notion of a super app. By PhonePe we are driven by technology to offer everyone an equal opportunity to access money and services. We think this manifests in three dimensions, consumers, merchants and banks. Firstly, on the consumer side, we believe in enabling equal access regardless of location or socioeconomic status. We take great pride in the fact that more than 65 percent of our nearly 200 million users are from small towns and villages all over India. I think this is a testament to the power of technology to really democratize access. Secondly other than the merchant side we work with 10 million merchants, the majority of whom are small and medium enterprises. And we are actively working on craving their — driving their growth We recently launched the PhonePe ATM which is a reeflution air first in market innovation that has totally transformed the ATM landscape in India. It simultaneously solves for a consumer pain point to have access to ATMs while also driving more foot fall to our merchant partners and there by drives growth. And thirdly, on the banking side whether you connect consumers and merchants together, mon lies at the heart of this intersection and all use cases are aimeddality unlocking the flow of money. So phone PE users can transfer money to each other to pay bills, to spend money both at online and offline mer merchants and manage and grow money using financial products like gold, insurance and mutual funds so we are a super app >> DOUG McMILLON: Some people may be contused by the ATM reference. India’s generation is skipping ATMs, it’s digital money disbursed frequently at kir rannas, that’s an example of how innovation is occurring in India and innovation is occurring at Walmart. We are excited about PhonePe that’s why we have excited about it so much today, but we are just as excited about FlipKart and Myntra, and the way these pieces fit together to decree yaitz a mutually reinforcing ecosystem is super interesting. The retail model has changed and is changing and we are learning a lot from what is happening in India, and we appreciateitive of you and the team. Please thank everybody for us. Will it might surprise you to know that in my job sometimes things get announced at Walmart that I have never heard of until I have read about them at the news. I know that’s not supposed to be the case, I’m supposed to hear about everything internally, but today there is so much happening across the company that it’s true 245 we are solving problems and innovating in ways I haven’t heard about. I try to be careful not to ask too many questions when that’s the case because it will slow people down and they will want to clear everything with leadership and we don’t want them to do that We have common values, we have a culture, you know what probles you need to solve and go solve the problems. That’s an important ingredient as it related to speed. When we were talking about telling you innovation and tech stories it was exciting for me to hear and what sher team has been doing to take technology and put it to work to tackle some of the biggest problems we face as humans. Kathleen is a global shaper as it related to thought leadership and policy and we are really thankful that she is part of Walmart heap helping us all become chief sustainability officers. If you would, Kathleen, tell them how we are deploying tech to help with things like climate change >> KATHLEEN McLAUGHLIN: Climate is one of the biggest issues we face in the environmental and social landscape. What we are trying to do at Walmart is take issues that are real development for our business, our customers, our associates, communities, and address them through our business assets in a way that not only helps the world move quicker to transform, to address these issues but it’s also good for I about. And climate is a great example. We have been working, Doug, as you well no since 2005 in earnest on our own emissions from operations. We have doubled fleet efficiency We are on our way to 50% renewable energy powering all of our stores. We are working on energy efficiency on rerefrigeratorrants, all of these things, but we are a retailer and in the consumer goods in general, 90 percent of emissions are not in retail separations, they are in the

supply chain. It’s things like agriculture, waste, food waste, packaging waste, the design of consumer products themselves, deforestation, things like this So a couple of years back we set a science-based target for emissions reduction. We were the first retailer to do so, and we said, okay, scope one, scope two, we have got it. The question is how do we tackle all of the emissions in the supply chain? We launched a project call gigaton that is powered by a digital platform to help suppliers engage and work with us to accelerate emissions reduction across supply chains and there are three things that are pretty exciting about it One is it’s science-based, but it’s very practical. So we worked with worldwide life fund, with Environmental Defense Fund, to develop a bunch of super practical interventions that suppliers can take in supply chains and translate them through calculators into emissions reduction. So it’s very easy for people to engage in this and get started and start working on emissions reduction. The second thing is because of that, it democratizes cake says. Karthik, you talked about this. That’s a theme that runs throughout Walmart. We now have 2300 priors working on this, signed up, working on initiatives to reduce emissions, and I think you mentioned this earlier, Doug, we are over 200 million metric tons avoided, it’s actually north of 250 at this point just a couple of years in. So well on our ways to the gigaton target And the third thing is the way we have set if up with the platform and incentives and help for suppliers, it’s a bit of an escalator in terms of ambition and impact. So people can come in. Ease easy to get started but then we rach ratchet them up in terms of ambition and what they are able to achieve. We have incentives from gig ga giew raws, these are the run dreads that have smart goals, reported results and so on. We are excited about that because it allows us to keep the standards high of what does it mean to be making progress on this, but have a broad, get people in and move them up the escalator toward the goal. We received an A from CDP on claim mate action I think it makes us one of 30 companies out of 8,000 that submitted to CDP to get that score. So I say watch this space. We are going to continue to innovate here, and with our whole ESG agenda to try though drive impact in a way that does create value for business >> DOUG McMILLON: I mentioned earlier this idea of business serving-month-old — multistake holders, you gave us examples of how reaching out to suppliers or thinking about the planet or communities is really good business because eliminating waste helps us fulfill our purpose of saving people money so they can live better and sometimes the waste takes the form ever carbon, sometimes plastics and we are trying to work across the whole system, be systems thinkers, and drive an overall optimization of our business model, not a sub optimization. I hope through these examples you can see that culturally we are there, our mind set is there and we are doing good work and we know we can do more and Kathleen I appreciate your leadership in making that happen >> KATHLEEN McLAUGHLIN: Thanks >> DOUG McMILLON: Karthik, thank you. We will pivot now to the Q and A portion and I will invite the team to join me up here and we will open it up for any subject on any question you want to ask and Paul’s hand went up first. He was early >> If you could state your name and firm, we would appreciate it with the webcast >> AUDIENCE: Thank you for the information provided today I wanted to maybe first focus on the U.S. operation. A key to success is the collaboration between John and Marc’s team Maybe let’s just dig into that a little bit and speak about that collaboration and maybe even that friction as we think about balancing growth and being a more profitable company As a part of that conversation, maybe just bucket for us what are the omni channel initiatives really enabling this year’s guidance, and then if we were to think about if you were actually providing a longer framework what are those items from an omni channel standpoint that’s

not yet at scale today but will absolute I be a factor over the coming two to three years? Thank you >> DAN BINDER: We all want to weigh in on that. John, you go first >> JOHN FURNER: First, I think it is important that between Marc and I, there is a lot of collaboration, we spend a lot of time working together, thinking about how which serve customers, whether in store, pick up, channels and really the lines are pretty blurry between eCommerce stores and how we think of omni. What I’m most excited about and energized by is thinking about putting the customer at the center and then building everything in our ecosystem around the needs of the Kansas and between all of our businesses and the tools we have available being able to serve the customer anyway they want to be served, at home, direct to home, refrigerator, other services like health and wellness. So thinking about it for us as we look forward, it is all about the customer, finding ways to create new ways for growth and then layer on top of it innovation that works across all the channels. The I’m really excited about the work we have been doing >> MARC LORE: As John said, the lines are blurred. We think about the business as one U.S business. As John said, there sure one customer at the center We have been on a journey now the last couple of years, we brought in a chief customer officer, Janey and we recently brought together the supply chain under Greg Smith so the orgs are coming together and I think it is working well. Both the chief customer officer and Greg went into supply chain, it has helped us create a true end-to-end omni experience, merchandising is the next area we’re focused on in looking at right now. Even still, you know, underneath, the people running both areas of eCom and stores, Gms of the businesses are working closely together more so than ever before >> DAN BINDER: In the late 90s I was the general merchandise manager for electronics, books, sporting goods, stationary, other categories, I could see what was happening with eCommerce, eToys and Amazon selling books, those changes, going way back then we were thinking about spending out WalMart.com and having it be a separate he went tip separate from WalMart to create speed and investment. From the late 90s through the last few years I have seen the fits and starts with WalMart getting committed to eCommerce to make it happen and would love to do some of that over again if we could do it over again and kept separation, I had seen it in large and small waysdy anyonish the emerging investment business, in innovator dilemma, it influenced me a lot, having had conversations with him, I concluded we have to keep it separate for a little while the customer keeps pulling it together, they want one experience for the brand, and so what we have got to have, we have to have a leadership team that gets omni and believes in omni and supports the whole thing People that work in eCommerce that want to help stores, em that work in stores that want to help eCommerce and over time this ends up being one business and one thing. Marc mentioned the customer org and supply chain org, other changes will come along but we have to set ourselves up so that the whole thing can evenly know straight, move with speed in an omni figures and I appreciate how everybody has worked together the last few years but there is a whole new gear to get to to make it-in a faster way, it is really time, this next year maybe a bit beyond to finish that off and have one omni org still with a great diverse team thinking about how we solve these problems, but in the end, one customer proposition that’s seamless You asked about what’s that unlock looking ahead, just think about how easy we can make it to do merchandise returns when somebody wants to do a merchandise return. I think about how we can connect payment, how we can use data when we have one version of the customer, we know who they are and what they have consumed across the channels. There are lots of little unlocks that will occur as we’re better at that I’m really excited about it >> KATHRYN McLAY: Even across, if I think about this, a thing that John is doing well with Marc that we can import across, if you think about what you’re doing with Spark delivery, that’s great as we lean into ship from club. As you think about the format, what are the things that are working in other formats from aen omni perspective that you can just steel and go fast with >> AUDIENCE: This is KeyBank, capital markets. You seem like you’re leaning in services in a superstore, I know you have always had some service component, restaurant, things like that, what’s different this time and what filters are you

looking for in order to determine if you do a broader rollout? Thanks >> DOUG McMILLON: The first are the initiatives in healthcare It goes back to what customer officers need and our ability to serve customers and call it 5,000 communities all around for a second gives us an interesting ability to help a lot of customers with the things that they need. You know, another area, when they’re in the store, they need to — on the website, they want to finance an item they’re buying, we can help with that, whether it is us, a partner, some combination there have, there are a number of ways that customers need to be able to close all their transactions and I’m excited about both those opportunities as Doug said, we have a big base, we have a lot of data, things we can do to make people’s lives easier on their behalf and Walmart is well suited to do that >> AUDIENCE: Just a question on — goingen humid — a question on the Walmart apparel offering, learning from December, but as you think about the mix of business, opening price points versus brands, I would be curious to hear from both of you guys if you can talk about the importance of branded apparel in the mix and what you’re doing online with branded apparel being able to maybe move some of it into the stores and sort of how you’re working together on making the apparel business better >> BRETT BIGGS: I mentioned it earlier, the fashion pyramid, basics, fashion basics, fashion at the top of it. In the store assortment in the last year or so, it is focused at the lower end of that end points where we need to expand up, having it aligned between them, working together we can use the website for different things that we can use the stores for and they complement each other and it is important to think of that thread that goes from the fashion business into the basics and then there are different items we can share across others that you may be able to do online that we don’t do in the store >> MARC LORE: We have a good example, both brands they were online first and now in stores, and we see that trend continuing through opportunities, you know, through branded assortment we create that’s proprietary going across pcom and stores >> BRETT BIGGS: Home and apparel are an example of two teams working closely together and they can extend assortments in ways they couldn’t on their ownt apparel, but home in particular has had a lot of success early and Anthony and Jeff, the two people that lead the business, they have done a really nice job pairing up what’s in the stores, the core, and they complement it on the side with the long tail and customers are responding really well >> AUDIENCE: Chris, JP Morgan, you talk about the fill by Walmart vision, a little more, how much is the tails of the assortment versus say the first 1 million skus you talked about that drive 80% of all of the transactions? Is it recognition that you’re not getting the coverage as fast as you want, maybe you’re not getting the access to the brand as quickly as you want? Then just broadly, what’s the puts and takes of 1P versus 3P >> MARC LORE: Well mart services, it is a critical part of our strategy you mentioned it, it has brought it in assortment. There are merchants on third party that we want to have that simply don’t have fulfillment capabilities, we’re not and to get that assortment on the website. That’s really the first priority, to really focus on those brands and getting assortment for customers, also just having the stuff in our warehouse allows us to offer a better customer experience and allows us to comingle the product in the same box when we ship it out with first party, which helps the economics. There’s lots of reasons to like the business We’re feeling good about the start. We have built the technology, we have got a handful of sellers using it, they like it, we’re seeing good results. It is something that we’ll take slowly, make sure it is right before we really blow it out >> AUDIENCE: A follow-up: It seemed anythingsly it was well, if we get coverage up to that 1 million skus we don’t necessarily have to go beyond What I’m trying to N.D.P., what’s changed now that you’re doing it? It is more we’re good at this now, moving to the next leveling or was there something that you felt like the strategy wasn’t addressing? >> MARC LORE: It was always part of the strategy, just a matter of getting to it The top million SKUs is an area of focus to get those in our warehouse, it does represent a large percentage of sales, but the goal is still to carry everything. So we definiteliy want to carry everything that a customer might want when they come to Walmart.com >> We may have failed to

communicate clearly, including me, the 1, 20 million, first party versus everything, we never thought 1P plus 2P were a million, we were focused on 1P as we were answering those questions, it will be a bigger assortment when you put 3P with it >> The market perception is that Walmart has been especially the U.S. Walmart is on a journey in the last few years where there’s been an investment in price, there’s been an investment in people, and now the company is starting o harvest those returns and at the same time, it is eCommerce profitability stabilizing such that the totality of the U.S. business, the margin there, it is stable and can continue to be stable from here. A, is that a reasonable expectation? B, what are the two three factors that might have — that might arise to motivate the company to say, hey, we have to make further sizable investments and bring down our profitability from here? Totally unrelated to that before carry takes away the microphone, have you won the war against the hard discounters? Could the battle reimmerge such that those price gaps are going to shrink and you’ll have to as all the others have, get bigger, mother stores, more competition, we’ll see flareups of that over time? Thank you >> DOUG McMILLON: We look at the profitability of what you saw last year, particularly in the U.S. business and you see the guidance we have given this year, pretty similar. I think we feel good about this and John can tag on a little bit. We feel good about that kind of algorithm so to speak for the Walmart U.S. business. We’re always going to invest in the business first. If we see opportunities for things that we think give us a long-term benefit I think Doug said this morning but may have short-term pressure we’ll be upfront with you about that. What we’re saying today with the guidance is we think we invested into things that we feel we should to make sure we’re there for the customer now and in the future But the customer will continue to change, competition will continue to change and we have to make sure we have the ability to evolve with that >> DOUG McMILLON: There is a reason we only give annual guidance. It is a fluid environment and we’re making decisions all the time. When I look ahead, think about what more we of we would want to do, it is things we would do to secure the future of the company. If we see a window to play offense on something and we think speed is important, we would be more aggressive in that way. We would like to pay our people more, and we have been, and we’ll continue to be focused on people. That will be important. But we have put a lot of this on the board, now we have a lot to would, with, a lot of variables to make decisions around and so I think we have described it earlier and today, just now sufficiently >> The sales number as we said earlier, it is 9 million of growth, a great number for the total business and, you know, inside the box, online, we’ll always be watching what competitors do. I wouldn’t underestimate any competitor at any time, we’re constantly scanning, looking, making sure that whatever we are out to offer is what a customer wants and it makes sense in terms of value. We’ll always be looking and we’ll decide as we go >> As it relates to hard discount, we don’t underestimate them or anybody, our opening price points will have the right spec and right sized and priced competitively and then we have this whole other assortment we can work with to make sure we deliver profitability for the business >> JUDITH McKENNA: And how we have exceed with discounters, a difference with the U.S., the price position is much stronger already and it gives you the ability to compete on everything else. That’s not necessarily true in every market around the world where the price gap is much wider, you’re already starting from a better position here than I think you would see in other markets >> AUDIENCE: Caroline from lines burn steen, I want to ask about the supply chain support for the omni channel support in stores, it sounds clear that the supercentres will be the hub for pickup of course and then home delivery. Curious if there are investments you’re considering for things like picking at the DCs, dark stores, pickup points, anything along those lines A separate question for Judith, your perspective on the regulatory environment in India and hop that is looking? >> Let me take the first part We showed in the presentation earlier this idea of something called Ahlphabot, it is an experiment we’re learning from in salen, New Hampshire and we’re expanding to mother stores this week, that and on the parts will work in distribution centers as well we’re internally rethinking the way that we would define supply chain Historically we may have thought

of supply chain as the part of the business that brings something from a supplier to the back of the store, but with all of the things we are doing today, including Walmart and home, the supply chain goes from point of supply all the way to the refrigerator. Everyone of those pieces needs to be put together and optimized the right aand there are several different types of text knowledge we’ll test with, experiment with to find the best way to do that We’re running automated vehicles in a market, for example, and we have got as we said Spark, Spark is the first multitenant platform we built-in side of the company where tenant number one, Sam’s club, tenant number 2 and that’s a platform that can be expanded. Think of it as the point of something that’s grown, manufactured, packaged, all the way to the customer officer’s home is how we’ll optimize the whole entire supply chain >> MARC LORE: Another way to think about how integrated supply chain is starting to get, imagine, you know, we have regional distribution centers that supply stores and full truckload, could you move product purchase fulfillment center to RDC to the store and then ride the rails of last mile delivery to someone’s home where we’re already delivering groceries and the GM package just rides. There are things like that that we’re thinking through right now. It is certainly very fluid, a fluid process >> JUDITH McKENNA: For the regulatory environment in India, what I would say, sometimes people forget we have been operating in India for over ten years. This is not something that we got used to 18 months ago when we made the investment We have had a strong cash and carry business there throughout that time You know, I think actually payments, eCommerce, legislation around the world is shifting and changing. Everything as these businesses are grow are learning different ways to look at them In an emerging market with India with such a fast-growing part of the business, that’s no different either. We continue to work with the Flipkart and other teams closely they’re focused on the customer ultimately I think is the right thing to do, keep doing that, and then we work with the government from a perspective of having a seat at the table to talk about these things and to work our way through them It is something we knew that was there when we made the investment. You know, seeing the results we’re seeing, not just for the business itself, but in the impact they’re making on broader communities, creating jobs, really thinking about how they support small micro businesses, Kirana shops as well, it is all part of that landscape >> AUDIENCE: Morgan Stanley You have always done a great job with your core customer Typically in that demographic they spend a large part of disposable income and you’re probably getting the lion’s share, the key is breaking in to different demographics, that’s the future, you’re doing it, eCommerce business is growing Can you rate your success maybe for you, Doug, John, Marc, breaking into new customer demographics? Have you any specific examples? Then a second question for Judith on flip card, for Judith and Brett, when will delusion moderate? We talk about losses are consistent with what you ex effect. I don’t know if we know exactly what you expected, should they moderate given that it is a volatile environment? Thanks >> DOUG McMILLON: Let — >> I’m start with the first question, customers and grocery pickup specifically. We have had a large successful grocery business for some time and in the last few years, quality improved, assortment range has improved and you have seen the business accelerate and share go up When you can get into the balks of what’s being shopped in groutry pickup we see more choice B, we see prime beef, organics, produce, groceries show up, it appears at least part of this growth is coming from other channels and places because we have been able to marry the assortment with a service that appears — that ahad lines well with someone who is time starved with a higher income level. Inside the pickup business, encouraging to see what happened, the quality levels enable us to be able to appeal to that consumer across other channels like the work that Marc and the team are doing online. It is a great example in there, item by item >> MARC LORE: We hae been pushing up UAR each year on.yom as we break more premium brands and we’re definitely seeing new customers come in, especially with the proprietary haddie brands, with Elequis, all of the brands that we have formed, scoop is a great example a lot of folks are new to Walmart and Walmart.com there >> Sam’s made a pivot to a higher income member a few years ago. How is had that going? >> KATHRYN McLAY: That’s going

really well. The move to a member whose income is about 100,000, a larger family, and what we’re seeing, that is driving membership growth and also driving traffic >> JUDITH McKENNA: On the Flipkart piece of this, the way I think about this, it is we have been clear, the dill illusion next year will be roughly in line with what you have seen. That’s the guidance that we’re giving I’ll tell you about the business, it is no different to the U.S., thinking about where we invest, thinking about where we grow, thinking about where we save, think about new revenue streams. The great thing about both flip card and FhonePe, they have a lot of levers, they’re thoughtful with how they do that, both are thinking about tech revenue and they have this amazingly powerful data engine that sits behind that and I’m really encouraged by some results I’m seeing from it >> Bared First question on the services around the supercentre when do you think you’ll be ready to talk about the cadence of the rollout for the health centers? Is that something that we should expect tall this year, next year? How does that impact, if at all, your optimal strategy, what you’re currently doing in the stores? That’s the first question >> Let me first talk about what we have. We have two centers open in Dallas, Georgia, we opened the second in calhoun a few weeks ago and I think we’re encouraged by the demand we’re seeing. The number of consumers that are looking for options for healthcare and the quality and affordable, it is encouraging Now, what we have do do in the next if you months is learn how the model work, right mix of services and how we price services, that’s work to be done. We want to get through this and get a clear understanding of where we’re going with it over the next few months. In addition to just those two services, we also have got a big pharmacy business, we think there is more opportunity to serve patients in ways other than just filling pre descriptions. So think about the ability in the right places for our pharmacists to practice up in their license and help put diagnosis, another opportunity that we can explore over time and then the second part of your question — >> AUDIENCE: How would it impact if at all your current optimal strategy >> That’s an important part of it. Optical. We have a good optical business, we have a remodel program that’s very encouraged optical remodernized, the shop, things inside of it, we have equipment we’re learning about checking your vision from remote locations, using technology to streamline the consumer experience. Both businesses are quite encouraging, we know there is a big demand for it >> AUDIENCE: Then Judith, maybe one for you, just your latest thinking around the Monday advertisation path for the Indian assets and and as you think about assets like Sam’s club and great value how do you use those assets in markets that maybe you don’t want to operate in as a corporate entity, are there ways to maybe sweat those assets a little more >> JUDITH McKENNA: I think we talked about the Monday advertisation path within the Indian businesses. It is a really interesting one in terms of a learning skills in new areas but also thinking about use cases that can create compatibility as well for those The one that’s interesting is actually the question onal scams club and how you think about that you may remember that we did a transaction last year with Brazil and one of the things we’re doing in Brazil is we’re still supporting the is scams club and the — of Sam’s club and we still provide member products into that, we talk about how the operation runs and we still provide training expertise to it as well. It is really interesting when we’re learning how we can support that in a market where we already have a 20% stake within it. So new further plans other than to learn at the moment It is an interesting experience for us to make sure that we can operate something in a way that can be externalized >> AUDIENCE: Burkely’s John, you mentioned that there was — you did a quick collect order and you noticed there was some friction that you think you can work through. I’m wondering if you can provide more color on that Then, with respect to the in-home tests that you’re doing now, can you give an update on how many customers you have and then what would be the gating factor on really aggressively — more aggressively rolling it out >> JOHN FURNER: I’ll talk about the shopping experience first First, the grocery pickup business that we built is a great offer for customers, it has got a really clear way for customers to shop in food and consumables, it offers a little bit of general merchandise in the operations, they have done a great job of growing not only

with new stores but the coms is encouraging for the stores that are open more than a year and some over two years Then, on the other side, we have got an application that we call the blue app with general merchandise in it and mostly comes from the site or from the marketplace, but inside that are embedded so really great applications for in-store tools, maps, lists, customers use those and like those tools a lot What’s going to happen over the course of the year, we have already got about half our users in aen environment where they have both apps in one place and then we’ll be building out an experience where you’ll have search that helps you look across the portfolio, a basket where you can ring out multiple things and we have a simple identified experience when you go to the store to pickup or when you have something delivered to home. It is hard for a customer right now, at times you flip back and forth between the app and you have to navigate different fulfillment option os, we want to bring it together and make it seamless On in-home, the retention rates are high. We haven’t disclosed how many customerless are using at this time, it is in three markets but away really encouraged by what we’re learning, the MPS scores are high, the customer satisfaction that come along with that,, the comments and feedback is outstanding, it is another way that a customer can decide to have Walmart as a brand take friction out of their lives and whatever is on your shopping list, the most important thing is that when they come home, it is in the refrigerator and constantly stocked. We’re encouraged by what we’re learning so far >> DOUG McMILLON: We didn’t didn’t take it to every store in Kansas City, Pittsburgh, it is a Mal small number of stores and a small sample size right now >> AUDIENCE: Any color on the demographics of the customer base? >> Not yet. I don’t think it is big enough that we wouldable able to tell you the insights with demographics, but generally speaking, it is encouraging to see the number of people who are loving the service and with every delivery business, in-home, Spark delivery, one of the challenges that we’ll work through over the next fun months is getting density in an area because the more customers you can deliver to in a neighborhood or a suburb then it brings the efficiency of the delivery process and the cost down per deliver I didn’t >> MARC LORE: It is encouraging to see the customers that are new to Walmart as well. That’s very exciting >> DOUG McMILLON: A thing I learned when I went to visit the Kansas City test a few weeks ago, our own associates are using the service. It is $20 a month, and our sample size is small, our associates make up a small percentage of that small pole, but a bunch of them are delivering into each other’s homes and love it All kinds of people are going to use this service. It has been fun to watch them deal with each other’s dogs and things like that >> AUDIENCE: Scott from R5 capital I wanted to — 77% of the business is consumables, throw pharmacy in there, it is clear that you guys with omni channel becoming bigger in that business have a lead with what you have done on a click and collect and now delivery. I guess going back, the race is on to improve economics, Kroeger that’s partnered with Koto Amazon that now has cut all fees and doing it for free, how do you guys defend your lead and use whether it is micro fulfillment, there are a couple more of those, how do you continue this lead and maybe even grow share in an environment where your competitors look right now that maybe they’ll have automation sooner >> JOHN FURNER: Step one, you have to run a great operation We’re proud of the progress made in the stores and Suresh talked about the substitutability, the best substitute is it is in stock, we have to be in stock what’s whiting go learning to manage this pickup business in addition to how we have managed stores over time, we have an interesting in flow of information from customers telling us all of the things they want to buy and how they want to buy it leading us to a better way of designing modulars and assortmentless store by store. So I’m pretty excited about being able to put the customer lens into everything we do inside of the store The second, we have more stores to go and I don’t want to say that’s where all the growth will come from, that will help, more markets we can cover and get the service out and then third, you know, adding on the ability to be able to fulfill this in a number of ways that is seamless is probably the thing, I have said a couple of times, I’ll say it again, I’m mostly excited about bringing the two apps together, having a customer-centered view of how we think of all of the things in their lives, a busy Saturday, trying to get refreshments for the soccer game, birthday party, weekly grocery shop, the new Deli where we have one associate go into or a service pick up and run dinner home. We have a really great portfolio there, we have to build it out so that the customer thinks of us as default the way that Doug’s mother

thought about when she went shopping at Walmart >> DOUG McMILLON: Speed of automation is important. It is of automation. When you this of the stores like we have done with Alphobot, same inbound freight and last mile shared with this automation outside of the box instead of some huge center that does grocery automation, that’s an interesting choice that time will tell which one was the right one >> AUDIENCE: Kate, Goldman Sachs My question is on gross margin It sounds like you’re implying it willic down this year, I think that was the answer earlier. What would have to happen for gross he margins to be stable to up even if it is a continued error of price investment? >> DOUG McMILLON: We want gross margins to be stable, we want to drive the productivity label, we have to get the savings to be at a faster rate than the gross margin investments that we make, Kate. I don’t think there is necessarily a place where we rest on gross margin, I think we’re constantly going to be trying to give a better value to customers >> JOHN FURNER: Talked about it earlier, the sustainable way to drive every day low price, it is about bringing the cost down The best way to bring cost down is to sell more. Cost is a denominator, and then if you can continue to chase SDNA down, line by line expense management, we would like margins to reflect the decrease in SDGNA because we want customers to have a better value >> AUDIENCE: Greg, a follow-up on that if we went whack to Sam’s a couple of years’ ago I think the decision to repurpose 60 clubs as fulfillment centers, really move ahead on the omni channel, now that had a few months in the WalMart U.S. role, do you see a similar shift in how you use those assets to optimize for productivity going forward? Is it a totally different kind of shift in the U.S.? >> JOHN FURNER: We’re still thinking through the entire supply chain from end-to-end So I don’t think I would be ready to say today the right way to design the supply chain, whether it is the fulfillment center, distribution center, stores, number of nodes we have to work through to make sure we’re serving the customer officer in others the best way we can. The stores, our stores people shop in, they also fulfill. I don’t want the message to be that we’re thinking of the stores as fulfillment centers where you shop. They’re stores that can fulfill and what we have done in the business I think is quite helpful, it is maximizing and optimizing the number of slots and then creating the minimal amount of disruption so that stores can be great supercentres with a great produce department, meat department, bakery, and have a really high-functioning merchandise area throughout the business but we can fulfill orders at a strong rate >> JUDITH McKENNA: We have a business in the UK, a home shopping business, online shopping which is 15 years old They have got some high densities already, high pick rates, they have been out there for a much longer period of time. There is still — they don’t have a completely different layout in the stores, but the density of pick in many cases will be higher. I think there’s still a lot of learning that we can do through that China, the other way, they’re starting to layout stores slightly differently so that they can respond much faster as the time to deliver is coming down rapidly. You know, we’re trying to sort some of the deliveries out in 40 minutes So it evolves as well with the customer offer and we have got this benefit of seeing around the world how different people are doing it, learning from how you drive density so you don’t have to go to dark stores, but equally, if you have to change the layouts a little you can do that without disrupting the customer’s experience >> DOUG McMILLON: And we’re pleased with the eCommerce that’s happening from the clubs >> KATHRYN McLAY: We saw it grow, it gave us extra capacity but it helped us to substantially reduce our shipment cost as well, our fulfillment cost side of it as well The other part that I think is exciting, looking from ship from club which gives you a whole other 600 stores which you can use as points to leverage as well. You know, as we look at club pickup, ship from club, direct to home, and using these clubs that we have turned dark, it has given us a great kind of network to go after the omni sale >> AUDIENCE: My follow-up for that, and you can pass it off as you want, but I think about how we expand the addressable market for Walmart, and also Monday advertise all of the great customer traffic and productivity loop, I think we bought jet, flip card, a good place to expand, Amazon is built on 1 1 million-dollar advertising business and I think in the past we have talked about, you know, partneringne, l comes to mind as we picture it And I think it is more organic than through acquisitions, there may be periodic acquisitions, you know, obviously can’t rule

that out, but the opportunity to build digital products, which is part of the point of the panel, you have now got a situation where across the company we’re learning how to build experiences that you can Monday advertise and tack on to the Corp business I think I said something earlier about we’re attaching digital products and businesses to the people and physical core businesses that we built over time. That’s a big opportunity. And it can relate and will relate to financial services, we have a financial services business now in the U.S., obviously we have talked a lot about phone Pe today, there is an opportunity in Mexico, that exists across the company and all the different markets In the U.S., you can weave in with payment, more successfully than we have so far, other use cases that help drive financial services wheel and then there is healthcare services, advertising has grown faster than sales. We want to be thoughtful about how we grow that advertising business and not have it pollute the customer experience either online or in store. There is kind of a management governor on how big and how fast we want to make that. It will grow faster than sales. We have a great opportunity to do that Are there others? Yeah, there are. We’re choosing not to make a big investment in digital entertainment. There is plenty of money being used by others to do that. We can use ours to do something else and so there will be an opportunity for us to have partnerships in the digital entertainment space, and as we have described to you before, we do think about what is strategic in core that would cause us to lean towards can we build it as it relates to acquisitions, do they bring speed of speed and expertise better than building, with what’s left, how do you partner to create open systems so people window, we have a history of enabling people to win by doing business with Walmart, we think it can be done in the future with all kinds of people beyond product suppliers >> AUDIENCE: BMO had capital A couple of eCommerce relate related questions, in terms of the initiative to map the general merchandise more for the same day availability, what’s the timing and expectations for that? I assume that can have a big impact on gross margin there Then we have talked a lot about in-home but not as much as grocery unlimited. I’m curious how that’s going, what kind of ink mentality you’re seeing, people kind of — your customer trading up from pickup to delivery, is that a new customer? Just any insights on that? >> JOHN FURNER: I’ll take the second first It is a mix. Our customers are shopping in the store who go straight to delivery, others who have moved from the store to pickup, others we gained from other places either by pickup or delivery that are now using the service. It is only a few months, but encouraging results so far. We’re happy with the number of people who have signed up monthly and then annually, so we’re happy with that The first part of the question to make sure I shoulder it? So we have a percentage of the store now that’s available for pickup in what we call the orange app and you know, priority 1, to get the apps merged together so that we can start expanding assortments and do things like align our catalog so we know who the customer is, knowing who the customer is shopping that helps us understand intent and you can merge and and line this with a catalog of products across the entire store and then beyond the store so that we can be more predictive and serve them in a way that they want to be served We were working on it every day and working meeting on it everybody week >> DOUG McMILLON: Expecting a lot of product in picking on that in the course of the year To repeat what John said, you can go out on the grocery app, the orange app and buy back to school, moms love it, they take the list from the school, it populates, that’s a great example of the fact we can already do it and how much they want it We do have to stitch these two together as soon as we can and obviously do that well >> MARC LORE: I would add on one app, it is super important as John mentioned, as we bring the two together, we’re not asking customer officers to download two apps so we’re really leveraging that relationship we have built to then sell more long tail GM on Walmart.com. We have already now got about 50% of the traffic on Walmart.com that has seen the grocery app and we’re seeing a nice lift from that so hopefully when we do it the other way around and we actually show blue app, the Walmart.com to grocery customers we see a similar type of bump Yeah. It is a very important part of our strategy >> JOHN FURNER: That’s an important point What’s interesting, there are customers that are only using one app or the other, unaware of the other one. We merged them together seeing customers using blue getting on orange, vice versa is encouraging so far >> DOUG McMILLON: I think I said

moms can use it, dad’s can to, it is moms that have hugged my neck, literally when I go to a store most always go out to the pickup area and for two years in a row when I have gone out to that spot and I have seen moms that have a grocery order with their back to school list and had they say things like I don’t have to throw elbows with other parents to get my school supplies, you know how great this is! One literal wherey hugged me! Mo moms and Dads would both love it I’m sure >> AUDIENCE: Chris, jeffreys On Sam’s, a lot of positive comments today, renewal rates improving, membership count accelerating, accelerating year on year, I’m curious with respect to the guide how do I square the fact that comps are looking to decelerate a little bit on the one year, two year, is there something that I could be missing? I have a follow-up, thank you >> KATHRYN McLAY: Did you say that comps are decelerating >> AUDIENCE: The guide is basically 3 for this. Coulding year whereas it was 3.5 last and two years as well >> KATHRYN McLAY: Yeah. We still see there being growth, we still see that we’re investing into meeting the mobile where they want us to from an omni perspective and also driving traffic. I mean, you know, it’s down a little bit, but I’m not seeing it decelerating >> AUDIENCE: Separately, just long-term strategy with respect to capital allocation, you made a few efforts in pushing upstream in the supply chain, how critical is that on a go forward basis and just any early color with respect to the returns that you’re seeing this far? >> JOHN FURNER: The way we think of supply chain, the stores first, we have a number of experiments going on in the supply chain, one we’re working through, a product symbotic in Florida, pal advertising things so that they can be delivered on pal lots and we’re pretty excited about the results we have seen so far that helps the associates in the store, and as a result to helping the associate, it helps the customer, we’re in stock, and as things come in from the back of the store, on to the sales floor, it is much easier for the product we take straight to the aisle and put on to the counter All of these things, whether it is in the dry supply chain, preparing the supply chain, the meat plant, the Dairy plant, we’re thinking about the end user in mind and it is not just a point of assembling something to pull cost out of a silo. We don’t want to sub optimize, we want to optimize the entire network from top to bottom >> AUDIENCE: Regarding machine learning, part of the opportunity, it is scale and the training set. What do up see happening across the connected dataset as well as inventory management as you transition to prescriptive analytics and an emerging Tomic for younger customers is privacy and transparency around data. We would love your thoughts and I have a follow-up >> JOHN FURNER: We’ll start with ML and supply chain. We’re working on processes upstream to help narrow down the positive rate of forecasting, in other words eliminating issues with supply chain, it start with the forecast and as product moves from start all the way to finish variable I it, receiving times, it traffic patterns, weather, creates the rates, as you narrow the tolerance down, transaction by transaction, then you work the failure points out, we can get to a point where inventory is more realtime, less extra inventory in the store and I’m excited about the work streams that the team between Suresh and us are working on. Forecasting is a big piece. You have heard us talk about perpetual inventory before. Products work in the stores that help us to correct if they’re wrong but we’re trying to solve the reason why they’re wrong with ML from top to bottom so that the store associates have a better experience with on hands being right which helps us with in stock >> DOUG McMILLON: Anything more to add on the customer and data? Suresh, you’re citing Miced up Stand up if you would >> Suresh: The mic is not turned on With what John was saying, a thing we’re trying to do with ML is actually make use of the data that we have already collected There is a bunch of data where we can bring it together in such a way, we can train models on it, a thing we’re really excited about, it is that behaviors where we can draw inferences about customer’s behavior in such a way that we can actually help the customer experience are the areas where we believe that there is great potential Whether it is — I talked about

substitutions as one example, but there are many areas where we can take the information that we have about our customer, train models on it so that we can go back and improve the customer experience, that setup the flywheel that we’re talking about, supply chain is just one area, but there are many, many of these customer experiences where ML is actually going to continue to enhance the customer experience >> DOUG McMILLON: Back to the bigger picture of trust and privacy, we feel we have earned a certain amount of trust from customers overtime and we just want to build that, we certainly don’t want to lose it Rachel, if you don’t mind grabbing a microphone, she leads our governance area, compliance, ethics, legal, Rachel, you recently created a new position in the company to help us think through al of these issues, Rachel, Dan Bartlett, myself, we spent a lot of time thinking about how we set the company up to not only have an effective business model but to manage privacy in a way that it accrues trust to the company even more so, especially with being in the customer’s home, servicing them with groceries, they have to trust us and they have to trust how we’re handling their data >> Rachel: Data and technology is an important part of the company, it was coming up in just about every conversation I was in, I took my organization and pulled the existing privacy resources and created a new SPV level for digital citizenship level which is a term I came up with to convey that this is not just a legal issue, it is about building trust with the customer, a lot of issues that are adjacent, responsible use of AI, we want to do all of that in the way that fosters the notion that trust is a competitive advantage for Walmart Shough we hired what I call a world famous privacy expert oh conner that recently had been a president of an NGO, an expert in a legal and sort of policy reputational aspects of privacy and all of those issues. We think we’re on the right track >> KATHRYN McLAY: Can I add on to that to say in the past too we have used history, whereas we’re in a position where now we can look forward. So if you think about a forecast, it is always what did we sell similar week last year, now we can actually scrape other people’s websites to see what they have on pro Megs motion, we can look at social media, see what events are happening and you know that individual buying patterns of your members or customers, so you can anticipate what they’re going to purchase so just flipping the world in how you actually get in front of the purchase and I think about it from a scams club perspective, we’re now sailoring our offers in our instant saving book, so on the back page of the book we’ll actually create offers for individual members to start to draw them along that purchase path because we know that they’ll be loyal and sticky if we get them in member mark or we know if we get them to use optical, that’s a customer or member that’s with you a lot longer period and so how do we design offers that actually encourage them to participate with us even more than they have in the past >> AUDIENCE: Where are you with doing that at Walmart, and is there a potential for o loyalty program at some point at Walmart? Maybe including the in-home service, some of the other things? Have you thought about something more comprehensive? At Sam’s club you know the customer, you know exactly what they buy, but at Walmart you don’t really, you know, you know what masses of people do, but how do you get more tailored to that customer? >> DOUG McMILLON: In today’s world and tomorrow’s, we have to personalize for customers Walmart has got to create one view of the customer and then put it to work One of the key questions will be for which use cases? We really believe in every day low price for Walmart supercentres. The benefits of flowing inventory in this business model, it is signature. So — is significant. We wouldn’t want to start down the path of an old school loyalty program, high, low, creating disruption in the supply chain, but there are plenty of use cases youal bought that tie, you will like this one, you bought this Nike top, we don’t carry Nike yet in the Walmart stores, I hope they’re listening maybe! You bought this so you want that. You know, you brought a printer so you need a — so things you’re buying — many use cases that we can do using data that will help us earn more trust, drive the loop and we’ll do those things and we’ll do it as quick as we can do it, but we need to be really careful which use cases we adopt within the Walmart brand >> AUDIENCE: Bank Of America securities A lot of great questions on pickup and the app. Just longer terms someone was asking before, is there an opportunity to really meaningfully move general

to the store level and couldnt- that start to make your gross margin improve in the.com business, we wouldn’t see it in fiscal 21 but how important is that relative to being a comp driver and how much further can you go in fulfilling from store, you know, using shipping partners as well, is there — are there real opportunities over a five-year basis to dramatically improve the profitability of the U.S online? >> JOHN FURNER: We do a few things already that I think would help answer the question as we said earlier, we have got the pickup business, we have general merchandise categories that are in that during seasonal times of the year and we have the ability now in many stores to deliver to the from the store to the home as we align the shopping experiences, we’ll pick more and more of the supercentre and deliver it same day. We believe that’s an important piece of the solution and should have all of the benefits you just talked about. Again, it is a part of the solution, I wouldn’t want to say that delivery from store is the answer because it is a part of the the answer, part of of the answer may be deliver from store and an FC depending on the ord order or move it all to the FC, we’re conscience to think through the timing of all of the changes and steps that over time build out the ability to do all of those things >> MARC LORE: Keep in mind the marginal cost to deliver a GM eye testimony he out of a store when it is already going with the groceries, it is very small That’s a big opportunity as we expand to assortment to leverage the basket, pharmacy is another good example of getting that in the basket to increase size Ultimately, I think there is opportunity to drive mix, it is this a long tail and we’re doing that in home and fashion and marketplace. I think that’s really the big opportunity >> DOUG McMILLON: Increasingly happening with the membership fee that goes along with it. We didn’t talk about delivery unlimited much, that was not necessarily intention, we have a membership program, we’re starting to learn how to sell the membership and it is something that we can build on with same day delivery from the super centers, including GM >> AUDIENCE: On pickup, Brett said it first, the stores that are comping pickup, what is driving the comp? Is it the same people using it more? Is it new people still. Coulding in? So therefore the pickups are comping? What are the bigger driversers to stores that have pickup and — >> It is both of those things, over the last 3 to 4 years as we have expanded we have seen frequent using and seen new customers come in to pickup either from somewhere outside of the environment or from inside of the environment. It is a mix of all of those and really happy with the growth rates we have seep in the last few years >> AUDIENCE: Last thing, are there stores where pickup is too high, where it is creating problems for the shopper experience and things like that? How many stores and how do you — what do you do in those situations? >> We have a number of things we have been working on, first, the time slot issue that Suresh talked about, helping customers that’s meaningful working with their schedule and ours as well, we’re trying to spread out the I canning in stores and we have a number of stores in markets, if you were thinking about a market like Chicago, Dallas, where we have got multiple stores in an area, we’re testing ways to pick in stores while closed and move the inventory either through a van driven by a person report automated vandal, autonomies vehicles so that we can move from place to place we’re looking at the ways we can to spread the volume out >> We do cap in a few store, the demand is higher than we’ll fulfill because we don’t want to destroy the experience in the store whiff brings you back to how fast do you automate, where do you automate >> On the grocery delivery front, I was curious opportunities to lower grocery delivery fees and then as you look at your consume were surveys, how important is it to your consumers to have groceries delivered at 0? How important is that? >> DOUG McMILLON: We will end up doing a membership in larger numbers and the fee if self may go down some over time as we figure out autonomous and how we pick Our front foot will be on the membership fee >> JOHN FURNER: That’s right You have options today where you can pay by the transaction, you can pay monthly or you can pay one fee for the year. So we’re just now in the beginning of learning which of those customers like the most and it has only been a up can of months, we’ll learn >> AUDIENCE: Wells Fargo A follow-up on grocery and as it relates to pickup, you have clearly led the market in this strategy. What do you think the biggest drivers of that have been? How much is the fact that you’re not charging versus the fact that that your peers are? How much is related to the fact that operationally the execution

just seems better? And then what happens when competitors eliminate theirs and how does that impact your business Unrelated, I wanted to ask about supply chain related to Coronavirus, the question there is how much are you selling is all in true replenish., how much inventory do you have? How long before we need to start worrying about the fact that it could create inventory issues if supply chain in China really doesn’t begin to open back up more normally? >> JOHN FURNER: I’ll take the first question On pickup, and I believe the question was when you look across the operation that we have, whip is don’t charge and we’re able to fulfill customer’s basket today, what happens if others do it, then the most important thing that we would always focus on, and I think we have talked about this next year and year’s to come, it is having the very best quality items and great values in the store. If you get the a I sort. Right, then the mechanism for delivery, it makes it much easier and much easier for us and the customer The reason that the growth — it is about the customer. People are businessier than they have ever been, we’re all trying to tackle lots of things and this is a great service that fills a big void On the second part of the question like we said earlier, it is just early to tell. We’re first concerned about our supplier partners, our associates in the country, our sourcing associates, associates that work in Walmart China, we’re thinking about them first and foremost and as we learn more about what’s going on, we’ll be able to tell where the impacts are, some categories will be sooner than others and it depends on the lead time and how quickly the supply chains move in the categories >> JUDITH McKENNA: One of the things that we have learned over the last few years through our global sourcing and merchants, with he have gotten closer to the detail and thinking about the flow of products coming in our business, we know exactly which orders are in, which factories, when they’re due to come in and what that looks like and I think that attention to detail as we go through this even though it is such a fluid situation will help us to understand better as things become clearer exactly what the impact for us would be in the future >> With that. We’ll wrap up our Q&A >> DOUG McMILLON: We’ll close by saying thank you. Brett may want to say a word too. We appreciate the relationship that we have with the investment community, we’re trying to do the best job we can for you of laying out what our opportunities are, we have got a strong team, not just the people that are represented in this room and 2 million plus, they’re working to make these things happen, and as we walk out of this room today we know yesterday is yesterday, we’re focused on driving speed, innovation, execution so that we can continue to have strong results. We appreciate the engagement we have with you >> BRETT BIGGS: Not that I need to encourage this probably, but keep giving us feedback. On how we communicate, what we’re communicating, how often we’re communicating, it helps us get events and things Wes do in the future. But we really appreciate all of the feedback that you give us >> DOUG McMILLON: Thank you, everybody