Walmart Inc

Results of Operations

Consolidated Results of Operations

Our total revenues, which are mostly comprised of net sales but also include membership and other income, increased $7.7 billion or 4.8% and $17 billion or 5.4% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were primarily due to strong positive comparable sales in our U.S. segments and international markets driven by growth in transactions, with strength in eCommerce as well as strong sales in grocery and health and wellness. Net sales for the three and six months ended July 31, 2024 were negatively affected by $0.3 billion and positively affected by $0.1 billion, respectively, in fluctuations in currency exchange rates. Membership and other income increased $0.2 billion or 16.0% and $0.5 billion or 18.5% for the three and six months ended July 31, 2024, respectively, primarily due to strong growth in membership income globally.

Gross profit rate increased 43 basis points for both the three and six months ended July 31, 2024, when compared to the same periods in the previous fiscal year. The increases were primarily driven by the Walmart U.S. segment due to managing prices aligned to our competitive price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 35 and 38 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increase for the three months ended July 31, 2024 was primarily driven by higher marketing expenses and higher variable pay as a result of exceeding planned performance. The increase for the six months ended July 31, 2024 was primarily driven by higher variable pay as a result of exceeding planned performance, higher marketing expenses and business reorganization costs of $0.3 billion incurred during the first quarter of fiscal 2025.

Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period. The net increases of $5.1 billion and $1.3 billion in other losses for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year, were primarily due to changes in the fair value of our equity and other investments driven by changes in their underlying stock prices.

Our effective income tax rate was 24.2% and 24.4% for the three and six months ended July 31, 2024, respectively, compared to 24.9% and 25.8% for the same periods in the previous fiscal year. The decrease in effective tax rate is primarily due to the tax impact on changes in fair value of our investments. Our effective income tax rate may fluctuate from quarter to quarter as a result of factors including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix and size of earnings among our U.S. operations and international operations, which are subject to statutory rates that may be different than the U.S. statutory rate.

As a result of the factors discussed above, consolidated net income decreased $3.3 billion and increased $0.1 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. Accordingly, diluted net income per common share attributable to Walmart was $0.56 and $1.19 for the three and six months ended July 31, 2024, respectively, which represents a decrease of $0.41 and an increase of $0.01, respectively, when compared to the same periods in the previous fiscal year.

Walmart U.S. Segment

Net sales for the Walmart U.S. segment increased $4.5 billion or 4.1% and $9.3 billion or 4.3% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were due to comparable sales of 4.2% and 4.6% for the three and six months ended July 31, 2024, respectively, driven by growth in transactions, with strong sales in grocery and health and wellness. The Walmart U.S. segment's eCommerce sales positively contributed approximately 2.9% to comparable sales for both the three and six months ended July 31, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Gross profit rate increased 51 and 48 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were primarily driven by managing prices aligned to our competitive price gaps and growth in higher margin businesses, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 41 and 44 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were primarily due to increased marketing and depreciation expenses, as well as higher variable pay as a result of exceeding planned performance. Additionally, business reorganization costs of $0.1 billion incurred during the first quarter had a negative impact for the six months ended July 31, 2024.

As a result of the factors discussed above, operating income increased $0.5 billion and $0.8 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Walmart International Segment

Net sales for the Walmart International segment increased $2.0 billion or 7.1% and $5.2 billion or 9.6% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were primarily due to positive comparable sales in the majority of our international markets led by strength in eCommerce and food and consumables categories. Net sales for the three and six months ended July 31, 2024 were negatively affected by $0.3 billion and positively affected by $0.1 billion, respectively, in fluctuations in currency exchange rates.

Gross profit rate increased 44 and 38 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were primarily driven by improved eCommerce margins and growth in higher margin businesses, partially offset by ongoing channel and format mix shifts primarily in China.

Operating expenses as a percentage of net sales increased 11 and decreased 18 basis points for three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increase for the three months ended July 31, 2024 was primarily due to planned investments in associate wages and new-store operating costs in the Mexico and Central America market, partially offset by operational efficiencies in eCommerce and ongoing format mix shifts. The decrease for the six months ended July 31, 2024 was primarily due to strong sales and disciplined expense management across markets, as well as ongoing format mix shifts primarily in China.

As a result of the factors discussed above, operating income increased $0.2 billion and $0.5 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Sam's Club Segment

(1) We believe the "Excluding Fuel" information is useful to investors because it permits investors to understand the effect of the Sam's Club segment's fuel sales on its results of operations, which are impacted by the volatility of fuel prices. Volatility in fuel prices may continue to impact the operating results of the Sam's Club segment in the future.

Net sales for the Sam's Club segment increased $1.0 billion or 4.7% and $2.0 billion or 4.6% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were primarily due to comparable sales, including fuel, of 4.7% and 4.6% for the three and six months ended July 31, 2024, respectively, driven by growth in transactions, including strong sales in grocery and consumables and health and wellness. Sam's Club eCommerce sales positively contributed approximately 2.2% and 1.9% to comparable sales for the three and six months ended July 31, 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

Gross profit rate increased 22 and 39 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increase for the three months ended July 31, 2024 was primarily due to improved margins in fuel and lapping an inflation related LIFO charge in the prior year, partially offset by mix shifts into lower margin merchandise categories. The increase for the six months ended July 31, 2024 was primarily due to lapping an inflation related LIFO charge in the prior year and improved margins in fuel, partially offset by mix shifts into lower margin merchandise categories.

Membership and other income increased 13.5% and 13.9% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year. The increases were due to growth in the membership base and Plus penetration. Membership income also benefited from lapping a prior year promotional offering related to previous membership fee increases.

Operating expenses as a percentage of net sales increased 26 and 21 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year, primarily due to increased compensation related expenses, including higher variable pay as a result of exceeding our planned performance.

As a result of the factors discussed above, operating income increased $0.1 billion and $0.2 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.