Walmart Inc. (WMT) Earnings Call Transcript & Summary

Okay. Thanks, everyone. So my name is Peter Keith, senior research analyst at Piper Sandler, covering consumer hardlines and broadlines. I'm very happy to have Walmart with us today and particularly excited for this discussion, which is going to focus on Walmart marketplace. So with me on stage is Manish Joneja. He is SVP and Global Head of Marketplace and Fulfillment Services. So Manish, great to have you here. Thank you.

Thanks for having me.

Let's jump right in. One thing that really stood out to me if we look at year-to-date results is the acceleration that marketplace has seen. You've seen 50%-plus growth in Q1 and Q2 which was a pretty healthy acceleration from 2025. So what do you think about some of the key drivers to that acceleration?

Yes. So I'm going to address this mall close room. So I'll address all of you together. So when I think about our growth, there's no one particular thing that we change. It's the fruition of everything we've been doing for the past few years. So look at marketplace or an e-commerce business, we look at the right assortment at the right price, at the right speed that discoverable. So what we're investing in is focused on rather than vanity metrics like what are the right use people looking for in a particular market, in a particular month, enabling sellers to price it right. So building tools and capabilities are -- they can set a low bar and high bar and compete with others. Third part of it becomes speed, which is critical. Think about same-day promises, next year promises. Part of my business is also to run Walmart fulfillment services where we have our next-gen FTEs that we invest in, and we place sellers' inventory there. So in place that inventory that converts a 50% high conversion rate overall and when you add ads on top, that creates a discovery mechanism. So when that whole pipeline fires up, you see basically conversion happen to a whole different level. So that's what I'm noticing is the growth coming in from like getting all those pipelines connected together and our investments being off.

Okay. All right. Thinking about on a go-forward basis, obviously, you would see a good runway for growth. Do you think those types of things coming together could continue to drive this type of growth? Is there anything new that you're excited about that suppliers were starting to ramp up with?

Well, I feel like I get in a candy store, sometimes it's a first inning right now. So we're getting our assortment, price, speed and discovery together as such. But when you look at our assortment, right, working back from customers, we still have gaps in assortment. So as we're getting more assortment, we focused on getting the right assortment placing them in the right node, the same day, next day delivery becomes critical to promise, putting them in stores which we'll talk about in a second as well. But those -- that gap actually is really exciting because we're filling those gaps, getting the right brands, the right sellers, the right D2C companies that can buy it. So getting K Beauty, for example, that's right now sitting in the back of the stores, our FCs and my wife talked to me a lot about those brands, which I forgot, but I think Medice and others, right, that we get on board. So we've seen that materialize really fast. It's helping us connect with new customers. So a good example, we got Nespresso. I think they've talked about this recently. 40% of the people who bought that from us, never bought coffee from us before. So we've seen our existing customers capitalize on this assortment that was never available. And we're seeing new customers coming from the new assortment that we are getting. We're seeing higher penetration of higher income households that are buying like my wife is never knew -- I mean, we have our CMO William White, who did the campaign. I think that was like a master stroke, right? And my wife didn't know that we carry or we say -- So now she knows and she's buying it from there. I never bought it before for Walmart. So we've seen that trend happen more and more as we increase more assortment. The second part of this, when you think about growth is also international. So my role changed to look at global marketplaces, which includes Canada and Mexico. Canadians and Mexicans want same thing, right assortment, right price, right speed, that discoverable. So we're starting to have the same playbook, leveraging that basically accelerate those markets. We open up dotcom for Canadians and Mexicans to buy U.S. assortment from our sellers now. So that's open. And the last third part of that kind of equation becomes connecting to broader Walmart. Now one of the best advantages that I've had building marketplaces that Walmart had invested in these foundation blocks for decades. We have one of the best supply chains ever in the world because we brought in goods from China and Vietnam. Now we can extend that platform to our sellers without significant investment. So they're piggybacking on the back and that really exists. So connecting the dots between those in the stores is another factor for growth. So still the first innings.

Okay. That's exciting. Maybe I'll just take a step back and we'll just talk about the competition in the space. So it's competition is intense and there is global competition. You've got a major competitor here in the U.S., obviously, they have a very large and somewhat mature marketplace. So why does Walmart need a marketplace? And sort of what's different about your opportunity versus others?

Yes. So it starts from customers backwards. We want to serve our customers what they want, need and love. That's a phrase I use in our team, it's not just about needs. It's also about what you want. So the example about the brand actor was a want, not a need, but our customer is searching for these brands. So when we work backwards from that, what our sellers bring to the table is that assortment to the table in our fulfillment warehouses and with ads. That just allows our customers to be in Walmart and shop for different occasions. So now when you come in for, let's say, grocery, you can also find farmers dog, right, there that you can buy with it. You can also find the cap beauty elements that didn't exist before. Even sneakers that my kids are crazy fan sneakers, they love soccer, I can find those goods that I could never find before. So the objective is to serve our customers what they want, need and love. And we don't have to carry every single SKU. We have to keep our promise to have it at the right speed and inform a sellers what price would look like and have them be discovered. And when you create those -- that ecosystem together, that just basically drives conversion because our customers get more options, they retain. We see them spend more, spend more frequently and spend more in different SBUs like fashion, home, hardlines that never thought about before. In terms of differentiation, when you think about marketplace brings this massive assortment overall that our customer is looking for. Combine that with the foundation I talked about for Walmart, where we have stores right now, we have FCs, next-gen Cs. We're helping them bring goods from source countries into the market. When you compound those, that just leads to a whole different multiplier in terms of their growth. When sellers see that growth happen, they bring more assortment that customers -- our customers buy more need some more membership. So that creates a whole fly view. That's a key differentiator versus anybody else in the market that nobody can replicate the 4,500 stores that we have in the market plus the assortment that we're getting in.

Yes. Okay. With the assortment, I think Walmart is obviously very well known for grocery and consumables. I guess the marketplace over-indexed to general merchandise, is that we are seeing a lot of new brands show up that maybe Walmart has traditionally offered?

Yes, it is. So marketplace is predominantly general merchandise. It doesn't mean that there's no food elements to it. There's international grocery shelf-stable grocery that we get. But it's a high mix of fashion, home, hard lines, electronics and toys. What that does is it creates a resonance with our customers when they come and look at, hey, I want to buy something from a store where the goods may not be available, we surface that with discovery. And that's where the ads element comes in as well as you guys know, when you bring a new item to any marketplace, there is something called a cold start challenge. Like if you've been selling tight bars all your life, search might show you tight bars. Ads and our organic search teams helps us deconstruct that, so the new items have a chance for sellers to go and sell, and they can inform their product behavior accordingly to redesign it.

Okay. Interesting. Maybe sticking on GenMerch. So if we look at the overall results for Walmart, the general merchandise comp in the second quarter was up low single digit. Marketplace, you're saying is mostly GenMerch, up 52%. How does the marketplace numbers impact that overall GenMerch same-store sales?

Yes. I think same store, we're talking about this recently as well that we need to do a better job educating how we look at the business, how we run the business. Same-store comps are the right comps for traditional retail. We should always look at that. What we're working on how do we provide complementary metrics that tell you essentially that those stores are no longer just stores. They become fulfillment nodes. E-commerce, online pickup delivery grew 43% last quarter. It keeps on growing. People want to buy these items much faster. And think 95% of America is in 3 hours delivering of stores, 60% is within sub 30 minutes. So stores are no longer traditional retail stores. They become nodes. They become a neighbor for marketplace and e-commerce both. So we need to do a better job of complementing with metrics and how we obsess like every Monday, we sit with Dave, who is our CEO, and look at not just like same-store com, but overall how the business is performing. How are we thinking about bleeding basically between different businesses because you're right, marketplace, we report our net sales, GM's not a metric you're looking at, how we're looking at growth for GenMerch within it. I expect GenMerch to grow more and more with Marketplace, and that's going to get fulfilled more and more by our store node. So we'll start evolving to a unconventional retailer, if that's the right word, but it's more than retail.

Okay. All right. Maybe that's a great segue to the next question, which is with your store base. And we think of a lot of retailers that are trying to open up their own marketplace. It seems like it's a little bit separate. It's going to be drop ship from the supplier, and it's, I guess, it doesn't really have a lot of connectivity with stores. It feels like you guys are trying to drive this integrated experience where marketplace and stores can work in partnership -- maybe talk about how you're doing that and how that could be a competitive advantage.

Yes, that's something I'm super excited about. So as a customer, we do not want you to feel any difference between a first-party product or a third-party product. We don't you want feel a difference between FC fulfil versus store fulfillment. Our stores are massive advantage. It's like throughout the U.S., not just U.S., Canada and Mexico as well. What we started now is when you buy some goods from our marketplace, typically, it goes through SC, -- same day, next day, 2 days, if it's a non-sort so far, I might take 3 days, right? What we now started doing is we inform based on data insights, which region customers are looking for what in that particular node and started basically forward deploying inventory into the stores in the back. So when you have added mill or potatoes to your cart, like you said, you come in for grocery, now you can see third-party merchandise in there. It's not every single item, but what might sell in Seattle in December is different than what might sell in Dallas in December, right? So we look back from those customer demographics and sales patterns to forward deploy inventory. What that does is OPD is a massive growth engine for us, the backbone for us. It just basically now allows sellers inventory to be discovered as part of that and added to the same cut, and be in a door in sub 30 minutes of 3Rs depending on where you are. And that's a major unlock, which I expect to keep on growing. We're ramping those things up essentially with our sellers working with them over a long period of time, midterm, it's also a monetizable opportunity. on the shelf, it's 1 of the most valuable space, basically, right? So how do merge third party with one first party, that's a really important thing for us. What we've seen is we have suppliers who become sellers, new sellers who become suppliers. A lot of brands come in with marketplace. They test out. They find the top 10 SKUs. We work with them to find out where to place them and we buy them. Or we have suppliers to say, "Hey, I have 100 SKUs with you, I have 10,000 more that are selling and we bring it to marketplace." So you'll start seeing osmosis between cells and suppliers, which benefits our customers, benefits us as well.