Walmart Inc. (WMT) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Michael Lasser, the hardline, broadline and food retail analyst from UBS. How thrilling is this? We get to have a fun conversation with Brett Biggs, Walmart's CFO. He's been the CFO since...

I don't think I've ever been called thrilling ever.

This is thrilling, this is thrilling. And part of -- one of the more thrilling elements of this is across our country, we've had 2 big retirement announcements from superstars this year: Tom Brady and Brett Biggs, and only one of them has actually paid their respects to Boston. So that speaks...

You've been working on that one a long time, haven't you?

Yes, I did. I did. I think it hit though, so...

It did. That was good.

And we have Kary Brunner with us as well, a key member of our Investor Relations team, but thank you so much.

Yes, my pleasure. This was the last live conference we did before COVID, it's here.

I know, I know. Last in, first out as they like to say, and we appreciate you coming back. One of the big topics over the last couple of days has been inflation, and there's probably no company that has a better perch or better positioned to help the consumer navigate through this inflationary environment. So if inflation lasts longer than expected, is that good or not so good for Walmart?

As you look at the last couple of years and go back the last 5 years, I think we've demonstrated the ability to operate pretty well in most -- any kind of environment and consumer was really healthy, certainly partially because of stimulus last couple of years, but we performed really well in that environment as well. I think as customers -- we're not seeing a lot of change in customer behavior at this point. If we did and customers start getting more focused on their own spending, I think we have a lot of things to offer for that customer. We have sharp pricing, we have assortment, one-stop shopping with a supercenter. If you want to shop online and stores, delivery, curbside, whatever you want, we've got it. I don't think anybody benefits from a lot of uncertainty, and we all probably have a little more uncertainty than we would like to see right now in the macro environment. But when customers get really, really focused, I think we do incredibly well in those environments.

Greg gave the best barometer of the heightened sensitivity from this and that his mom has started to ask him about some of these...

The mom index.

Mom index. And does that say anything about what -- how this is going to unfold? We're all trying to figure out, not just what's going to happen tomorrow but what's going to happen in the next 6 months as the consumer has to navigate through this?

The consumer's navigated a lot in the last 2 years, so I think companies and consumers have gotten a lot more flexible in how they manage through whatever situation they're in. So I think the nimbleness is there. But I think, again, Walmart's in the right position to be able to help them through that. We know -- we talked about at the end of Q4, we know that inflation is on the customer's mind for sure, still is, and now fuel prices. We've seen fuel prices this high before but probably haven't seen them go up this quickly and maybe most of our lifetimes, the kind of speed we're seeing fuel prices go up. Now oil prices have come back down the last couple of days. I think it's TBD what happens, but it's -- look, consumers have a lot of things on their minds right now, and I think we can help them in that situation.

So a year ago or so, Walmart introduced an algorithm on generating 4% top line growth and better than 4% operating income growth. Excluding divestitures this year, it expects to largely be on trend with that, and that's despite lapping an incredible amount of stimulus that was distributed in the year-ago period. So if Walmart can achieve that type of algorithm in this very dynamic and challenging environment, why couldn't it do better than that in a more normal year?

You always liked asking that question.

That's right. Aim for the sky.

I feel as good about the business as I've ever felt in our ability to achieve that algorithm. We said... [Audio Gap] Top line growth and then more on operating income side. If you look at the last 2 years in the U.S., you take [indiscernible] we've grown revenue over $65 billion, 17% top line growth so it's amazing growth. So I feel great about our ability to do that, to be able to add on top of that. And you add on the newer businesses that were, call them growing businesses, whether that's advertising, marketplace, Walmart fulfillment services, fintech, health care, all of these are businesses that could scale on their own. They're all scalable and they all tie in really well with what we're doing on, let's call it, the core retail side. And that's really what the omnichannel strategy is. And we get questions at times, look, how are you going to beat so and so? Well, I'm not trying to beat so and so. I'm trying to be the best Walmart. And by doing that, I think we will be the winner in retail over the longer term because of all these different things that we can do that allows us to address customer needs at the same time as we're addressing shareholder needs. And you want us to grow our returns. And that's -- we feel strongly we can do both.

And we talked a little bit about this earlier today, like literally in the coming 2 weeks, this will start to be a period where not only Walmart, but really the economy laps what was just an extraordinary amount of money that was distributed to the consumer in the year ago period. How do you keep the team focused as they're going to go through a period of declines in the business because the business did so well in the year ago period? It's only natural for human behavior to panic.

I mean, we still think we'll grow revenue in the quarter. But it's the reason our operators and stores are so successful is that they do look at this day to day, and they're trying to -- they're competitive and they want to beat those numbers every day. I think it's for all of us to step back and make sure we want a little bit of that pressure. That's good. We want them trying to beat those numbers. But at the same time, we got to step back and John Furner and Doug and others do this and all the way down to the organization to say, "Hey, last year, it was pretty different." I mean, March and April were huge sales volumes last year, particularly in the general merchandise side. And we've just got to help keep people focused. We just had our year beginning meeting last week, about the Sam's Club and Walmart, which is great. We got people back live and enthusiasm is fantastic. But we'll be smart about it.

And would you -- outside of Walmart, would you expect other retailers to start to engage in knee-jerk reactions to what's inevitably going to be a more difficult environment?

I think you just have to prepare for anything you might see. We've been through periods of time -- I think about my 22 years with the company, we've been through periods of time where the competitive environment gets more challenging or discounting gets more heavy. I think that's more unlikely when prices in general are going up, you may see less of that. But competitively, again, where we are with our price gaps, where we are on assortment, where we are on customer convenience, just I think we've got a really nice mix and, I would say, optionality in running the business. We just -- you've heard me say this many times, we have so many levers that we can pull as a company to make sure we're taking care of customers that need us and may need us more, given what's going on right now, but take care of shareholders. And as a management team, we know we have to do both. We don't get to choose between those 2.

You and I have actually talked about these levers repeatedly in these 2 seats over the years, and it seems like the number of levers that are available to Walmart today versus even just a couple of years ago has dramatically increased. And one of those levers is Walmart Connect, its advertising business. Walmart has aspirations to be a top 10 advertising destination. Does it have the infrastructure to be able to do that today? And just as importantly, does it have the credibility with advertisers to be able to fulfill those aspirations?

Yes. I think we've always had the credibility. We have the infrastructure as well, some of the things we've done with our partnership with Trade Desk and other things like that. It's more automated, more self-service than we've had in the past. The credibility has always been there in that space. We've been a little self-limiting on this the past few years. If you -- and I go back to conversations we had about this a few years ago. Internally, we always wanted to make sure that as we were growing the advertising business, that we could do it in a way that's not confusing for customers, that the site's not cluttered, that we're not making it difficult for customers and also doing it in a way that when a product gets recommended, that the customer knows we think that's good for them, that it wasn't necessarily someone else making that decision for us, that we still own how that happens. And we've gotten comfortable that we can do that and still grow a sizable advertising business. And I think there were some people who was a little larger than they anticipated. But I think you can sit back and look at it and say there's definitely room to go in that business. And you talk about the number of levers increasing. What I'm excited about is that they have increased, particularly with some of the newer businesses that we have. But it's not like I'm talking about 100 levers. It's a manageable number of levers that are all scalable, that we can focus. When I look at all these newer businesses, each one of them can scale on their own. Some of them will be better than we think. Some just the likelihood, all of them won't be as good as we think. But if a fair number of them are as good or better than we think, it's very sizable. And so it doesn't all have to work perfectly, but they're all great businesses. And if they work like we think they can, it's really exciting for the future.

And speaking of good businesses, you've gotten animated this morning when you talked about financial services. It seems like that's an area of particular excitement. How does Walmart build credibility in financial services? There's been periods in the past where retailers have thought about trying to enter this arena, Sears and Dean Witter. How does -- how is this time different? And how does Walmart build credibility in this area?

We've had a long-term business in this. It's been what I'd call a little more probably older school financial services, money transfer, money cards, the things that our customers still need, want and we do a great business there. We made the decision last year to partner with Ribbit Capital, and some of you guys know Micky, a fantastic entrepreneur, great mind, and Omer who came from Goldman Sachs. Again, just fantastic, smart, innovative. And it gives us a chance to look at the business a little differently and be a little more forward-footed on it. Today, one of the challenges that a lot of fintech businesses have is customer acquisition cost. But given the eyeballs that we have and the number of people that transact with us every week, customer acquisition cost is actually something we already bring to the table. We should have a lower customer acquisition cost than other companies like that. And then, when I think about financial services, I think about it -- and Doug and [ I used it ] too, it's broader. It's how do you help customers solve problems. They're not sitting there thinking -- sometimes they're sitting there thinking, "I need a money card." So sometimes they're sitting there thinking, really, just how am I going to make my life easier? How do I manage subscriptions? How do I manage my budget? Where do I invest? How do I go procure insurance? And it's all these things you deal with every day, and they're all our customers already. And if we can just help that existing customer base make their lives easier and it's profitable as well, it's a no-brainer for a business like us. But I -- the way we'll do financial services in the future and not in the long future, in the near future, is going to look different than what we did in the past.

Well, hopefully, you're not thinking about investment banking and equity research as part of financial services. If you are, we should talk.

I'm not even going to touch that.

Okay. I'll pivot the conversation to the online business. And where we want to start is Walmart has been building more infrastructure to support the various ways it's serving the omnichannel customer. Do you expect that Walmart will have to have as large a last-mile delivery infrastructure as the largest online competitor out there?

I don't think we have to, but I think we could. When we started Spark, looking at Kary, several years ago, 4, 5 years ago maybe, it was another way for us to service a customer. We're using third parties. We're using the common carrier, doing all kinds of different things. But it was something we wanted to try. We thought there could be some benefit to us there, and it's been great. It's been great enough that we decided it could be its own business with things like GoLocal, that we could take something that was a cost and turn it into a revenue stream. And there's demand there. We're one of the largest logistics companies in the world. We know how to do this. And so taking something like that and doing something that's revenue driving is pretty different for Walmart. But it's how we're thinking about things now, and you're going to see that, I think, more often in the future. So I think we could be. I think we can scale as much as we want to. And we'll be flexible on how we look at that last mile. We want to get to a customer as cheaply as we can on time, the right service and how we get that done then becomes the option.

So is the thought process as you can see all this as fast as both your 1P and 3P business necessitates?

Yes. We've got the infrastructure, the technology to really scale it how we want.

And to what degree does the technology and the infrastructure enable the growth of the third-party business? That seems like...

Yes, similar. It's basically some of the same systems so it does allow for that scaling.

And I have third-party sellers seen this growth and various options that you've been giving to them and said, "Well, Walmart is now more of a credible outlet for me to build my business."

Yes. I think sellers look at us a lot differently than it did 3 or 4 years ago as we've made -- we made onboarding much easier. We added 20,000 sellers last year. We expect to add 40,000 this year. We've made it simpler, everything you want, right? You make it simpler, you make it easier for them to build their business and you give them an alternative. We have a big e-commerce business that's getting bigger. And so they want eyeballs and they want simplicity. And I think in both cases, we've upped our game significantly in the last few years.

Is it as easy for a third-party seller to sell on Walmart as it is for them to sell on Amazon?

I think for the most part, we -- particularly now we have Walmart Fulfillment Services, that is something -- it was a piece we're missing a few years ago. And as we add capital in the fulfillment space, the good thing about the capital in that fulfillment space is whether we grow third party, first party, it can all go through the same fulfillment centers. So we're somewhat ambivalent to it, except we want a bigger Marketplace business. Marketplace, from a margin perspective as well as a top-of-mind customer SKU perspective, customer destination perspective is really important. So as you think about Walmart, we need -- you need to know that when you go online, you can find anything you want. We have 170 million SKUs today. I'm going to guess that's going to fulfill pretty much everything you want. But we're going to keep adding to that. And it's all of those things that matter. We'll have a bigger Marketplace business. We will. Yes, for sure.

I think the term that rhymes with [ my wheel ] is one of the most overused terms in the business world right now, but it does seem like you're creating this ecosystem that really is going to build on itself. And one of the drivers of this ecosystem is the subscription model that Walmart introduced a few years ago, Walmart+. What is the profile of a customer that signs up for Walmart+?

Yes, it's a big initiative for us. We -- people talk about sometimes this is new to us, but we've had Sam's Club. We've had a membership business for a long, long time. And so we know what kind of things drive those businesses. It's an incredible opportunity for us. We know that shoppers, I'm not going to get into the specifics, but shoppers that have Walmart+ by significantly -- or I mean significantly more than a non-Plus.

And if you get into specifics, what's Doug going to do? Come on.

We'll just keep it at this, how about that?

Okay.

But significantly more than non-Plus members -- or people that aren't members. So -- and we know that, that carries on. So it's not just they do it right away and then they don't use it again. Once we get them in, we keep them in. They're a significantly larger customer for us which is what you would assume, right? And then when you get them into that ecosystem and they're transacting even more in using financial services, they're buying more general merchandise, they're buying those higher-margin apparel and home items, that's where the magic works inside that flywheel and where the P&L works as well.

So we've talked about financial services. We talked about the third-party marketplace. We talked about Walmart Connect. We talked about Walmart+. This is -- these are the pillars of this evolution to Walmart's business model. Walmart's business model historically has been, have big stores, you sell a lot of stuff, get big volumes, use that leverage with your suppliers to offer the cheapest prices out there. You still have that and then now you layer on all these alternative profits. What's the strategy for them going to take some of those alternative profits in this really juicy profit pool to then go and potentially reinvest back further in price and distinguish Walmart even further from the competition?

We're always going to be sharp on price. But I don't think those decisions aren't mutually exclusive. As we think about what the P&L looks like, when we think about the algorithm that we laid out. It's really about the total. What's the total profitability of the company based on the revenue we think we can generate? And then how do you move the pieces in a way that gets that done? There's all kinds of different ways to get to the same answer. So it's not we make more money here and that just -- we're going to put that all back into pricing. Our price gaps are in really good shape. And we're always going to be there for our customers, but we're going to be there for our shareholders, too. And so we're going to make sound decisions about how we think about pricing. There may be times where we say, "Hey, more of that's going to flow to the bottom line. And maybe time to say it's time to go invest in something and we do that." But it's another lever, it's optionality that we really weren't talking about as much a couple of years ago, that when I look out, I've said before, right now, I feel as good about Walmart as I've ever felt. It's because of all these different ways that we can get to the answer that we want to and serving customers and taking care of shareholders. It's as good a position as we've been in.

And it's part of the answer, look, we have this profit pool, but we don't want to get too [ over it ]. It doesn't make sense to necessarily have our price gaps too wide because it may not provide the unit response right now. But with that being said, as we -- what gave you confidence to guide to how you did was if you're not seeing the traffic or the unit volumes, you have the optionality to make some of these investments to be able to drive the business as you move throughout the year?

Yes. Growing market share for us is incredibly important. We want to be top of mind with customers. But we can do that in a way that makes sense financially. I think we've been doing that in a way that makes sense financially. But we want to take market share. We've been taking market share. Top of mind with customers, #1 for us.

And these pricing investments and being top of mind with consumers can be that much more important in this environment where that lower income is -- a lower income consumer is feeling a little bit of pressure. Are you seeing any signs that, that consumer is feeling the pinch? And how you would see it?

We're not -- we haven't seen much change in customer shopping behavior yet. Typically, when fuel prices go up, for us, you'll see some consolidation in trips. You'll see if -- traffic might go down a little bit, transaction dollars will go up. So they'll buy bigger baskets, that fits right with us. If you're going to go -- if you're going to decide to go one place versus 3, you're going to go to Walmart because of the SKUs, everything that we can offer in product service. But we haven't seen a big change yet. And I -- when you look at all the metrics, you look at unemployment is low, wage rates are high, customer balance sheets are still pretty good. Savings rates are still pretty good. There's a lot of things that are still feel pretty good from a consumer standpoint. And we just haven't seen that change as of yet.

Understood. Wages and labor investments have been a big topic for Walmart. There was a round of investments over the last couple of years. Where does Walmart stand in terms of the average wage rate? Does it need to make another investment? Has it gotten any easier to attract and retain employees?

Yes, I think the things we've known over the last few years got us in a good position and probably no better metric than that than we hired a couple of hundred thousand people as we got into the holidays, which is no small feat no matter how big you are. So I think that's a good data point. We've been proactive over the last couple of years, not just in wage rates but other things we've done with Live Better U and other benefits. So the average hourly rate in Walmart stores today, the Walmart U.S. business is $16.40, a little bit over $16.40, on average. SAM's a little bit higher than that and the supply chain is over $20 an hour. So I think we're in pretty good shape. And again, the ability to hire is your best metric with that. And we're all going to monitor and watch what happens in the next few months on inflation and wage rates and everything else. But as of right now, I feel good about where we're at.

And how does the deployment of automation and technology help to alleviate some of this? Walmart, starting last year, had made some investments in areas like micro fulfillment. What should the market expect from those investments moving forward?

Yes. We've made investments in places where we can be more productive, but also in places where there are jobs that associates candidly just don't like to do as much, whether that's -- one of the things that people really don't like doing is unloading a truck. It's really difficult to do, it's time consuming, it's labor-intensive. And some of the work that we're doing, we've talked about Symbotic in our distribution centers is going to help alleviate some of that. You can redeploy people to jobs they'd rather do, higher value. And so all of that plays into, I think, what we want to do as a company, not just from a financial standpoint but also what our associates want to do as well. But it helps. I mean, it's -- we've gotten -- we're more productive than we were a few years ago.

Is the deployment of those investments going to be bigger this year than they were last year between the robots, the automated unloading?

Yes, there are some things we've been working on the last couple of years, probably more in the supply chain that you'll see. There's some store automation but more on the supply chain side, that we'll start seeing this roll out over the next few years. And as we go through that, we'll be walking investors through that and what we're doing, where we're seeing the benefits, what we're working on. And I think you saw us talk more about advertising in Q4. As we make -- our CapEx is a little higher than it's been in the past. And as we raise CapEx, we know that we need to come back to investors and say, "Hey, here's what you're getting for that CapEx. Here's what's working and here's what we're working on." And so I think you'll continue to see more and more data from us.

Has it been more challenging to deploy some of this automation that was thought? Because the recent narrative has been more about some of the alternative profits and a little less about some of the...

Yes. No, it's -- we're pretty much where I thought we would be. The challenge is 2 fronts: one, the omni model has never really been built. There's no other company doing what we're doing with stores and e-commerce and pulling this all together in the way that we're doing it. It's never been done. There's no playbook for this. So we're developing the playbook. So it's hard to know if we're on time or not. We always feel like we're behind, which is probably what you want to hear, and we feel that way. On the technology side, it's complicated. It's -- when you look at what we're doing in our distribution systems to automatically stack a pallet and stack it in a way that you can unload the stores, so have a significant amount of time in the store and have it out ready when we get to the store, that's a complicated system but we know it works. And now we know that we'll be in the process of starting to roll out things like that because it works. But it takes time. We're just doing things that haven't been done before. But it will also be, I think, a significant competitive advantage.

Has Walmart accelerated its embrace of technology versus a couple of years ago, such that 5 years from now, it will be in a pole position or leading the deployment of the next-generation technology?

Yes. It's -- we're incredibly comfortable with it. And a lot of that started with Doug. Doug -- and go back 30 years ago or 35 years ago and start with David Glass. David was really the first retailer that said, "We're going to put in satellite dishes and talk to our stores every day." I feel like we're on another journey on that. And Doug's been a leader in that. Three years ago, we brought in Suresh Kumar who had worked at big, big tech companies, and he's brought in new ways of doing things and different ways of looking at talent, different ways of looking at process. And yes, it does feel different than 3 or 4 years ago. It's faster. It's quicker. I feel like when things -- when we go into something that doesn't work, I think we stop it quicker as well. So I -- yes. I like the feel of it.

Yes. I want to pivot the conversation to Sam's for a little bit. Sam's been doing...

Doing really well.

Really well. And with that being said, is the room for Sam's to accelerate the growth in new warehouses and other initiatives now that it is doing -- has such good momentum behind it?

I think there's always the possibility you could do a club here or a club there, but the club base we have right now is -- it's strong. It's -- we're getting more dense in each one of those clubs. And the club business is about scale. And when you can get scale in a club, it just runs differently. It runs much more smoothly and members like it better, profitability gets higher. You throw fewer things away, it all just works better. So I like the club base that we have. Where we're seeing the biggest impact is membership is up significantly, both base membership but also our Plus member penetration is much higher. Member engagement is high. Sam's has been great in leading the company at times in technology. And let's try something here at Sam's. It works. Scan & go would be a great example. You see that used more -- it's different at Walmart but utilized at Walmart as well. It's been a great place to develop people and it's never run better. It started -- 4, 5 years ago, really took a tick up. Furner was over there. Kath has come in, done a great job. The team is -- you want to talk about a motivated team, that team is on fire. And we talk about this little business. It's $70 billion or more. And so it's really big business and it's great returns for Walmart.

And there's a lot of talk about fee increases. It's constantly asked for Costco, Netflix and Amazon have raised their fees. Sam's hasn't raised its fees in a while. Why is that the case? And how much pricing power does it have to raise its fees?

Yes. We're always looking at member value, and it's -- you look at the membership fee along with pricing, gross margins, your expense structures and what's best for the member. I'm comfortable with where we're at today, but we're always looking at structurally, how does -- what does that look like? We've talked about it a number of times during my tenure. And so nothing to say specifically today.

No announcements?

No announcements today. I apologize, I'm not going to do that on your stage here. So we're always looking at what the best, I think, amalgamation of all those things are for the member.

And pivoting to the International business, is the International business at all being impacted by the geopolitical uncertainty? And how would you if it will be, where and how will you expect it to be impacted?

Yes. We don't have any direct business in that region and very limited even supplier base in that region. It's -- I mean, just on a human level, it's awful. And we've got -- we have associates certainly have family members there and support them. It's just -- it's an awful situation. Everybody thinks about it and my prayers all the time, that situation. But from a business perspective, it hasn't had a major impact on what we're doing. We reduced our exposure in the U.K. That would have been the closest thing we had from a geographic standpoint. And so it's just not, from a business standpoint, in direct line of site from a business impact...

Business standpoint. Any -- and I'll lead into a broader question, but any sourcing from Europe that would be impacted?

I think it's just -- it's to be seen what happens. I think it's really hard to predict what could happen. And I think just like everybody else, we're just going to have to see this play out and be nimble about it. I think the last couple of years have proven how nimble all of us can be with new things that seemingly kind of come out of nowhere. And we'll have to just -- this one is far worse, but we'll just, from a human perspective, we just have to work our way through it.

No doubt about it. Speaking of sourcing from a supply chain perspective, is the global supply chain better today than it was 6 months ago?

Yes. I think it's definitely getting there. One, I think companies have learned to work through it a little bit better. We're better in some ways because of it in that we've just learned how to -- we can operate differently. We can do some different things. It's not ideal. You'd like -- you don't want to go through what we've seen in the last year. But I think port congestion getting a little bit better. Let's talk about at least maybe like a couple of weeks ago, everything seemed to be getting a little bit better. When we gave guidance, we had assumed that we'd see it settle out some probably as we got towards the back half of the year and get in-stocks back in like where we'd have them pre-pandemic. So I think that's still our hope, but you always plan for it if it doesn't work out that way, then how we're going to keep working through. The good thing is, is we've learned to work through it.

And you mentioned between the supply chain challenges and tariffs before that, Walmart has learned some new agility...

A Walmart merchant, that's a pretty tough job, actually.

Yes. Welcome to equity research.

Again, I'm not touching this...

For sure. How does this permanently change Walmart's agility? Does it make it -- does it manifest to make it more profitable business? Because you said, look, some of the things we had worried about doing in the past, we've had no choice to. And as a result, we can now comfortably navigate in that way.

We have more confidence, for sure, that we can navigate -- again, it was 3 years ago, started with tariffs and then we went into COVID and now what we're in, inflation. So we've learned to navigate through that. I think our merchants are better. More tools in the shed to deal with situations like this. And we have a great mix of merchants, of our Chief Merchant, Charles Redfield, I've grown up in the company with Charles and he's spectacular and the kind of guy you definitely want in the seat when you're trying to manage margin and pull all these levers. He's seen probably everything you can see at Sam's Club, Asda, Walmart. And then you have some newer merchants that can bring new ideas and bring fresh ways of thinking of things. And I think it's a great mix.

And speaking of profitability in the fourth quarter, the Walmart International business did experience some gross margin pressure because the e-commerce business was doing pretty well. Is this a structural challenge that not only the Walmart business -- the Walmart International business is going to navigate through, but the domestic business might have to experience this at some point? Or you've kind of mastered that?

The International business, you got a couple of things going on. You've got, as you said, e-commerce penetration is going up. It's 20-ish percent as we got toward the end of last year. China business, which is a big business for us, the Sam's business is doing incredibly well. That's a good thing but it's lower gross margins. Operating margins would be somewhat equivalent. So from an operating dollar standpoint, I don't think you have a challenge there. Each market is really different. And the Walmart U.S. business still, you have typically more general merchandise, so you have a different margin mix in the Walmart U.S. business. And now with the other profit pools that we have there, it's -- I don't think it's apples-to-apples.

The profit pools that Walmart's developing in the U.S., how fast can it replicate those in...

Yes, we're starting to. It's in places like Canada, you see Canada has a lot of similarities to the U.S. in how we run the business. Walmex, though, is doing an incredible job thinking of the strategy of what makes sense for the population in Mexico and Central America. Walmex is a phenomenal business. Great sales growth, great profitability, great returns, just a phenomenal business. India is going to be a business that we can continue to scale. I feel good about the markets that we're in today.

And the converse of taking what's working in the U.S., scaling it internationally, what's working internationally that you can now bring to the U.S.?

Yes, what we've done in the past in a lot of the grocery business and pickup business, we were doing that in places like Asda before we were doing it in the U.S. And so there are certainly learnings and people as well, a lot of people that have come from Asda to run some of our business. So I like that one of the first trips I ever took to Flipkart would have been, I don't know, 4 years ago, and PhonePe, I started seeing some of the things they were doing around, let's call it, the broader definition of financial services. How do I make the customers' life easier? And I came back to Doug, I was like a lot of these things we've been thinking about, they're already doing it. They're doing it in India and they know how to scale it. And we've taken some learnings from India and how some of the things that we'll think about with our own joint venture.

And the growth in India it seems to be pretty unlimited, given the market opportunity there. Are there key unlocks that still need to be put in place in order to capitalize on this potential growth?

We've built out fulfillment capacity. It's always one, how do you get last-mile delivery, but with what they do with eCard and some other things we've done there, I feel good about our ability to get product to the customer. Huge market as far as not just number of people but the growing middle class. It's competitive, but we have competition in other parts of the world. And when you have a market growing like that, you're going to get competitors. And I think competitors make us better, will make us better there. But I think the growth there is still -- it's just TBD, it can be big.

And pivoting the conversation, ESG has taken on a new relevance, a new priority across the business world. How is this...

What was that you said?

ESG.

Oh, ESG.

ESG. How has this impacted Walmart? It's -- at the very least, it's been much more front and center in the messaging to external constituents. But how is Walmart practicing what it's preaching?

Yes. I think for us, it's an advantage. We've been -- this definition of ESG, we've been -- it's been a part of our DNA for a long time and definitely back to 2005 when Lee Scott introduced sustainability. And we were one of the first ones -- nobody knew what it was and how we were going to make our operation more sustainable. And we've gone from most of our store waste going to landfill that now, I think over 80% doesn't go to a landfill. We've got over 30% of our energy globally is renewable. We've come a long way. So when this started coming up in the last couple of years, we're like, hey, people are going to talk more about ESG, well, like, that's great. We've been wanting to talk about it. We're a leader in this space and the scale that we have, no one can do what we can do to -- and it's not about I want to make you happy from an ESG disclosure perspective. It's what we can do for the planet and what we can do for our customers and what we can do for society. We've been way ahead of this. And it's one of the things I'm most proud about Walmart.

Is this something that's increasingly been part of the internal discussion? And...

How much has been? I mean particularly, again, since 2005, when Lee started sustainability, it's almost every discussion I can remember around merchandising or customer or strategy always had this element to it. And it's been a great part of the business. We've saved our suppliers money. We've saved ourselves money. We've saved our customers money. It's good business practice.

No doubt. Sadly or maybe happily, depending on how you look at it, this is going to be one of your last times in front of a forum like this, all these lovely folks. What skill or trait do you think is important for your successor to have that you may not have?

That's like what's your greatest weakness question in an interview. I'm hoping I haven't left too much low-hanging fruit. It's a great question, though, and it's the right question. And if you're Walmart or any company like this, you've got to be looking ahead 5 to 10 years and saying, "What's the strategy? What do we need to be great at?" And for us, it's an omnichannel business. It's increasingly digital. Those are the things you're going to look at and say who's the best person to help us -- to work with the rest of the team to guide us through that. I think it's always it's who's different. When Tom Schoewe was CFO 12 years ago, Charles Holley was different than Tom Schoewe. I'm different than Charles Holley. The next person will be different from me. And that's what you need. And I'm -- I was kidding with Doug. I said, inherently, you're looking for someone better than me, I understand that because that's what you should be doing.

That's not easy to do.

But that's what a company should be doing. It should be looking to get better and making sure that they take care of the future.

Yes. And throughout this conversation and prior to this, you've mentioned several times that you feel Walmart has never been in a better position than it is in today. What makes you say that?

I get questions when I say that, like why are you leaving?

Why are you leaving?

The company is in such great shape. And one, I think when you think about a transition, this is when you do a transition. You do it when the company is in great shape and the next person that comes in can work into it. That's what you want. I've just -- I've never seen a time and I've gone back through -- I'm actually doing -- we have an off-site in another month and I'm going back through -- I'm one of the old guys at Walmart now so I'm going back through some of the history of the company and explaining it to how we got to where we got to, to people that are newer to the company. And as I'm going back through that, you see these inflection points like when we started the supercenters, not everybody thought that was the greatest thing we'd ever done, and it turned out to be the greatest retail format in the history of the world. But I sit back now and I think -- we think we're in that moment again. You rarely see it when you're in it, but I think we're in it, which is we've got a great base business, incredibly good, globally. And then we have all these other places where we can touch customers' lives without going too far outside the retail circle but touch their lives, fulfill our mission of save people money, [ selling one better ], fulfill the mission, do it in a way that makes sense for our culture, do it profitably and help grow the business. And it's not just one thing. It's not like here's the one thing we've got to do and if it works it's great, but it doesn't, that's not good. There's all different kinds of ways that we can make it work. And I feel like there's more opportunity now than I've ever seen.

It is Walmart's culture.

Revenue growth, profit growth, opportunities for associates to grow their careers, ESG, I think all of those things, they're just more opportunity than I've ever seen.

Is it Walmart's culture at the point where it will enable some of these opportunities?

Yes, I love the culture. There are so many things about it that feel like 22 years ago when I came in. We're still very cost conscious. And when I think about our 4 core beliefs, they're all still the same. It's a very respectful place, but we're competitive. We want to win but I think we do it in the right way. I've been blessed to be in this company and be in this job. I don't lose sleep at night because of the kind of company we are. I know we're going to -- we don't always do things the right way because you can't be perfect, but we try. We really try to do things the right way. And I've been blessed by that. But the culture has evolved, though, in a way that it's more relevant, I think, for people who are coming in new to the company and more tech-focused. It's quicker, it's more agile. I'm still -- I'm not surprised but I'm still amazed how quickly we can move, the size company we are. So all the good parts of the Walmart culture are still there. But it keeps evolving in a way. I think Doug has done an amazing job in evolving the culture in the last 7 years, 8 years that, yes, I wouldn't bet against us.

Well, congratulations, and we wish you much luck in your next phase.

Thank you very much.

So please join me in thanking Brett Biggs.