Good afternoon, everyone, and thank you for joining us at Oppenheimer's 26th Annual Consumer Growth and E-Commerce Conference. My name is Rupesh Parikh. I'm the Senior Food, Grocery, and Consumer Products Analyst here at Oppenheimer. I'm very excited to introduce our next presenting company, Walmart. The company recently reported a strong Q1 results and reaffirmed guidance. In particular, the Walmart U.S. segment delivered a 4% plus comp increase with broad-based momentum across categories. Walmart remains a top pick for us, and we expect management to continue driving industry-leading top and bottom line growth. So joining us today is Dave Pugina, the new president and CEO of Walmart U.S. So Dave, thank you for being here today. The format today's session will be a fireside chat. We'll go through a number of questions that are prepared. And with that, let's get started. So Dave, you're recently appointed to the Walmart U.S. COC. So I thought maybe you can kick it off by talking a little bit about your journey at the company and how this influences your approach to leading the U.S. business.

First off, great to be here and good to see everybody. I'll give a quick background on my career and time at Walmart. So before Walmart, I worked in manufacturing and in digital retail with roles leading logistics planning, operations, quality. I had customer-facing functions like customer service. And then since joining Walmart in 2018, I've had the opportunity to lead teams in product, in automation, in innovation. I led our supply chain for a number of years. And last year, I led our e-commerce business before stepping into this role four months I would say that those experiences have shaped how I think about leadership myself. Whether you're running a fulfillment center or building technology or serving customers in a store online, it really comes down to helping customers get what they need, what they want, and what they love, when and how they want it. I've also learned through the years the importance of having great associates, a fantastic team, the importance of execution and using technology, not for technology's sake, but to make work simpler for our teams as well as shopping easier for our customers. And as I step into this role, my focus is on building upon Walmart's strengths and continuing to innovate and deliver value for value and convenience for the millions of customers and members that we serve every day for PESH.

Great. So we're going to spend the bulk of our time digging into the Walmart U.S. strategy. However, before I start, I want to touch on a macro backdrop. So the consumer environment clearly reigns quite fluid out there, higher gas prices, geopolitical uncertainty, snap changes, et cetera. So how would you describe the overall health of your Walmart U.S. consumer as we sit here today? And then what are your expectations for the balance of the year?

Overall, the consumer, I would say, is relatively healthy. Customer spending with us continues to be strong. You mentioned U.S. comp sales in your opening of 4.1%. If you exclude maximum fair pricing, that would have been at a 5.1%, and that's an acceleration from our prior four quarters. Our omni-channel strategy continues to resonate with customers across income levels, and that's driven by really three things, value, convenience, and speed. We delivered our best traffic growth in six quarters, and we continue to gain share across a broad base of categories, including general merchandise, which reached its highest share gains that we've seen in five years. Now, I will note that there is variation in spending across household income groups with higher income customers continuing to spend with confidence while our lower income customers are feeling more pressured and making trade-offs, particularly in discretionary categories. But the good news is that this is when Walmart shows up with our purpose to help people save money and live better lives. And our business model is really built for this environment. And when customers become more deliberate in their spending, they turn to Walmart to save not only money, but time.

Great. That's helpful, caller. Now I'd like to shift to some more strategic questions. So maybe starting on e-commerce, where momentum has continued with U.S. e-commerce growth in excess of 20% for now nine consecutive quarters. So Dave, this is clearly an area where you obviously have a lot of experience given your prior role as Walmart's U.S. EVP and chief e-commerce officer. So what are the key drivers behind the top lines to rent? And then what is your team's confidence after you're sustaining that momentum?

Yeah, Rupesh, our momentum is driven by a handful of things. First, we are broadening the assortment, the in-demand assortment that's available to our customers. We continue to lean into price and value as we always have, and we're enhancing the experience for customers. And if you can do those three things right, you can build trust. And once you've built trust, you can earn frequency from customers. And that's really reflected in the results. E-commerce grew at 26% in Q1, representing roughly 25% of our segment sales. It was our fourth consecutive quarter of e-commerce growth above 25%. And importantly, that growth is broad across the business. Store fulfilled delivery grew nearly 50%. Our marketplace saw a growth of nearly 50% in advertising, which has really helped buoyed by both the former two, grew by 36%. As for addressing your question on sustaining momentum, I really want to emphasize we believe we're still in early innings in the e-commerce space. More customers are choosing Walmart for a combination of value, convenience, and speed, and those advantages continue to strengthen in our business. As I noted, value remains core to who we are. We had 7,200 rollbacks across the business in Q1. About half of those were in food, and we saw strong growth in response to those investments. We are actively making it easier for customers to stretch their budgets through solutions like our meals, ready-to-eat meals like our rotisserie chicken and two sides, which feeds a family of four for less than $10, to our summer grilling basket, which helps families host a cookout for under $5 a person, Or if you need something to wear to that cookout, maybe you can try free assembly or scoop for summer fashion, which is really resonating with our customers. So we see significant opportunity ahead across the business as we continue to strengthen our omni-channel experience and deepen customer membership engagement.

Great. That's great color. So stores obviously play a critical role as well in your omni-channel strategy for serving both in-store shoppers and for your faster delivery. So on the Q1 call, your team indicated that you're not able to serve 60% of U.S. households within 30 minutes, and then also share some interesting tidbits on the drone side. So going forward, what are the bigger opportunities you see to continue bending the curve on speed, convenience, and then also to drive faster penetration of your faster delivery options?

I want to start with our stores. Our stores are one of Walmart's greatest competitive advantages, and really they are the foundation of our omni-channel strategy. About 90% of the U.S. households live within 10 miles of Walmart, enabling us to reach 95% of households in less than three hours and 60% in less than 30 minutes. So we can deliver very quickly. And as such, that has helped drive more than 50% growth in fast delivery sales in Q1. And what's exciting about this Repassion team is that the momentum continues, and we continue to get stronger in this space as we improve our core business. And here's a few ways that we're focused on improvement. One is batching. Another is chaining orders, improved routing. We're also focused on positioning more in-demand inventory closer to our customers through things like remodels, new fulfillment centers, new stores, and better inventory management and better inventory flow. And through all that, we're able to make more items available to more customers faster, and that drives conversion up. But at the same time, these investments don't just buoy our digital business. These investments elevate the in-store experience. Remodels elevate the in-store experience. Stronger merchandising, like the fashion brands that I mentioned earlier. Or expanding services like our pharmacy services, Fresh, our new auto care capabilities. You know, last year, we also opened or converted roughly 12 stores. And those locations are performing incredibly well. They're beating our expectations with higher digital penetration and stronger performance in spaces like beauty, fashion, and baby. And that's why we believe our store network isn't just competitive advantage today. It's one that really becomes more and more valuable over time as we make these investments and helps us deliver an even stronger combination of value, convenience, and speed. So we're excited about the future here.

Okay, great. So next thing I want to touch on is agentic commerce. So I understand it's still early, but your team has shared some interesting data points on your AI shopping agent, Sparky. So how are customers utilizing this today? And then where do you think this will go in the future?

I think what differentiates Sparky and maybe helps you get an idea of where we're going to go in the future is the combination of value, of convenience, and real-world execution and the scale of Walmart's in-store and online data connected with agentic commerce. So we connect AI-driven shopping directly to our omni-channel fulfillment network, and that includes our stores, our fulfillment centers, our forward-deployed inventory, all of the delivery capabilities with our Spark network, and we're seeing customers respond to those capabilities that I just mentioned. we had our weekly active users increase by over 110% quarter over quarter. We saw from the beginning of Q1 to the end of Q1, Sparky-attributed GMV increased by more than 150%. And we saw that customers using Sparky continued to build bigger baskets. We had shared this previously, but we mentioned it again in Q1. We're seeing baskets that are roughly 35% larger than non-Sparky users. So what's also encouraging, I think speaks to your question of how are folks changing behavior, is early on in Sparky's tenure with us, Sparky customers who are using it were really focused on what I would call spear phishing or looking for specific items, often general merchandise. They were looking for a particular item and they'd ask a lot of questions about that item to learn more about it. They are still doing that today. But as we have rolled out capabilities like replenishment, meal planning, Sparky is now aware that you're in a store and can help you find items in the store. We're seeing customers now not only purchase general merchandise, but utilizing it for both consumables and food. And that's helped units that are purchased through Sparky increase by over 4x year over year. So I do want to emphasize it is still very early in this space, but we're excited about the opportunity ahead of us and Sparky and the capabilities that we've introduced in our ecosystem and even outside of our ecosystem through Sparky is resonating with customers.

And with Sparky, have you guys done anything to drive usage through advertising or anything else, or is it simply customers discover it through primarily the app when they're shopping at Walmart?

So today, customers can discover Sparky through our app. It's at the center, lower navigation panel from the app, but also Sparky helps us engage with customers in other large language models. So we have deep linking experiences in other large language models and are testing embedded experiences where Sparky comes to life within an app, someone else's large language model.

Okay, that makes sense. Shifting gears. So I wanted to dive deeper into some of your alternative revenue streams, starting with Walmart Plus. So membership fee revenue growth accelerating in the latest quarter with net ads reaching a new Q1 high.

What do you attribute the acceleration to? yeah great call w plus continues to see strong momentum and our goal is for it to become really an essential membership for households across the u.s members are telling us that they love free shipping that they absolutely love our fast delivery that's 30 minutes or faster three hours or faster from our stores and they love the easy returns what's probably most encouraging is the level of engagement that we continue to see when someone becomes a member walmart plus members spend four times more than non-members on with walmart we generate roughly seven times more e-commerce visits than non-members and roughly two times more store visits than non-members. We're also seeing really strong growth in benefit usage, whether that's auto care benefits in store or our fuel savings, the 10 cents off at the pump. These are driving greater shopping frequency. And I also want to mention our Who Knew campaign. It has really performed incredibly well. It's a really fun campaign if you haven't had a chance to see it. In Q1, the Who Knew campaign helped change perceptions, really influence perceptions around assortment, quality, and delivery speed. All of those improved and our focused messaging, particularly around W+, Express Delivery, and RxDelivery drove 50% more paid memberships and delivery trials versus our average investments on those topics. So overall, the value and convenience of membership is continuing to resonate. And we see that in double-digit membership growth as well as in the frequency metrics that I just mentioned.

Okay, great. Your team has also continued to improve the Walmart Plus experience. I know you guys continue on new perks. I saw that hotel perk. I think you guys doubled the cashback on booking hotels through Expedia. I know there's a big focus on perfect orders. So what opportunities remain to further improve the customer experience for Walmart Plus members from here?

Yeah, Rupesh, we're always listening to our customers and our members and looking for ways to improve the offering, and we'll continue to do that. That's an evergreen problem that we'll continue to solve. First and foremost, that means to continue to strengthen the core value proposition. We will continue to focus on broader assortment, broader in-demand assortment, price and value, convenience, and better, more lovable experiences in-store and in the app. We still see significant runway to improve the everyday shopping experience for our members, whether in-store or online. So that focus will continue. Beyond that, we're focused on adding services that just make life easier for customers, whether that's streaming offerings like Paramount Plus or Peacock, home services like furniture, assembly, TV installation, or we announced last week that we are starting to do quick service restaurant delivery for Subway. all of these things help customers not only save money save time but just simplify simplify life and i think it points to towards us leveraging our unique assets to to solve more customer needs i mentioned qsr since we announced that last week maybe i'll just give a little more color on that I think this is a great example of us using our unique assets in ways that only we can. We announced last week that we're lighting up delivery for the roughly 1,200 subway locations within our stores. And we're seeing really strong customer response in the stores that we have lit up to date. They're not only reaching into grocery, but general merchandise and locations are seeing added sales by enabling them to sell not only in the store, but digitally. And then I would just remind the group that we have over 3,000 restaurants in our stores, which will be the area that we are focused on for that capability for the time being.

Great. That's helpful. And then from a driver availability perspective, there's plenty of capacity out there with your smart network to be for these deliveries.

Yeah, our spark network. I just look at it. One way to audit that is to pull up the app and look at your scheduled delivery slots and whether or not fast delivery is available. And what you'll see across the country is that we have incredible availability, fantastic availability. And that has been performing at high levels throughout the year. And we expect that to continue.

Okay, great. I got to test it out. So next I wanted to discuss your marketplace effort. So under your prior role as EVP and chief e-commerce officer for Walmart U.S., you played a big role in driving the growth and expansion of Walmart marketplace. And we saw, again, strong momentum in Q1, growth of nearly 50%. So what do you see as the bigger opportunities on the assortment front? Is it just about getting some of these larger brands, or is it still about building out skew coverage further in starting categories?

Yeah, we are very encouraged by the momentum that we're seeing in marketplace, which delivered its strongest growth in 10 quarters. But we, I want to emphasize that we're still in early innings here, and we have an incredible amount of growth to come from our marketplace. I wouldn't say it's one or the other. Our guiding principle here, Rupesh, is pretty simple. We need to have the brands and the items that customers want. We're focused on expanding assortment. We're focused on bringing on brands that really enhance customer perception and, in short, increase our SKU count. We've seen success across categories like electronics, toys, and beauty. And in some cases that some of these sellers started on Marketplace, but they've earned a place in our stores. Some notable recent launches that I would call out are Farmer's Dog recently launched on the Marketplace. Garmin recently launched on the Marketplace. And then it's not just about brands that can bring SKUs. It's also adding sellers. So Vavor and Carraway are two large sellers that we've added recently that are going to bring in-demand expanded assortment available to our customers. Assortment matters because it drives engagement with customers and members. And we see, you know, significant runway ahead as we continue to strengthen the assortment offering in our marketplace and available on, in particular, Walmart Fulfillment Services.

Great. And then on the seller side, how do you think about the runway in Walmart Fulfillment Services? Should we expect the momentum to continue as more and more vendors use these services over time?

Yeah, I would say something very similar. We're just getting started with Walmart Fulfillment Services, and we are encouraged by the momentum in the space. They're obviously highly, highly related. We just started expanding U.S. assortment into Mexico and Canada. We're excited about the potential there. Units shipped same day or next day through Walmart Fulfillment Services in the U.S. grew by approximately 150 percent in Q1. so you can see our network getting faster as we put more marketplace items in more fulfillment centers and stores. And we still have plenty of room to grow there. I would call out that when someone joins WFS and they have a two-day or faster badge, we are seeing a lift of roughly 50% in conversion. So our sellers are seeing results when they join, and we have the inventory to deploy across the network. Logistics and transportation are, as you know, complex, and WFS helps reduce that complexity for sellers, in addition to simplifying their operations. WFAST is also about 15% lower cost than industry average. And as we continue to attract more sellers and help them fulfill more products through our network, it creates this really healthy ecosystem. More selection drives faster delivery as we can deploy more of it across the network. That drives a better customer experience. that means more volume and more demand, which drives density, which helps us lower cost. And as we lower cost, we can reinvest and the whole thing turns once again. So we're feeling really bullish about this space, Rupesh.

Great. So now wrapping up the alternative revenue discussion with advertising. So Walmart Connect continues to show significant strength, it's up 44% in Q1 ex-Vizio. So where would you say we are in the advertising journey here in the U.S., what are the bigger opportunities from here to sustain the momentum?

Yeah, we're very pleased with the momentum in advertising. But again, advertising is directly connected to our e-commerce and our marketplace business. And as marketplace expands, more sellers and brands come into our ecosystem. and by integrating advertising capabilities directly into seller workflows and making self-service tools more accessible by this population, we're making it easier for brands of all sizes, big and small, to connect with Walmart customers. Hence, you see the growth, the 44% growth that you mentioned. and you see this taking shape in customers reaching deeper into what I call our torso and tail assortment so you've got our head assortment the fastest moving items are perishable items food that people consume but then as you move into your torso and tail assortment we've seen a 25 percent increase year over year in just the number of SKUs that we're selling in any given week. And everything I just spoke to really creates a really powerful flywheel. More assortment attracts more customers and members, which attracts more advertisers. And then that drives greater engagement from our customers and therefore monetization across the platform and really improves the economics of our business.

Great. So now I was hoping to touch on the recent comp momentum at Walmart US. So we've seen strong growth in share gains at grocery for some time now. More recently, we've seen significant success in general merchandise category where last quarter, your team had the highest level of share gains in five years. So what do you view as the key drivers behind the multi-quarter improvement in comps? And then how do you feel about the sustainability of the momentum?

We're very encouraged by the growth and momentum in general merchandise and the share gains that we're seeing. As you noted, I would say the drivers are really investments that we've made in store remodels, expanding the assortment, as I just noted, marketplace, all of these are paying Growth is really led by fashion, hard lines, and double-digit growth as well in our private brands. We have added more than 300 in-demand GM brands over the past year. Marketplace growth in GM exceeded 40% across home apparel and hard lines. And brands like Scoop, Free Assembly, Avia continue to resonate with customers. Um, I think one fun anecdote where this came to life, uh, we had a fashion pop-up in Soho, uh, earlier this year, and we saw sales in that fashion pop-up, uh, increase from the last event by, by more than 70%. So I think really the bigger story here is that customers are increasingly seeing Walmart as a, as a destination for both value and style. And we believe that there's a lot of runway ahead of us to continue the momentum there.

So I'm going to switch gears to a couple other topics. So on the supply chain, your team is doing a lot of work on the productivity front, leveraging technology and automation in a number of ways. So we've seen firsthand Walmart's U.S. effort in automating the supply chain. It was down in Tampa, I think, a few years ago. What inning would you say you're in today with these efforts? And then how is it helping with inventory management? that?

I would say we're in the, you know, for baseball, if we're using baseball analogies, Rupesh, I'd say top of the fourth. You know, we're increasingly seeing the benefits of our automation investments show up across the business. The rollout across our distribution, that's both perishable and ambient distribution centers, our fulfillment network that remains on track. And these investments really drive improvements in capacity, more capacity for our business, improved accuracy and quality, speed, productivity, and then they help reshape work for our associates, which helps us improve retention, which helps us run a better business. Today, about half of the e-commerce fulfillment center volume is moving through automated facilities. Roughly 65% of our stores, a little over a few thousand, receive freight from automated distribution centers. I want to call out though, we are starting to see sites complete their automation rollout. We'll have by the end of the year, 16 distribution centers that are going to be sending, these are ambient distribution centers, going to be sending fully palletized loads to our stores. And just to remind the group what that means, we had floor loaded trailers historically. And our associates would take hours to unload these trailers. Moving to intelligently layered pallets allows us to unload that trailer in minutes. And these intelligently layered pallets, 70% of the time move directly to the store floor and can immediately be stocked. And then we're testing some really interesting capabilities. You could theoretically put together a pallet that has all out of stocks, put that at the back of the trailer so it's the first one that comes out. We are testing for, you know, events like back to school, holding the freight upstream and then releasing it all at once. So you get your entire set for back to school in one load, and you're able to set that immediately. So that is incredibly more efficient than what we have done historically. You know, so in general, I think what's exciting about automation is its It's a combination of automation, inventory, visibility, helping us operate a better supply chain, helping us operate better stores and extract waste from our business and improve our costs and improve our economics.

Great. So in the last five minutes, I want to cover two last questions if we get through both of them. So I know your team is using AI and technology to drive productivity in many parts of the organization. So what areas or applications are you most excited about here on the AI front?

Yeah, I would say physical AI. Everything I just talked about with automation utilizes physical AI. So we use AI algorithms to both put away, retrieve inventory to build those intelligent and layered palettes. We're excited about the agents that we're building that help our associates and our customers. Maybe I'll give you one example of each. On the customer side, we recently built a variant agent that really helps customers shop more intuitively online by grouping related items together. And then it continually learns and improves based on customer engagement and surfaces the right variants coupled together on a product display page. On the associate side, we have a fantastic tool that we started in supply chain and then have rolled out to stores. It really is targeted at improving retention, uses a gradient boosting AI model, takes in about 90 different attributes, and helps managers know who to engage and what topics to engage them on. So, for example, Rupesh, if you're my manager and I came late a couple of days in a row and I'm not typically late and the model realizes that it may ask you, Rupesh, to have a conversation with Dave and you may, by having that conversation, discover that, you know, there's been a change in my life, in my situation. Maybe I need to get onto a different schedule. And that tool is having a causal impact on retention, which is pretty incredible to see come to life. So those are just a few small examples.

That is fascinating. So to wrap up, recognizing only a few months in your new role, what growth opportunities excite you most at Walmart U.S.?

What I would say, maybe I'd leave you with three things that excite me. first the strategy is working and the momentum we're seeing is broad-based our investments in stores e-commerce marketplace walmart plus advertising and automation are paying off and they continue to pay off second our ecosystem is getting stronger so each capability we add strengthens our business more assortment and faster delivery drive engagement engagement drives membership and advertising opportunities, which improve profitability, and engagement drives volume, which lowers our operating costs, which then allows us to reinvest in experience and price. And then third, I would say that I'm excited about the runway that remains and the fact that it's so significant. We have the right team, we have the right strategy, and as I noted, we have a large business with plenty of opportunity ahead so appreciate your time thank you so i'd like to thank dave and the walmart team for joining us today so thank you