Walmart Inc. Q1 FY2026 earnings call

• Strong Q1 results: Sales grew 4% and profit by 3% in constant currency. Global eCommerce grew 22% with all segments seeing at least 20% growth.
• Tariff management: Focus on keeping food prices low, moving production where possible, absorbing costs within categories, and supplier creativity in shifting materials.
• Inventory management: Entering Q2 with well-managed inventory.
• U.S. supplier investments: Committed to add $350B in incremental U.S. volume over 10 years, with initiatives like Grow With Us and Open Call event.

Walmart U.S. saw comp sales grow 4.5%, with eCommerce sales up 21%, grocery sales having mid-single digit comp and share gains, health and wellness sales up high-teens, and general merchandise sales slightly down. International sales grew 7.8% in constant currency, with eCommerce showing double-digit growth across markets. Sam's Club U.S. had comp sales ex-fuel increase nearly 7%, with eCommerce growth at 27% and Members Mark sales strong.

Management is confident in achieving full-year sales and operating income guidance despite tariff uncertainties. The range of possible outcomes is wide due to trade policy dynamics, but they expect to meet guidance if trade deals progress; downside risk exists if tariffs remain elevated. The second quarter has a highly fluid operating environment with a wide range of outcomes for operating income due to accounting methods.

• Tariff impacts leading to higher prices, especially on China imports.
• Uncertainty in demand elasticity and macro environment affecting sales.
• Inventory management challenges due to tariff-related cost pressures.

Q: Hi, thank you, guys. Thanks for all the details on your pricing philosophy tied to tariffs, very helpful. My question is on eComm, big milestone for the company, achieving profitability in the eComm business. Just curious what finally got you over the hump? And whereto from here in terms of where margins in that business can go relative to the rest of the business? And what do you see as the key drivers of further improvement to eComm profitability from here?

A: Paul, thank you for your question. This is John David. Let me start with just giving a little bit more detail on the global eComm profitability. We noted that we achieved it on an enterprise basis globally as well as for the U.S. segment. And so if you to break that down by segment, the U.S. was profitable, Sam's was profitable, and the international was slightly unprofitable. But if you take all of those together, we had a profit for the quarter. So we're really pleased with that. There are a few things that have driven the performance, notably in the U.S. And John will talk more about this, but one is the densification of our network. And what I mean by that, as we have more customers that are coming to Walmart now and taking advantage of our eCommerce offerings, we're able to spread those deliveries over multiple households. So think about the opportunity to deliver a package to five houses on a street versus one house on a street. And so as we grow, we continue to spread those costs over more volume. The second is delivery cost, and this is where John and his team have made a tremendous amount of progress in reducing the unit cost. And this is a lot of the supply chain infrastructure that we've implemented. But part of that too is the willingness that customers have shown to be able to pay for expedited delivery. And what I mean by that is delivery within one hour or within three hours. We noted in the last quarter that fully a-third of our customers are taking advantage of that option. And it shows the relevance of convenience. We've seen an uptick in that even in the most recent period. And so John, maybe you want to add a little bit more, but to me those are a couple things that stand out to help improve the profitability.

Q: Hi, good morning, everyone, and good quarter. So Doug and John David, you both touched on this. You built this business and financial model now that your margins could go up and invest faster for growth at the same time. I've asked you in the past about, like, the toggling that balance and I kind of heard some of the prepared remarks on this. I'll push back and say why not toggle it in favor of investments even more in this environment. We know how much or how important it is getting more gross profit dollars, especially in Jan-March. Why not lean into there? And you said it yourselves, Walmart should be better positioned than most to navigate this environment. Thanks.

A: Yes. Thanks, Simeon. This is Doug. I'll go first, and then John David can comment. I think with our guidance where it is for the year, we positioned ourselves to be appropriately aggressive. I think as the quarters play out, we may make different choices depending on what's happening with pricing. It is fluid. We're watching what's happening with cost of goods. There are a lot of moving parts as it relates to merchandising these days. And as it relates to the retail prices, we'll watch where our price gaps are, but we'll also watch what customers are telling us and the response that they're getting from them and the pressure that they're feeling. So the bottom line is, if we need to invest more, we can. Having said that, I really want to grow profit faster than sales. Like, we've been working on this for a long time. I think we deserve that. You guys deserve that. And if we can navigate this in a way as we balance all the interests between customers, shareholders and everyone else, such that we can keep prices low enough to help people and grow profit faster than sales. That's what winning looks like to me.

Q: Thanks. Good luck.

A: I would underscore the points that Doug made. I feel, Simeon, that we are striking the right balance between investment and growing profits. If you look over the last two years, we grew operating income about 10% on average. Our guidance is, let's call it, roughly half of that this year. And so this is a year of investment. But even while doing that, we are hopeful to be able to grow profits faster themselves. If there's, to me, a story about the quarter from a financial perspective, it's really one of the diversification of our income streams. And so you're seeing all these things play out. If you were to just take advertising and membership as an example, that's a quarter of our profits. Membership was really strong in the quarter. We grew each segment membership double digits. International was north of 20%. So you're seeing this diversification of our income streams that allows us to continue to take a very long term perspective and invest in this business. So these are always a little tricky in terms of what striking that right balance, but we feel like the plan that we have right now is the right one for us.