This conference call provided a detailed overview of Walmart's financial performance for the second quarter of the 2026 fiscal year, including highlights from various business segments. Management shared their views on the current performance and prepared to answer questions from investors. Participants were reminded to adhere to the conference rules and limit the number of questions asked to ensure more people could participate. The meeting also emphasized the risks and uncertainties associated with all forward-looking statements and advised referring to relevant documents for complete risk disclosures and adjustments to non-GAAP financial measures.

The report points out that the company's global sales growth has been significant, benefiting from strong performance in e-commerce, advertising, and membership revenue. Sales in all regions exceeded expectations, especially in the Walmart US and Sam's Club US markets. In international sales, markets such as China, Mexico, and Flipkart have made significant contributions. New businesses like Walmart Connect and Vizio advertising revenue have surged, driving revenue structure optimization. Despite facing additional costs, the company still achieved profit growth, demonstrating good financial resilience.

Discussed how Walmart is facing increased tariff costs, taking measures such as lowering prices, optimizing inventory, etc. to reduce the burden on customers, while also utilizing AI to enhance service efficiency and productivity, preparing for the holiday sales season and demonstrating confidence in the annual performance.

The company is currently building an AI super assistant, including Sparky for customers, and assistants for employees, suppliers, and developers respectively, aiming to enhance shopping experience, internal collaboration, and product innovation. Through AI technologies such as digital twins and dynamic delivery windows, operational efficiency and customer service are optimized. Emphasis is placed on the team's positive attitude towards change, looking forward to the widespread application of AI in the enterprise in the future.

The dialogue emphasizes the performance growth achieved by the company in the face of challenges through measures such as strengthening price leadership, optimizing customer experience, and cost management, especially the accelerated development of e-commerce business and increased market share. The company has raised its annual sales and earnings per share guidance, demonstrating a commitment to profit transformation, responding to cost pressures through the growth of high-profit margin business, and ensuring financial flexibility to support the expansion of short-term market share.

The company focuses on long-term development by investing in employees, supply chain automation, store and AI technology to balance the pursuit of market share growth. The performance in Q2 exceeded expectations, with a 25% year-on-year growth in e-commerce sales and a 4.6% growth in Walmart's US department sales. Particularly, significant market share growth was achieved among high-end income groups, indicating the effectiveness of the company's strategy and positive response from customers to initiatives that emphasize both value and convenience.

In Q2, Walmart's overall sales performance was positive, with significant growth in e-commerce sales. International business, especially in China and Flipkart, performed strongly. Sam's Club sales and e-commerce penetration improved, inventory management was effective, gross margin improved, strong sales across all channels, and a wide range of product categories saw growth.

Walmart's e-commerce business continued to grow in the second quarter, with particularly strong performance in advertising and membership fee revenues. Global advertising business grew by nearly 50%, with the partnership between Walmart Connect and Vizio in the United States seeing growth of over 30%, and international advertising revenues led by Flipkart growing by 15%. Sam's Club membership revenue increased by 7.6%, while Walmart Plus membership revenue achieved double-digit growth. The number of members, renewal rate, and Plus member penetration rate steadily increased.

Walmart's upcoming new premium cash reward credit card will provide cardholders with high cash back for shopping at Walmart, especially appealing to Walmart Plus members. However, the company is facing pressure from rising claims costs, resulting in a negative impact of 560 basis points on adjusted operating profit growth in the second quarter. Nevertheless, Walmart has maintained its guidance for full-year operating profit growth by increasing reserves and taking measures to control the number and cost of claims, demonstrating confidence in long-term profit growth.

Adjusted operating income increased slightly with the exchange rate remaining stable, mainly due to higher than expected sales and continued improvement in operating profit margins, despite facing higher claim costs. Adjusted earnings per share increased by 1.5% to 68 cents. Special expenses related to legal issues and restructuring during the period have been excluded from operating income and earnings per share to ensure accuracy of comparisons. Currently, the company's inventory is at a healthy level, with a year-on-year increase of about 4%, mainly due to adjustments in delivery times impacted by rising import costs and tariffs. The company is closely monitoring customer demand and adjusting inventory decisions based on the price elasticity of affected goods.

The company has raised its full-year sales growth forecast to 3.75% to 4.75% and expects sales growth to remain in the same range in the third quarter. Despite facing challenges such as rising costs and currency fluctuations, Walmart expects operating income to increase by 3% to 6%. Management emphasizes the importance of maintaining strategic flexibility in responding to changing demand and investing in market share growth in the current uncertain market environment. In addition, the company remains optimistic about long-term operating income growth, expecting it to return to a multi-year growth trend in the future.

The discussion covered whether Walmart's current profitability is affected by temporary factors and the potential impact of AI strategy on business growth. The spokesperson stated that AI has not directly increased sales yet, but has huge potential in customer service and inventory management. Additionally, the spokesperson expressed optimism about the diversified growth of the business, such as strong growth in areas like membership and advertising, despite cost pressures. Overall performance is solid, and profit expectations have been raised.

Discussed the impact of major competitors expanding their grocery delivery business on the industry landscape, as well as how to maintain our own competitive advantage. At the same time, facing recent fluctuations in profit margin and other financial performance indicators, it is necessary for the company to demonstrate to the market that this is just a one-time event rather than a long-term trend, emphasizing the importance of continuously improving customer experience and cost control.

The dialogue revolves around Walmart's financial management and inventory optimization in a complex business environment. Faced with unexpected expenses and tariff impacts, the company has shown good financial performance and inventory control capabilities, especially in the strong growth of e-commerce business and fashion products. Management expressed satisfaction with the team's execution and emphasized the precision and timeliness of inventory management to ensure customer experience and business continuity, holding an optimistic outlook for the performance in the second half of the year.

The conversation primarily revolves around the business performance of Sam's Club, pointing out that despite facing complexity, the company's sales have still achieved a 5.9% growth, driven entirely by unit sales and showing an accelerating trend. E-commerce, especially the delivery business, plays a significant role in the sales growth, contributing two-thirds of the incremental growth. At the same time, to support sales growth, the company needs to increase inventory purchasing, but has maintained stable inventory turnover and days through tactical purchasing. The company expresses gratitude to its members and employees, believing that their support is key to maintaining business momentum.

The conversation revolves around the retail industry's pricing adjustment strategy in the face of inflation pressure, including elastic pricing, consumer response, and cross-category management. At the same time, it discusses strategic priorities in international markets, such as business development in Canada, India, and Mexico, emphasizing the importance of enhancing localization capabilities and market adaptability.

In the current quarter, e-commerce grew by 22%, thanks to the initiatives of store pickup, delivery, and market business. China added 33 cloud warehouses, achieving a 450% coverage increase, accelerating online sales. India established 300 FCS locations to improve delivery efficiency. Mexico and Canada integrated the global platform, with Mexico launching a unified shopping experience and Canada already online. The growth of international business drove profit increases, with plans for long-term development to ensure a higher return on investment than other departments.

The conversation revolves around the profit capabilities of Walmart's global e-commerce, pointing out that the e-commerce in the United States continues to be profitable, while the international e-commerce is operating at a loss but making a positive contribution. 50% of the new profits come from advertising, membership, and market business. E-commerce and diversified new businesses are driving organic growth by 5-6%, enhancing the company's valuation. Walmart is accelerating its development speed, optimizing delivery services, aiming to cover more regions and improve customer satisfaction. Future plans include using AI technology to further enhance efficiency, ensuring a consistent global business model that facilitates technology sharing and accelerates development.

The discussion focused on the possibility of higher gross profit margins in the second quarter due to retail accounting methods and pricing timing, as well as the uncertainties the company faces in the second half of the year, including the pricing strategies of competitors and the impact of price elasticity. Management emphasized the importance of maintaining flexibility and highlighted the team's ability in managing discounts, sales conversion rates, and seasonal product sales. The company will continue to monitor price differentials, gross profit margins and profitability in order to serve customers, maintain revenue growth momentum, and achieve the goal of profit growth outpacing sales growth.

Discussed the fluctuations in Walmart's profit margin due to tariffs, as well as strategies to address market changes through inventory management, price adjustments, and promotional activities. Emphasized the importance of optimizing inventory, increasing turnover rate, and customer value, while monitoring competitors' dynamics to ensure price competitiveness and customer satisfaction. Looking ahead to the future, will continue to optimize inventory, provide value for key categories and events, in order to deal with environmental uncertainties.

Discussed Walmart's advantages in the field of AI, including massive amounts of data, real-time delivery data, and customer situational understanding capabilities, as well as how AI can enhance the shopping experience, such as identifying shopping intentions, personalized recommendations, and inventory management. At the same time, the application of AI at Sam's Club was mentioned, such as scan-and-go technology, which enhances the convenience and trust of members, attracting more young members. In the future, Walmart plans to further leverage AI to optimize the online and offline shopping experience, enhancing brand competitiveness.

Discussed how Walmart attracts high-income customers by providing flexible, fast shopping options, including a huge selection of goods, fast delivery services, and convenient in-store pickup channels. These measures help meet the needs of different income groups, especially in increasing transaction frequency among high-income customers.

The conversation discussed the changes in Walmart's membership structure, particularly the growth of high-income members, and how newly introduced brands are attracting this type of customer. At the same time, the initial response to the new advertising campaign 'Who Knew' was mentioned, which aims to showcase Walmart's wide range of products and fast delivery capabilities. Additionally, consumption trends and strategies for different income groups were explored, emphasizing Walmart's commitment to providing products across all price points and quality services.

The company discussed its capital allocation strategy, emphasizing the usage of each investment in high return projects, including self-investment, AI technology, and supply chain automation, with an expected return rate of up to 20%. At the same time, the company balances investments and share buybacks with free cash flow, especially during market fluctuations. The company will be more proactive in repurchasing stocks in order to achieve returns higher than historical levels.

The discussion focused on Wal-Mart's optimistic outlook for the upcoming holiday sales season, citing strong performance during back-to-school season as a positive indicator for Halloween and Christmas sales. Management is satisfied with the upcoming holiday merchandise and pricing strategies, expecting to maintain sales growth while controlling costs. Despite cost pressures in the retail industry, Wal-Mart plans to ensure the success of the holiday sales season through optimized management and pricing strategies.

The conversation emphasized the focus on customers and business fundamentals, including pricing and inventory management, as well as maintaining revenue growth and expanding market share. E-commerce growth is strong, but there is still room for improvement, while cost pressure is being eased through price adjustments to enhance customer satisfaction. General merchandise sales are performing well, and inventory management is effective. Strategically, continuous optimization of the business model is pursued, with a focus on developing new businesses such as advertising and membership services to achieve long-term growth.