Walmart Inc. (WMT) Earnings Call Transcript & Summary

Morning, everybody. Welcome to the Bernstein Strategic Decisions Conference. We're very happy today to have Brett Biggs join us for a second showing at the conference. Of course, he's the master of ceremonies and the CFO for Walmart, Inc., the big boss job. And I've known Brett for a long time. Have immense respect for him and the work that he and his team do all the time. Obviously, Walmart is doing an incredible job now, and we're very happy to have them here as the country goes through such a difficult time. Of course, as usual, we do want to make the disclosure that there are going to be forward-looking statements contained in this presentation that many times there will be phrases that will refer to events for which we are making guesses. One of the components that I think we're going to do is I'll flash the screen up in just a second, but be sure to realize that as you're in the Pigeonhole questions, please don't try to reach for those extra components that you know Walmart doesn't disclose. This is the Strategic Decisions Conference, and so we're interested in those larger strategy issues and not focused so much on the ticky-tacky of the dynamics of earnings and details. And so with that, I'd like to move on to a couple of opening questions for Brett.

The first thing that we wanted to start with was something kind of simple, but I think very profound. We've certainly seen this incredible growth in the grocery business. It's been a necessity for the marketplace. It's been a necessity for people just to keep themselves running. But I always think that Furner and Doug were general merchandise folks by training. And their background, and every time I would hear Doug speak and Furner, when we worked with him in China, he would not forget that it's a general merchandise shop as well. What opportunity do you guys see in that space? We often hear about the mix conversation. So I'd love to just hear how you guys think about the general merchandise opportunity now or in the future.

Yes. You bet. Thanks, Brandon. Thanks for having us. Appreciate it. So this is round 2 for us at your conference. So a little different than last year, to say the least.

Yes.

Yes. As you mentioned, Doug and John both kind of came up through that part of the business, and it's still a big part of our business. When you look at food and consumables in the U.S., over 55% or so would be food and consumables. But there's a big general merchandise business, and it's certainly that way on the e-commerce side. So it's a big part of our mix, and you saw some of that in the first quarter. As we went through the quarter, in the early part of -- mid part of March to late part of March, we became pretty much a grocery and consumables company. And then as the stimulus checks came in, in mid-April, reverted back to more of a normal mix, although even more to the general merchandise side. So as we go forward and you see the work that we've done on attracting more brands to the sites, what we're doing in marketplace, the things that we're trying to do with brands in stores, private label, which has become a bigger part of our business, we're very much focused on that general merchandise business. One, it's -- you need that from an assortment standpoint for the customer. It would be relevant on everything else that you want to sell. But then as you mentioned, mix is a big part of the financials that we put out and the results that we need to have, having that GM in there is important.

Yes. And one follow-up on that. When we talk about e-commerce, one of the stories have been -- because click and collect have gone so well on grocery, that we saw more general merchandise-quote items enter that basket. I know people still say the app's not entirely merged. Okay, fine. But we certainly see some of that product shifting over. Has that adoption rate in terms of baskets beginning to look maybe a little bit more like an old school supercenter basket start to show up a little bit?

Yes. Part of that has been us being able to get the assortment. Let's talk about online grocery, we call -- started up being called online grocery is really a lot more than grocery. But we had a fairly limited mix of general merchandise now. It's not exactly the entire supercenter, but it's much closer to that than it was. And over, let's say, the next year or 2, I think almost everything in the supercenter you'll be able to put in that online grocery basket. So that's important. But as we get people coming into the store, doing pick-up, there's a big part of general merchandise that's a part of that. The merging of the apps, as you mentioned, the blue and the orange app, is really important to the experience for the customer. And I've used it recently, and I do see the difference that it can make in getting general merchandise, making it easier to get general merchandise into the basket.

Yes. That seems right. As some of the stores -- some of the logistics hubs were getting closer to their operational speed limits, was there -- is there a sense that -- I'm trying to frame this the right way. What are some of the learnings you had or that are at least early senses of where those choke points might be, right? Because suddenly, the stores are clearly being both logistics hubs and service because they were one of the essential services still open. And we know that Tesco years ago had kind of pulled a lot of that pick entirely out of stores because they were physically more constrained, and they just didn't have that room to do that. Did you guys hit that point where you're like there's just too many people in the store at this point, not just because of COVID, but because of the physical difficulties of logistics of a pick process and customer shop?

Yes, the -- we tested a lot of things over the last several weeks that we weren't anticipating testing necessarily, certainly about how to get people through an online channel and get them to the stores as well. We were -- even before COVID, go back to last year, as we had online grocery stores that were starting to hit their fourth year, we were starting to learn where those choke points might be. And so as a customer, if you think about the customer that's in the store, you got to make sure you're not causing them a problem as you have pickers in the store that people that are coming in the stores can actually get around what they want to. So we had a lot of technology drive in that to become more efficient at picking different time slots for having people come in so that again gives us more -- in effect, more picking capacity. So there are a lot of things that we're already working on that, the experience with COVID, we'll get additional learnings, accelerated learnings coming out of that. And even, as you know, we turned on -- we had shipped from store. So we had about 100 stores, give or take, where we could ship items from stores to customers' homes. We hadn't used it a lot. But we accelerated over 1,000 in a matter of weeks, and we'll have over 2,000 that are capable of doing that. So it's just having the flexibility to kind of do what we need to do, when we need to do it. And having the capital to do it, the financial strength, obviously, we have to go do that. But then also, Brandon, you've -- you know this company well. I've been here 20 years. The ability of this company to move with speed is remarkable. I quit saying amazed. I'm not amazed by it anymore, but it's remarkable to have a $500 billion company that can move as quickly as we can and when we need to.

Yes. That's powerful. One of the things that -- we had some investor interest on this on omnichannel. I didn't see it as much as a change as I think maybe some of the investors did, which is with Jet.com kind of turned off as a brand, not turned off as an operation or as a team, et cetera, or as a capability but as a brand, does that really just mean that Walmart can be an urban hipster brand and the rich elites are okay shopping at Walmart, and we don't have to worry about that old notion of can Walmart hit the promise of being good enough for everybody but not too good for anyone?

Yes. On the brand, we may -- there may be still some things that we do with the brand. It's amazing how sticky the Walmart brand is, and we found that. By acquiring Jet, it was almost 4 years ago, and as we started utilizing Jet for different things, we kept finding the Walmart brand was really, really strong with consumers. And when you look at our customer base versus -- and lay it against the demographics of the U.S., it's actually strikingly similar. So we do appeal to every demographic. And particularly now when you look at -- the price has always been important. We've been a winner on that for years. We've always been big in assortment. We're getting even better in assortment. Convenience is the one area, go back 5 years ago, that people could have argued maybe Walmart is not convenient enough. I think that's not true anymore. With online, with stores, with everything that we can do for customers, pick-up delivery, we are convenient. So when you put all those things together, whether you're lower income, middle income, higher income, I think we've got what you want. Even items now that 3 years ago as a customer and as an executive, I would have thought, I don't know if we'll have that online. We do have it online. And so if I can do that and get the right price, why would you not go to walmart.com?

Yes. Yes. I mean we've always been believers that the ability to be a price and convenience location for some and a price and assortment location for others is one of the unique attributes that Walmart can provide. And that's true. When I say unique, I mean, genuinely unique. A handful of companies around the world can aspire to that model. And then yes, I have been impressed that some of the service components that normally might be a little bit of a reach, people are signing up for it. And I mean we talked before about how -- some of the service in the stores really has just gotten much better, electronics especially compared to the old days where it was lacking. Even within many incentives as a Walmart associate had to go to electronics, they would find themselves going to a competitor because the service just wasn't there. And now that's not. It's just not the case. So it's really quite an improvement. I want to turn a little bit to international. Again, I know it's not a huge thing for that, but the demand shocks in other markets may -- there may be places with a stimulus, they may have less opportunity than we've seen in terms of the kind of sustained small businesses. Should we worry about a V-shaped recovery in the U.S. and something sadder, a less-effective letter elsewhere in the world?

Yes. I think it's going to be -- and it's hard to look at international as international because every market is so different. And even within the U.S., I think as you talk about V-shape, U-Shape, swoosh-shape, whatever shape you want to -- you want to think about, we're going to see that in different parts of the U.S. even. As you look internationally, as you mentioned, we're seeing some of the same challenges we have in the U.S., which is channel shift, mix shift, demand cycles, very quick demand cycles. You have Canada who look a lot more like the U.S. Typically, Mexico, amazing business at Walmex, just continues to do incredibly well. But like you said, every country has got a different pattern of stimulus. Some much more -- you're seeing more stimulus in Canada than you will right now in South Africa, for instance. And so we'll have to work our way through that and are working our way through that. But we'll have to continue -- that it's going to continue probably for the rest of the year, trying to work our way through some of those things.

Yes. I think the one that we've got questions on were kind of, I'll call it, Flipkart. So thus far, again, you've got to look at the numbers there. It does look like India had as bad or disastrous things people had thought, but at the same time, the construct of this dynamic is just as important in India as it is everywhere else. And so I kind of had the sense that maybe that's even a tailwind for Flipkart, the way it is for others. Do you have kind of a sense of where you guys are on that? I mean it's early days.

Yes. It's early. And Flipkart for us obviously is a really long-term investment. Go back to the middle or end of March through really most of April, Flipkart was effectively kind of shut down because of government regulations. The country was really in a lockdown for about 3 weeks, and then there were just some slow reopening in different parts of the yellow -- red yellow, red orange, green zones and all that in India. We're starting to get back to a little bit more normal operations there. And just like with every other country, I think India will go through a different cycle. They were pretty early to shut the country down. And so we'll see how that plays out. But it's a great business for us, and I think will continue to be for a long time.

Yes. No, if we have more time, we definitely would chat about some of the -- like the payments business you guys have there, I think a success.

Yes, PhonePe. Yes, it's great.

There's just so much. I mean we've had entire conversations on just about managed business now because that's just such a remarkable growth. The other thing is, is China at some point, a similar, I'll call it, differentiated bet in the way that we've seen kind of a big amount of capital go to Flipkart? I mean, obviously, nobody forgets that it's on the board, but then should we -- when we're thinking about, okay, listen, Walmart's going to have to pony up some more capital in China. I don't know when, but it's going to have to come someday somewhere.

Yes. I mean it's already a big business. I mean India, we had a very, very small business. So China, we've grown more organically and have a big supercenter business. Sam's Club is doing incredibly well there. We continue to grow through the Sam's Club channel. So I think in ways we've made big bets. We did, as you know, a partnership with JD.com. We own around 10% of that company, which has been a nice investment for us. So we've made some pretty big bets in China. They've just been more gradual over time versus the big investment that we made at one time in India.

Makes sense. On Sam's, is there another market that you guys think is -- could be in China? Because China has been awesome for Sam's. I mean it's half the reason why I can take a swing at Costco every now and again because you guys are doing so well in China. But is there another market for Sam's that you feel is that way? I mean Mexico has already been great on that basis.

Yes. I mean what working in China is it appeals to middle higher income, which is emerging quite a bit in China. So it appeals to that income demographic. Mexico plays a little bit of a different role. But as you said, it's been a great format for us there. Obviously, a great format in the U.S. Adding different retail brick-and-mortar formats going forward is probably going to be less prevalent than we would have had in the past as a company. Just given where retail is going, you'll see more investment going into maintaining our existing fleet and growing our e-commerce business. But it's -- where we've got Sam's, it's fantastic.

When thinking about that, as you go -- guys go internationally, one of the things that we found is how big city matters so much differently in terms of how you serve that than anything else. And the U.S., frankly, doesn't have that many big cities, not really, not certainly by a global definition. But most of the rest of the population and most of the rest of the world is densifying and at crazy levels relative to the U.S. experience. Does that lead to that notion that on top of the idea that there's price assortment and service offering that can hit the right component, if you can take just enough convenience? Is there a sense that there is kind of an urban way of doing things and a suburban way of doing things? And that maybe the global battle is more about that urban way of doing things?

I think that, yes, there's certainly an element of truth to that. I mean the U.S. is -- we have big cities. There are different big cities. You have Dallas-Fort Worth, which has probably 8 million people, but it's spread out east to west almost 100 miles. It's very different than 8 million people in a city in Japan or in China, just the way it's constructed. So even at Dallas-Fort Worth, you get -- there's an urban part of Dallas-Fort Worth, but there's kind of a big suburban part of Dallas-Fort Worth, just to use that as an example. And our formats work incredibly well in the U.S. having now e-commerce, where you can be -- you can more easily deal with last mile in big cities. And then we're great, obviously, in suburban and more rural areas. It's going to be interesting, I think, how -- we definitely were seeing urbanization in the globe until the last 8 weeks. It's going to be interesting coming out of this how people -- does that trend continue? Or do they -- or do we stay a little more suburban/rural than we were heading -- coming into COVID? But I think no matter how that trends, again, with what we've done in e-commerce and the size of the e-commerce business we have and the stores. But the ability to pull that together in an omnichannel solution is something really, globally, no one's done. And we said, Brandon, go back 4, 5 years ago, we were saying we think omni, this is the way to go. And no one's really done this, so there's not a playbook. We're writing the playbook as we go. Those investments have paid off a ton in the last 10 weeks. And trends are going to accelerate. Trends are already happening, coming in to this COVID time period, are going to accelerate and the investments we made in the last 4 or 5 years are, I feel, the right investments. So I like our strategy going forward.

Yes. I think that's pretty clear. When we think about that kind of longer-run strategy, if we think about threats maybe to that -- what seems to be a pretty good path to success over the next 5 years, that's an open space. And let me just suggest one for us, which is do we think that the EDLC/EDLP loop is still working because e-commerce seems to take so much capital, right? And I know some of this is just observability, right? You push in the capital, you got to wait for the utilization curve in order for that EDLC/EDLP thing to work. But with stores, the unit economics were just so incredible that you'd be like, oh, great, these are awesome. This is a 5% [ hardware ] store in McAlester, Oklahoma and nobody's ever going to do that again. And so with D.C., it's going to be, oh man, there's a lot of money in the ground. And so that's -- my worry is does that loop still work? But there may be another threat that I'm not seeing that you guys worry about a little bit more.

No, I think you described that pretty well. It's -- capital is really different. If you go back to got 13, 14 -- 2013, '14, '15, more than half our capital was new stores. This year, it will be less than 20%, and most of that is in Mexico and China. So it's -- the use of capital has changed a lot. It's getting your associates more efficient and the tools that we're giving them, making it easier for customers in the stores, making it more enjoyable in the stores. That's now where the capital is going. So I think that will continue. Technology, of course, that will continue for a while. But I think for me, the biggest risk for us, and I usually answer this question this way, is just speed. How quickly can we get -- there's no end necessarily to this strategy. This is an omni strategy, but how quickly do we get to where not some of the time or most of the time, but all the time that we are top of mind with customers across United States and across the markets that we're in. We're really, really high on that list. For those customers, we are #1. We want to be #1 with all consumers. And I think speed and moving rapidly toward that, whether it's getting the brands that we want in stores and online. We've made great progress for that. Getting the capacity in our fulfillment centers and distribution centers that we want. Again, we've made great progress toward that. And balancing all that out with the returns and the financial results that shareholders expect, and I think we've done a pretty good job of that, that's what we're trying to do. But I think if you asked Doug the same question, he would probably give you the same answer. I just -- we just have to keep moving really quickly to solve problems.

Yes. Yes, I think that makes a lot of sense. And I will say, from a perspective of that, it's been amazing how much evolution has happened. But if I go back to my own experience in that, getting everybody to get on board with the omnichannel process was a while, right? It was a while. Because I -- go back 2005, 2006, their strategy components were working on that, were anticipating this universe. Probably too early, of course, to anticipate the universe, but it did take a while to get going. Now as Doug did and as you guys have accomplished, it's been incredible speed in the last couple of years, right? And that's, I think, made up a lot of the gap. But I think that's probably the right identification of the issue.

It's interesting. We were -- I mean, to your point, we were slower than we should have been on e-commerce and on realizing that there were a year -- I remember talking to investors, go back 5, 6, 7 years ago, and when I would say that supercenters are going to be an asset, you got strange looks. And supercenters are a big asset for us. And it will -- that supercenter will change, it will evolve, but having that space that close to customers is going to be a big part of what we do. I've gone back and asked executives from the past about the time when we went into groceries, right, and a lot of the things that you hear are the same things that we went through in the last several years around stores and e-commerce that back then, groceries they weren't fighting general merchandise, it was complementary. Now e-commerce and stores are complementary as well. We have to remember that.

Right. Yes. No, Division 1 and Division 27 used to feel quite a heck of a football team. And the same thing happened at the early phase of dotcom. I remember how many times -- my favorite way to figure out where the wind was blowing was whether or not the pickup for online was in the front of the store or at the back of the store, right? Am I going to force you to walk through the store because the store is the business here, I want to make it work for you because the consumer is the business. And again, that's I think you solved very well. The other one that I think has caused people to doubt a little bit maybe -- maybe it's not the EDLC/EDLP loop but just headwinds, it's just wage increases. So hats off to you guys for making the right moves to help everyone doing this incredible work with extra risk, get a little bit more. One of the things, though, that I think people are thinking about is, arguably, and this is a little bit more my personal view, I think you could say that the value-for-work society is given to what we realize are central worker society function has been a little bit arbitrarily low for maybe too long. I'm not smart enough to know the way that you do that without disrupting the function of the capital system. But we understand there might be some version of a living wage version. How do you guys think about that? Even though I think you guys led that charge to get wages back up, maybe it still isn't high enough. And kind of a sense of where your guys' head is on in terms of the potential that maybe long-run pressures of income and equality just are going to push wages higher.

Yes. I mean I want to start answering that question with -- you started there with our associates, which it's hard to even find the right word for what I've seen when I've gone into stores with the work our associates are performing, the attitudes that they have. I think so many of them feel like, and they rightly should, that -- they're serving their communities, they're helping people keep moving in this difficult time, and that's exactly what they're doing. And so what they've done is amazing and deciding to do the onetime bonuses, the 2 rounds of onetime bonuses in the U.S., we've done other things internationally and then pulling forward an important bonus in the first quarter was -- that was an easy decision. It just -- it felt really, really good to do that and to honor them. Wages, there's a lot of things that go into determining what wages should be, the markets you're in and the work that's being performed. As you mentioned, going back to 2015, we raised wages from -- in the $7s as a facility starting rate or $9 -- sorry, $9 as a facility starting rate, we were $7-ish in minimum wage and then went up to $11 over the last couple of years, definitely the right thing to do for associates. And there's different cost of living in different parts of the country, so it's hard to look at with one basket. We've got to be competitive in markets or you -- people won't work for you. And so we've got to make sure that we're paying a competitive wage in each market that we're in. And over time, we'll just have to continue to evolve. Again, with where the market goes and what we're doing as a company, all of that goes into that wage discussion. But we're being very strategic about it. There are -- as we get to places in the country where wages are increasing, it's getting more competitive. Certainly, we're addressing those things to ensure that we can get the associates that we need into those stores and be able to keep them as well.

Yes. There's been a lot about this if the unemployment program was richer than wages in some markets, if the states had relatively generous unemployment benefits that people won't come back to work. Where are you guys on that as a component? I mean you've hired a lot of people, other large players that hired a lot of people. I assume you've been able to meet the demand because you see the people in the stores and you see them adding all the protection measures, and making sure they're guarding people coming in line, et cetera. So I assume there hasn't been the barrier yet that you haven't hit that point that you can't find labor at the right -- at a fair wage. Are you a bit concerned?

Yes, I read the same things you do, I mean, about that dynamic and so that will play itself out how it ends up playing itself out. But clearly, I mean, we've hired more than 250,000 people just in a matter of weeks into fulfillment centers and stores and distribution centers. And I think for the most part, people want to work. They want to contribute. And I think in a time like this, people want to be a part of the solution to what's going on in the world, and I think they feel a sense of that. So that's my take on it.

That makes a lot of sense. I have a couple more that I want to run through, but I just want to remind everybody that on Pigeonhole, we do have questions and we have several in there that can be seen. Just submit and vote for those so that I can share some of those with Brett. One of the other things is tariffs. So we kind of thought that risk was gone. Rhetoric's gotten scarier, frankly. And I think we started putting it back on the table. We certainly had seen some move out from China underway for the retail industry broadly. I know that a long time ago, we'd advocated being less exposed to China on a resource base and that's why you guys have dozens of offices around the world to target those, and everybody else does, too. But how does -- how do you guys balance, as other global companies must, the sense of kind of a home country bias but also caring very much about servicing and being a part of the Chinese comp. Is that hard? Or is it still fine? Is it still just kind of like, okay, there's some fighting happening in between Washington and Beijing, but we can stay [ synerg-ed ]? Just would love any color on that.

Yes. I mean we've talked about before. I mean even in the U.S., still most -- I mean, a large majority of our goods are purchased here. And then once you get to the smaller part that's not purchased here. There's a part of that, obviously, it's in China, and they're a big trading partner for the country as well as for Walmart. It takes a long time for supply chains to move because you just got to have the manufacturing base and the labor base in the country to make that happen. 18 months ago, it seemed like all we were talking about was tariffs. And so I think as those discussions started taking place 18 months ago, a lot of companies started looking for different places to source. And I'm sure some of that has continued over the last several months. We're -- our merchants are -- they're so good at what they do, and they're such -- you got to look at price and assortment where it's coming from and cost and all the things that they look at with our suppliers, and they're just -- they're great at dealing with that. And even as we went through list 1, list 2, list 3 with the tariffs over that period of time, they managed it in a way that was pretty seamless for our customers, which is the main thing that we want to do. And so we're just going to -- we'll continue to work our way through that, whatever it ends up being, just like we always have.

Yes. One of the things that's come up as a kind of a sub-version of that is that we've heard from some retailers that they've had a harder time getting a hold of PPE or hand sanitizer or other components because the dependency on the Chinese supply chain for a lot of that for good historical reasons because it was that, I'll call it, semi-complex manufacturing, right? It wasn't super simple injection plastic molding, but it wasn't also kind of a higher order Japan or Germany manufacturing. Has that happened for you guys? Have you guys been able -- I mean, it looks like you'd get a hold of what you need to get a hold of, but have you had that like you had to go someplace different because China couldn't do it anymore because the demand wasn't there, or the availability to supply wasn't there?

Yes. Our team, our -- what we call our asset protection teams as well as our executive team, particularly in Walmart U.S., were really early on ensuring that we had what we needed. And we're starting to get what we needed for PPE, for masks, for plexiglass and all the things that we had, they were early into trying to secure that for the company. So nothing right now goes without challenge. But I think we were pretty successful in getting what we needed for our associates, for our customers.

Yes. No, it's remarkable. And you can just see you moved earlier. And our simple test is we take someone's hand sanitizer and we see essentially is it actually hand sanitizer. Or is it just some ethanol that smells like someone was drinking too much on the weekend, right? And you can just see like who sourced on time and who essentially couldn't do so.

I didn't know you were doing that research.

We've spent a lot of time looking at PPE without the whiskey drink. But I'll tell you why. This reopening component, think about what we heard from Target yesterday from Brian Cornell, we want to be the safest store shop in America. It's becoming arguably -- this is a little dramatic, but PPE or safety is kind of like a human right, right? And so that notion of going what is efficient in order for people to want to shop again. And so there's a whole set of folks who didn't go through the essential transition you guys already did. Well, they're going to have to do it. And so all of those dynamics have become quite remarkable.

Yes. We were pretty early to meet our customers into the stores. The evolution of masks and just the advice we and others were getting from various agencies went through its evolution, and we're -- obviously, we're following everything we need to in the states. But trying to stay ahead of that and just knowing what makes customers and associates feel safe, that's really important. And to your point, I think it's going to continue to be important for a while. Who knows how long? But if your customers; and associates don't feel safe in your stores, they're going to find somewhere else to go, and we want to make sure people feel safe.

Yes. I don't want to go too far down the tangent, but just because it was my job a long time ago to write the SARS 1.0 defense plan, which had a whole set of operation things, which seems kind of look like click-and-collect so I feel relatively proud of that. One of the other components was there was a dynamic of if you actually had to have, I'll call it, a clean part of the store and a dirty part of the store. So you might [ receive, and that's the dirty part of the store, then you would treat stuff, either with hydrogen peroxide or ozone, and then the clean part of the store. Have you guys had a place where -- was there a sense or has there been a notion that maybe there's even a -- there is more evolution to happen in the way that the store is run, even though today is really good, but maybe this isn't the final way to make the system as safe as it can be?

Oh, I -- yes. We're learning things every day. This -- again, there's no playbook for this. I mean there were SARS and H1N1...

[ Yes, but it wasn't right. ]

What's that?

I wrote you one, but it wasn't quite right.

Yes. Yes, I wouldn't -- there's no playbook for this one. So we're learning as we go. And like we do -- we'll respond to customer, what the customer wants, what we need to do, what's the right thing to do, what our associates want. It's got to be all of that coming together to help us write that playbook.

Yes. That's right. And to be fair, what's fascinating at this one is, is it's highly infectious, still terrifyingly high fatality rate but lower than what people were imagining, right? At the time, the notion of what SARS 1.0 or Ebola was, was essentially super high mortality but slower infection rate. And so there isn't -- you're right, there isn't -- this was not contemplated well, but by probably a handful of people in epidemiology. Private label has been awesome, you mentioned it before. Mostly when other companies do this, they do it for margin enhancement. You guys have a different -- a complex role. It doesn't mean that there's a good margin, and probably there is. But sometimes it's -- people will go, well, you have to do that to defend all the year. You have to do that to be -- have an opening price point that keeps your lower-income customer engaged. How do you guys think about the private label world at all?

Yes. It's evolved a lot over the last several years, and we've put a lot of resources, a lot of people against it. And when I used to go, early in my career, to the U.K. and I'd see 50% private label in a lot of places in Europe, I never thought the U.S. would ever get anything close to that. Because growing up as a kid, I remember private label being generic. It was not good product and like, well, the U.S. will never do this. Now I still don't think as a country, we get to 50%. I think this is a -- still a very brand-focused customer in the U.S., but it's more prevalent than I would have thought even 10 years ago, and Aldi and Lidl have done a really nice job with that. The lessons we learned in the U.K., in particular, is you don't compete with an opening price point quality. You've got to compete with a mid-tier quality on private label. But we've taken that pass through. Great value is one of the biggest brands in the world, not just for us, in general. And then we've taken that -- we've gone from 21 -- I think it was 21 private labels, the Sam's Club, basically to 1. We've evolved on the general merchandise side with mainstay and other things that we're doing on that side of the business. So it creates loyalty as well with customers. There is that margin mix and that's important. But it creates a loyalty with customers that we're seeing. And it's just another -- it's kind of another arrow in the quiver of how you address customer need.

Yes. I think that's right. I think that -- and we think you guys hit the quality really well on private label. And we've even seen those variations where you'll do -- you'll have an eco-friendly private label. You'll have a true opening price point that kind of look like the old one. And then you'll have what we think of as an Aldi color, like, yes, that's really good. It's got the right quality, it's got the right component.

Some of the things we're doing with the market side and just really, really good product.

Yes. That's exactly there. And one of the things that we always see is Kroger has done a very good job with private label, and they had that same aspiration, which is you almost are proud to have bought it and be like, listen, I'm going to convince you. Try the Kroger traditions, the pizza sauce, it's exceptional. And I think you guys are getting to that point.

Yes.

So just 2 more quickly, and then I've got some audience things. The -- I'm curious about the sale of VUDU, and I'm not after any commentary you guys haven't made from there. But one of the things that is a criticism we sometimes hear is that technology comes inside of Walmart, has a harder time getting it seed and growing and then kind of growing someplace else. And that's not a perfect example for, even because the whole business moved from where the original business case was. But I do kind of want the more general question of, do you think that Walmart's made moves to where entrepreneurs can really come and start showing their vision inside of Walmart as opposed to it's a place they would maybe be nervous about taking their baby and helping it use the scale.

Yes. A lot of times what you'll see when we make an acquisition is it -- it really just integrates into Walmart. And there are times where you have a technology that -- a technology or brand that you buy and -- Bonobos will be an example, where Bonobos is basically still Bonobos today. And there's places where you acquire something like a Shoes.com that really brought all that assortment onto Walmart.com, and it makes sense to integrate what we've done with those 2 businesses. The things that we've done in Store No. 8, delivery into the home, delivery into the fridge is the early testing and the early non-testing, the early pilots that we've been doing there came from here. That was some folks we brought into the company, and so that's evolved and flourished. We do need things that we can do at scale. That's important for the company. There's only so many smaller things you can do. You really need to be able to scale things up to make sense. When I look at what we've done with Store No. 8 and some of the technology you've seen with Scan & Go that have worked in Sam's, worked at Walmart U.S., it's just -- it's a different use inside of Walmart U.S., it was really exciting what we've done. And I think this is a place that if you're a technologist and now with Suresh as our CTO, our new CTO, your products and your ideas can flourish here. And actually, you can scale them in a way that maybe you can't do on your own.

Yes. Yes. I think that's powerful. A couple of quick ones, which is when I'm looking out to the left. So first is, could you please talk about the entry of Facebook into the Indian retail market through an investment in Reliance Industries? Game changer or just -- everybody is going to show up there one day?

Yes. India is competitive. We knew that. Reliance has been a competitor for years. I mean I've been going to India personally since 2004 as we started looking to our initial foray into there. So it's been competitive, Reliance, Amazon. So when you have 1.3 billion people, that's going to attract a lot of investment. That's a lot of the reason why we went there. So it's not surprising.

Right. I think that's right. The other one is, what is the biggest next opportunity you see arising from the pandemic? So is there a place where there's extra CapEx dollars that you're more likely to spend as a result of 2020?

Yes. It's -- we make decisions all the time, choices, trade-offs, and there's different elements that go into that calculus. This is a big one. This is going to change how consumers shop. I think that story is still to be written, how much do consumers change. So clearly, e-commerce is going to -- it was already accelerating. That probably accelerates another level. And so as we look at how do you fulfill that need, will we have more fulfillment space than we would have had otherwise? Probably. I don't think it's dramatically different because we'd already been adding fulfillment space. There different ways that you'll use your stores, more delivery, more pickup than in the past probably. But again, we are heading in that direction. So I don't see massive changes in how we would spend capital because everything we were doing was already heading in that direction. It's not like we have to stop and start. So I -- it'll accelerate some things, but I don't think it will be dramatically different.

Yes. It's a selfish follow-up one that, which is we've seen some of those smaller pickup points be tested in Chicago and other places. And we're curious if -- because you have really good density in lots of places, but maybe not all the density you want in all of the places. Is that still a possibility? Are those still thoughts that are on the table? Or is it sort of like, ah these are our [ shipped ] boxes and we're just going to figure out how to make them all [indiscernible]?

No, I think things -- there are so many things that are still on the table and addressing -- continuing to more efficiently address the urban customer is important. Like you said, there's a large part of population that we have. The great thing is we have businesses -- whether it's in London, Shanghai, Shenzhen, Tokyo, we have businesses that have massive density. So we know how to do those things. It's a little different in the U.S. But again, we've got to find things that we can scale. Having one-off type of pickup facility into Chicago isn't going to make as much sense. But now what we can do with supercenters, what we can do with e-commerce home delivery, Sam's Club home delivery, I don't think there's a customer set we can't address and aren't addressing.

Okay. Do you see the opportunity as -- some people have framed this is a market share gain for mom-and-pops because they just couldn't do the things in omnichannel that have been done. But do you think you're also kind of gaining better than fair share even against some of the larger competitors?

Can you repeat -- I'm sorry, Brandon. I didn't quite hear the question.

Yes. So there's an argument that mom-and-pops haven't been able to do anything on omnichannel for obvious reasons, low capital, can't do websites, so on and so forth. But the notion is do you think you're just winning against the weakest of the players or there's actually places where you're actually taking share against some of your stronger competitors?

Yes. You have to do both. And on the small business, the mom-and-pop, what's interesting is that where those kind of businesses are thriving, I mean, there's a lot of -- there's Bentonville, Arkansas and there's businesses that are thriving here. But on marketplace, our marketplace business in the first quarter grew faster than our e-commerce business. And so we're getting more and more sellers onto that platform. And what we're doing with Walmart Fulfillment Services, we're making it easier for them to get on and sell their goods. They don't have to develop all the infrastructure. We can -- we have that, and we're doing some of the same things in India and other places like that. So I think there's a way for the small business to win in this as well. I certainly think we're going to be one of the big winners in retail today for a long, long time. And to do that, I mean you've got to beat the best of the best and we know who those major competitors are. And I feel -- again, I feel good about our strategy and our offerings going forward.

A couple of rapid fire ones. I think this one's -- you've answered this before, but I'll say it anyway, which is how do you guys think about the profitability path for e-commerce. Are revenues awesome and you're going to keep accelerating it? It looks to us like that profitability is improving, maybe from not a great level to an improving mid-level, but maybe any color on that kind of path towards accelerating profitability.

Yes. We came into the year saying we thought e-commerce losses would shrink in the U.S. They did in the first quarter. And everything that we've been saying needed to happen, it's starting to happen. You've got to leverage fixed in a better way, and we're seeing that happen. Once you get the technology in the FC and the people in an e-commerce business, actually, once it gets started, will lever even more quickly than a store business. It just takes a while to get there. Contribute profit margin, contribution margins, really, really important. And with the mix of business that we're seeing, we're getting more brands in home and apparel and higher-margin business. We're seeing that contribution margin move up. And once it gets to a point, again, it levers a lot more quickly. So the underlying things that need to happen for us to get to profitability in e-commerce, it's happening. It's not happening as fast as we would like. Has it been slower than we thought? Yes. But I'm seeing a lot of positive things.

Yes. And we said this before. One of the things for me in that whole division is right out of the gate, 4 or 5 years ago when you did your first drive-through click-and-collect in Bentonville, I saw my favorite basket which was a [kayak and some snacks for the boat trip. And as soon as you get that available -- and again, you may order the kayak the day before, right, and it comes overnight and ships on the truck. But when that basket happens, no one's going to ask about e-commerce profitability, it's going to be [indiscernible]. Two quick ones, and then I have a unifying question that we're asking everybody. Are we entering a period of inflation or deflation with regards to food? And I know that's just kind of a guesswork. And then is that different than a general merchandise?

We were starting to see a little bit of inflation as we came into early March. The lack of inflation, to some degree, was helped by us, what we had done in pricing over the last 3 or 4 years, particularly on the food side. And so we were keeping inflation lower maybe than it would have been normally, and our price gaps are very, very good versus competitors. People have been predicting inflation for a long time, and they've been predicting higher interest rates for a long time, and it just -- it hasn't happened. So I'm not an economist. One would think with the stimulus money you've seen that you would start seeing some inflation, and we will in pockets, it will be by different categories. But I think we're just going to have to be prepared for whatever comes at us.

I know I got a Chicago banner behind me, but maybe modern monetary theory is going to work. I don't know, maybe. You never know. I'll ask my unified question. As you think through and beyond the pandemic, how do you expect your priorities to shift, especially as they relate to cutting costs or increasing levels of investment?

Yes. I think it's -- and we've already talked about that as we released earnings in Q1. There are things that we've seen work with customers, whether it was before COVID or during this period of time, that we're going to lean in and we're going to lean in hard that we think will benefit us competitively in the long term. And then there's places that we look at and say, okay, the world is going to change a little bit. I don't know why we need to keep doing x. And we're going to -- we're going to go after that in a smart way. We're going to work differently. Everybody is going to work differently than they did in the past, and that's going to change a lot of things about, I think, where and how you spend money, and we'll be taking those opportunities.

Okay. I think that takes us to our time. I did get a note from my legal people that I have to formally show the stream of forward-looking statements. It's long and it's under the traditional safe harbor, so...

And it's on our website, too, so...

It's on the website, too. And it's -- Section 21E if you haven't read it in a while, it's really fascinating reading. So...

I'll read it tonight.

Yes. That's exactly how I put myself to sleep. Well, it's always a pleasure, Brett.

Thanks, Brandon.

I know we're not that far away, but it's still -- until next time, we'll figure out a way to do this back in person again as everybody cracks this thing. All right.

All right.

Thanks for your time and thanks...

Thanks for everybody's interest in Walmart. I appreciate it.

Right. Very well. Goodbye.

Thank you.