Walmart Inc. Q3 FY2025 earnings call

Associates delivered a strong quarter with sales growing 6.1% in constant currency and profit up 9.8%. eCommerce grew 27%, advertising 28%, and membership income 22%. Segments performed well: Walmart International 12.4% constant currency sales growth, Sam's Club U.S. 7% comp sales, Walmart U.S. 5.3% comp sales. Handled U.S. port strike, hurricanes, and flooding with emergency operations, providing supplies and meals, and committing $16 million. Deployed generative AI for customer experience and associate productivity, with financial results showing Q3 sales, operating income, and EPS exceeding guided ranges, and consolidated gross margin expanding 21 basis points.

Walmart U.S. had comp sales of 5.3%, with eCommerce sales growth of 22%; food unit volumes grew at the highest level in four years, and general merchandise had low-single digit comp sales growth despite over 4% deflation. Walmart International saw sales grow 12.4% in constant currency. Sam's Club U.S. had comp sales ex-fuel of 7%, with eCommerce growth of 26%, Scan & Go penetration increasing over 250 basis points, and nearly complete rollout of Just Go exit technology across clubs.

Raised full-year constant currency sales growth to 4.8%-5.1%, operating income growth to 8.5%-9.25%, and adjusted EPS to $2.42-$2.47. Fourth quarter constant currency sales expected 3%-4%, operating income 5%-7.5%. Acknowledged Sam's Club wage investments in Q4.

Port strikes, hurricanes, and flooding affected operations and sales growth. Margin pressure from growth in GLP-1 drugs. Currency fluctuations impacting reported sales and operating income growth.

Q: Good morning. Thank you for taking our question. We wanted to focus our questions today on general merchandise and gross margins...

A: Hey, Kate. This is Doug. As it relates to general merchandise, I'll go first and then ask all three of the segment leaders to speak. We love general merchandise. First party, -- being a first-party merchant is something that we obviously grew up doing. And when you go into our stores and clubs right now, the seasonal impact of GM is exciting and energizing. And so this is something that we're passionate about. And in today's world, we can grow first-party general merchandise in stores, in clubs plus through eCommerce with both pickup and delivery and the expansion of the marketplace. So I think we've got a lot of opportunity kind of big picture from a GM point of view. John, why don't you go first and then Chris and Kath can chime in.

Q: Good morning. Thank you so much for taking my questions. What is Walmart finding out about its ability to drive steady growth in the core business while reinvesting back in areas like price and wages to lay the foundation for the future...

A: Yeah. Thanks, Michael. This is Doug. This is a real time conversation that we have all the time. Are we investing the right amount back? You called out prices and wages. I think those are the two areas that would come to the top of our list too. We think we are investing the right amounts, obviously, but it is a fluid situation. We watch price gaps, we watch what's happening in the employment market and have freedom now to be able to make different investments if we want to. So I think from a kind of an income statement point of view, I feel like we're being appropriately aggressive. And then on the capital side, that we've made some significant decisions over the last few years to invest in automation in the supply chain, for example, but we're also being, I think, very aggressive as it relates to store and club remodels. So I feel like on the capital side, we're also being aggressive. And as we do that, because of the way that we've set ourselves up, we can grow profit faster than sales and do those things at the same time. It's just a matter of degree and we will manage that as we go from week-to-week.

Q: Good morning. Hi, everyone. I wanted to talk about the top line, which it looks like it accelerated Q3 versus Q2, the underlying run rate. There were some storms and I know you mentioned port strikes. Can you talk about the underlying inflection you're seeing? What do we attribute it to? I don't know, if it's merchandising, marketplace, membership, all the above and have we inflected, does it feel like we've inflected to a higher growth rate? Thank you...

A: To me, it feels like it's pretty consistent. Like, if you look at what happened in the first three quarters in the underlying rate and then you look at what happened in this most recent quarter with the storms, things did increase a bit, but I still feel like we're kind of running the same level of momentum in the same economy. The fourth quarter will be fun to watch. The calendar is not our favorite with fewer days between Thanksgiving and Christmas. And I suspect when all that said and done, it will be similar to the kind of momentum that we've seen in the first three quarters.

Q: Thanks. Good morning, everybody. Can you speak to the changes in the 4Q operating income guide relative to where you started the year ex the FX change? To what extent did you change the topline outlook overall and in the U.S.? Then you called out Sam's wage investment, but was there any changes in your expectation around gross margin given what you're seeing in the alternate profit pools and 4Q is a big spike in terms of volume, so could that tilt the U.S. eCommerce business to profitability? Thank you...

A: I'll address this and others may want to join in. Chris, the way to probably characterize this, if you look at our guidance last quarter versus what's implied this quarter, there's a modest improvement in 4Q performance. There's not been a lot of change before that in terms of our outlook for 4Q. The business has been performing, as we've said, pretty consistent. In terms of GM, maybe one thing that has improved and been a little bit better than what we expected at the beginning of the year. And by GM, I'm talking gross margin is shrink has performed a little bit better in the U.S. and Sam's segment for the first part of the year here. But other than that, the business is continuing to perform very consistently with prior quarters. You do -- some of the more digital businesses, the newer businesses that we have did inflect a little bit higher in 3Q. I think also keep in mind that that's a function of the movement of Big Billion Days that I just mentioned. But if you just -- you go down the list, you look at as an enterprise, 28% advertising growth, 42% marketplace growth, 23% membership income growth, like, we are executing. Our value proposition is resonating with customers and that's why you're seeing us gain share.