“Notably, if currency exchange rates stay where they are today for the entire fourth quarter, we would expect a $1.1 billion benefit to reported sales growth.”

In context

“John Rainey: Thanks, Doug. We're pleased with how the team executed this quarter and with the strength of our business across markets, continued share gains and disciplined cost control. Our results were better than expected on the top and bottom line and reflect the advantages of our omnichannel model and the diversified nature of our profit streams. As we indicated earlier this year, we're playing offense. Accelerating our growth, reinforcing our customer and member value proposition, evolving our model and diversifying our profits. Importantly, we're delivering on our financial framework of growing profit faster than sales. Our strategy of offering everyday low prices while leveraging our physical and digital assets to provide greater convenience is clearly resonating. Now I'll get into some of the details of our third quarter performance. Consolidated revenue in constant currency increased 6% or more than $10 billion, led by continued e-commerce momentum with 27% growth. In all of our markets, we're getting faster with delivery speeds, reaching more households across a broader assortment and improving execution. For example, in Walmart U.S., approximately 35% of store-fulfilled orders were expedited or delivered in under 3 hours. And sales through these expedited channels increased nearly 70% this quarter. The notable thing about our e-commerce growth is the consistency of it across our markets. In Walmart U.S. comp sales grew 4.5% with traffic growth both in stores and online. E-commerce sales grew 28%, led by strength in pickup and delivery and advertising. This was the seventh consecutive quarter of e-commerce growth above 20%. We're encouraged by the share gains across grocery, health and wellness and general merchandise categories. Fashion in particular, has been a bright spot with improving comp trends throughout this year. The U.S. team continues to do an excellent job balancing price and mix to reinforce our value proposition. We're leaning into price rollbacks and making both everyday essentials and seasonal celebrations more affordable for customers and members. Walmart's Thanksgiving mill basket is a great example. It will feed a group of 10 people for less than $40. The International segment delivered over 11% sales growth in constant currency, led by strength in Flipkart, China and Walmex. Flipkart had strong results aided by the earlier timing of the Big Billion Days or BBD sales event. The BBD event saw strong customer engagement with sales growth led by mobile devices, electronics and fashion. At our peak, we delivered 87 orders per second with the fastest delivery in about 3 minutes. Sales in China increased 22% in Q3, reflecting ongoing strength at Sam's Club and more than 30% growth in e-commerce. Sam's Club U.S. comp sales ex fuel increased 3.8%. Recall that we're lapping a multiday period of strong comps in Q3 last year related to a port strike that equated to an approximate 120 basis point benefit to comp sales in last year's period. Members continue to engage more digitally, both inside the club using Scan & Go as well as through the convenience of curbside pickup and delivery options. Member adoption of Scan & Go reached 36% in Q3, an increase of 450 basis points versus last year, and club fulfilled delivery grew triple digits again this quarter. The Sam's team continues to enhance member benefits related to e-commerce. Curbside pickup is now free for all members with no minimum purchase requirements, and we've accelerated the speed of delivery by leveraging Walmart's Spark driver platform to pick and fulfill delivery orders. These actions have contributed to stronger e-commerce sales and improved average delivery types. Consolidated gross profit was relatively flat year-over-year. Walmart U.S. increased 19 basis points as a result of disciplined inventory management and favorable business mix. This was offset by pressure in the international segment from channel and format mix due in part to Flipkart's BBD event as well as ongoing price investments in Mexico. Merchandise category mix in Walmart U.S. remains a headwind to sales growth in grocery and health and wellness outpaced general merchandise. Across the enterprise, our business model continues to evolve with operating income increasingly influenced by improved e-commerce economics, particularly in Walmart U.S. and Flipkart, with growing contributions from business mix, most notably in higher-margin areas like advertising and membership fees. This quarter, the combination of advertising and membership fee income represented approximately 1/3 of our consolidated adjusted operating income. With continued strong momentum in e-commerce, our advertising business globally increased 53%, including VIZIO. Walmart Connect in the U.S. ex VIZIO grew 33% as we continue to grow advertiser counts, including through our third-party marketplace. We also saw 34% growth in international advertising led by Flipkart. Membership income increased 17% across the enterprise, led by 34% growth in international, primarily due to Sam's Club China. In the U.S., Walmart+ membership income continued to grow at double-digit pace. Across all income cohorts, we saw membership income growth accelerate with overall Q3 net adds our strongest on record, supported by new benefits like our One Pay Cash Rewards credit card and expanded streaming services. Sam's Club U.S. membership income grew 7%. We're encouraged by the strength of new member acquisition at Sam's globally, particularly among younger demographics. Adjusted SG&A expenses leveraged slightly in Q3. Expenses are being well managed across the business. Technology and AI have been enablers of efficiency gains. We're using AI across the organization to manage cost effectively and to accelerate our growth. As we continue to invest in supply chain automation, we're also seeing improved efficiency and fulfillment economics. In Walmart U.S., more than 60% of our stores are now receiving some freight from automated distribution centers, and more than 50% of our e-commerce fulfillment center volume is now automated, which is driving better unit productivity and helping to lower the cost to serve. Enterprise adjusted operating income increased 8% in constant currency, growing faster than sales across each of our operating segments. International delivered strong operating income growth of nearly 17%, reflecting contributions from business mix, improved e-commerce economics and growth of membership income, while we saw mid-single-digit growth from both of our U.S. segments. Adjusted EPS was slightly better than we expected, up nearly 7% to $0.62. Our third quarter GAAP results include a charge of approximately $700 million related to our PhonePe subsidiary in India. This was a discrete noncash charge related to share-based compensation expense and contemplation of a potential IPO. Our teams continue to do a great job managing inventory in this dynamic environment. Inventory levels increased approximately 3% for the total company, with Walmart U.S. inventory up 2.6% despite higher costs from tariffs. With our growing 3P marketplace, we have the ability to better balance owned and third-party inventory, improving our working capital efficiency, while still offering the customer a broader assortment. Return on investment is measured over the last 12 months declined slightly, primarily due to the PhonePe charge discussed earlier. Underlying ROI performance continues to improve, supported by capital discipline and operating cash flow strength. The business continues to generate strong cash flow with year-to-date operating cash flow of $27 billion, up $4.5 billion compared to last year. This provides flexibility to reinvest in the business while at the same time returning significant capital to shareholders. Year-to-date, we've returned nearly $13 billion through dividends and share repurchases. Overall, Q3 results demonstrate the underlying strength and resiliency of our business model. Our diverse portfolio of businesses are scale and our commitment to innovation give us confidence in our ability to deliver sustainable growth. Now turning to guidance. Recall at our Investor Day in April, on the heels of the tariff announcements, we said that we're going to play offense. We said that we would look to gain share. And we said that despite some of the obvious headwinds, we're not giving up on our goal of growing profits faster than sales. Given the year-to-date performance and our outlook for Q4, we're raising our guidance for sales and operating income for the year. Full year sales in constant currency is expected to grow between 4.8% and 5.1%, up from 3.75% to 4.75% prior. This reflects our confidence in our team's ability to continue driving share gains in Q4. Fourth quarter constant currency sales guidance is for growth of 3.75% to 4.75%. Notably, if currency exchange rates stay where they are today for the entire fourth quarter, we would expect a $1.1 billion benefit to reported sales growth. For operating income, we expect full year growth in a range of 4.8% to 5.5% on a constant currency basis, with Q4 growth in a range of 8% to 11%. Currency is expected to be an approximate 100 basis point benefit to fourth quarter reported operating income growth. Importantly, despite 150 basis points of headwinds from the VIZIO acquisition and lapping leap year, as well as higher-than-expected claims expense, we still expect to grow operating income faster than sales for the year, which aligns with our longer-term financial framework. For Q4, our operating income guide reflects the timing shift of Flipkart's BBD event as well as the lapping of wage investments in Sam's Club U.S. Business mix will continue to be a margin benefit and we expect merchandise category mix to continue to be a headwind. For adjusted EPS, we expect the full year to be in a range of $2.58 to $2.63 with Q4 in a range of $0.67 to $0.72. The consumer environment remains dynamic, and we continue to monitor customer member behavior alongside tracking the macro environment. We're entering Q4 with strong momentum, healthy inventory and a clear focus on our value proposition. Price, convenience and a broad assortment. I'd like to extend my gratitude to our associates who are serving our customers and members every day during a busy holiday season. I'd also like to share that we're excited to announce that our stock listing will be moving to NASDAQ, aligning with the people-led tech-powered approach of our long-term strategy. Walmart is setting a new standard for omnichannel retail by integrating automation and AI to build smarter, faster and more connected experiences for customers while enabling our associates to deliver even greater value at scale. We are appreciative of our long partnership with such a story institution as the New York Stock Exchange. But we're excited about partnering with NASDAQ on this next chapter of our growth story. Lastly, I'd like to say a couple of comments about our leadership change. I think I speak for many people at Walmart when I say that it has been the honor of my career to work alongside Doug. His mark will forever be on Walmart. This company would not be what it is today without his leadership. Doug, we will miss you. At the same time, I can't think of a better leader to hand over the reins to then John. John was the first person on the Walmart management team that I had the opportunity to meet several years before coming here, and he's a big reason why I am at Walmart today. Every company should be so fortunate to have such a capable and qualified leader to transition to. John, you have 2.1 million associates standing behind you as you lead us in this next chapter. We're now ready to take your questions.”