Wal-Mart Stores' (WMT) Presents at Deutsche Bank dbAccess Global Consumer Conference (Transcript)

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Wal-Mart Stores, Inc. (NYSE:WMT) Deutsche Bank dbAccess Global Consumer Conference Call June 15, 2016 10:00 AM ET


Brett Biggs - Executive Vice President and Chief Financial Officer


Paul Trussell - Deutsche Bank

Paul Trussell

Good afternoon to all our attendees here at the dbAccess Global Consumer Conference and good morning to all those listening back in the states on the webcast. My name is Paul Trussell, the U.S. broadlines and apparel retail analyst for Deutsche Bank. I am very glad to have with us today the management team of Wal-Mart Stores Inc.

Speaking and presenting this morning will be Executive Vice President and Chief Financial Officer, Brett Biggs and he is also accompanied here in the crowd by Senior Director of Investor Relations, Pauline Mohler, as well as Vice President of Investor Relations Steve Smith and with that Brett.

Brett Biggs

Good afternoon and good morning back to everyone in the U.S. Paul thanks for having us here and thank you to Deutsche Bank as well. There are certainly tougher draws to get than Paris in the summertime, but it’s been a great conference, we had some good meetings this morning with investors and appreciate all the interest in Wal-Mart.

I’m really looking forward to talking about Wal-Mart. I’ve been with the company 16 years I’ve seen a lot of change during my time with Wal-Mart and I’m as excited as I’ve ever been about the future of the company. We have a strong leadership team, we’re aligning on our plan and we’re encouraged by the momentum that we’ve seen in many parts for a business.

So this afternoon given that we haven’t presented as much in Europe. I want to spend a little time talking about the history of the company, so you may be more familiar with Wal-Mart than others but then spend most of our time talking about where we’re going as a company.

So our attorneys would be very happy if you could read this slide and it’s customary for this type of meeting and saying that we may be making forward-looking statements today. So please take a moment to review this information behind me and it won’t be on the screen too long or visit our Investor Relations website where the information’s all posted along with non-GAAP reconciliations.

So Wal-Mart is truly a global Company I want to take a little bit and talk about the company and its focus and its mission is about saving money so we can help people live better. With 2.3 million associates, $482 billion in annual revenue last year we serve over 260 million customers each week. And just ensure familiarity with the company we have three primary operating segments, two of which I will focus on this morning.

So Walmart U.S. which is our largest business and that’s primarily our U.S. supercenters as well as neighborhood markets and we’ll talk a little bit about more about that business in a few minutes. The second segment is Walmart International and we’ll spend a little bit time on that.

Sam’s Club for reporting purposes this is the third reporting segment for reporting purposes it’s our Walmart U.S. or U.S. Sam’s Clubs. We also have Sam’s Clubs in Mexico and China and in Brazil which are part of Walmart International. Then our e-commerce results will be part of each one of those segments.

So just for context Walmart U.S. makes of about 60% of our total revenue in about three quarters of our operating income. The Walmart International segment if it was a separate standalone business would be the second largest retailer in the world behind Wal-Mart Incorporated.

So our brick-and-mortar presence comprises assets of just over 11,500 stores, 63 banners around the world in 28 countries. Our digital format is comprised of 16 e-commerce websites in 11 different countries along with our mobile applications. So we’re working and we’re very focused on the integration of our digital business with our physical business to create the first seamless shopping experience of scale and I’ll talk about that in just a few minutes.

So before we talk a little bit more about the business I want to take just a step back for a minute and talk about our first quarter results which we would have reported about a month ago. We’re pretty pleased with the results as a good quarter for us and as a company we’re executing against our strategic priorities, we’re certainly focused on the long-term health of the business, but also in showing short-term improvements which I think we did in the first quarter.

So on a constant currency basis sales increased 4% so it’s $4.6 billion of growth to just over $119 billion in the first quarter. From an EPS standpoint we had a little bit of pressure because of the investments we’ve been talking about publicly around wages and training particularly in the U.S. So our EPS was down, but we did exceed our expectations and guidance for the first quarter. Walmart U.S. as you can see it delivered its 7th consecutive quarter of positive comp sales and also its 6th consecutive quarter of positive comp traffic.

From an international perspective 10 out of 11 of our markets delivered positive comp sales. And from a cash flow perspective, we generated $6.2 billion of operating cash flow in the first quarter a lot of that’s because of the operating results obviously, but also improve the working capital management across our business. So overall we are happy with the start to the year.

So let me take a step back and talk for a minute about the history of Wal-Mart. We really have 50 years of transformation as a Company and serving our customers in different ways. And while today we have almost $0.5 trillion in annual revenue. We had very humble beginnings. Our first store opening in 1962 in rural Arkansas and we’ve had tremendous growth as you know since then primarily started in rural America, but we knew our customers wanted more from us. So the next part of our evolution was into our membership clubs.

So in the early 80s, we started our membership club business and we opened our first Sam’s Club. Today we have over 650 clubs in the U.S. and revenue about $57 billion and I just mentioned we have Sam’s Clubs also in three other countries.

Then began a real transformation for the Company and that was with the supercenter. So our first supercenter opened in 1988 and was probably the greatest invention in retail history and certainly changed the retail landscape in the United States. Not shortly after that we started our international expansion and it started in Mexico just over 25 years ago. We have our team from WalMex here today that will be presenting tomorrow. And today our international business is comprised of over 6,200 stores, 27 countries and revenue of just over $123 billion outside the U.S.

As you fast forward to today and if you heard Doug McMillon, our CEO talk a few a couple weeks ago at our shareholders meeting. We look at – we get the opportunity to reinvent retail again, we’ve done that a lot in our history with Wal-Mart, but we get to deliver that seamless shopping experience a scale for our customers and combining the great physical assets we have with the digital assets that we are developing.

So I would think about Wal-Mart as a Company that has always transformed itself. We are going through another transformation today along with our customer and we are excited about where it’s going to take us. So we talked a lot about growth and change and our Company has been about both of those throughout its history.

Growth used to be just about we talk about building stores or growing comp sales and it looks different today, it’s still about comp sales and it’s still about building stores, but now it’s about mobile e-commerce, it’s about world-class fulfillment capabilities, it’s about developing new services all with the customer in mind.

And as you look at this slide, I’ll talk about few examples about how we’re using new capabilities to make our customer lives easier. And I’ll start with Walmart Pay that are in the upper left hand corner. By the end of this month Walmart Pay would have rolled out to the entire chain. Walmart Pay is our new payment app which allows customers to pay for their merchandise quickly and efficiently with their mobile phone. We’ve seen nice acceptance of this and we’re looking forward to seeing the results as we roll this out to the rest of the Company.

In addition, if we go down to the bottom right we’ve added five next generation fulfillment centers for e-commerce over the last year. And this allows us to get closer to our customers to cut delivery times to them and you would have seen even with our ShippingPass announcement recently that we’ve taken that from three days down to two days and having the state-of-the-art fulfillment centers is part of that.

We’ve also expanded our e-commerce into grocery, so we’ve expanded our Grocery Pickup in the U.S. now to nearly 40 markets about 250 stores. So you can imagine this has been a huge hit for our customers particularly with busy moms. Busy moms who don’t want to get the kids out of the car to come into supercenter can go to a supercenter and pickup their groceries and have a – put in their trunk. They really, really like this; we’ve got great feedback on it.

And earlier this month just a couple weeks ago actually you would have heard about the small delivery test in the U.S. that we’ve taken on through a partnership with Uber and Lyft and we’re excited to see what the results of that will be. So as we test initiatives, we’ll be smart about it, we will take our learnings, we will adjust from those learnings, but we’re willing to try new things as a Company. I think as a Company today, we need to be willing to try new things. And it’s about serving that customer how they want to be served and trying things differently, so we’re excited about what we’re doing.

One of the reasons that we’re able to try new things is that we have great financial strength. We have excellent cash flow, we’ve a rock solid balance sheet and we provide robust return to our shareholders. As you can see the statistics on the slide, last year we generated over $27 of operating cash flow. We announced a new $20 billion share repurchase program and we increased our dividend this year for the 43th consecutive year in a row.

So we believe this is a great strength of ours as we transform the business to be able to do that from a position of incredible financial strain. We’ve been investing in the business for many, many years and I want to point out a couple of ways in which we are investing in the business today is primarily around people and technology.

Our Company has always valued our associates and we’ll continue to do that, just recently over the last year we’ve announced a two-year investment of $2.7 billion in wages and training in the U.S. in stores and in clubs. We think we are seeing good results out of that and I’ll talk about that a little later. But Wal-Mart also provides a ladder of opportunity for people and we see people that want to make long – Wal-Mart a long-term career option. Last year we promoted over 250,000 associates globally.

In the U.S. 75% of our U.S. store management started out as hourly associates. So we’ve created and we’ll continue to create great opportunities for our associates. In fact, one of our most famous hourly associates was Doug McMillon, our CEO who started one of our distribution centers a summer associate and Doug has done okay for himself to become CEO of the Company. But I think Wal-Mart provides a great opportunity for its associated.

Technology has changed our world. That’s something that no one here I think would refuse and it has changed – our customer shop is changed how they want to shop and will shop in the future, but we’ve continue to invest in technology whether that enhanced search capability whether that mobile apps around the world, scan-and-go, Sam’s Club or Wal-Mart pay. We continue to invest in technology; we will continue to invest in technology, so that we can connect that online world with the offline world for our customers, because that’s the sweet spot for us.

And we’ll continue to invest in our business for the long-term; we’ll do it though in a thoughtful and strategic manner. We’ve talked a lot about – already this morning about delivering a seamless shopping experience a scale. We’ve always been a Company to save people money, but we know it’s equally as important to save people time. And delivering that seamless shopping experience across our app, across our mobile site, across our stores is incredibly important. We know that our sweet spot is that customer of the shops with us online as well as in stores and then engage with us differently in that way.

Advances we’re making around the things we just talked about whether its fulfillment online capabilities we want people in the Wal-Mart ecosystem. We want to make it easier for them to refill a prescription to order groceries to find an item on the shelf or to check out; we want to make that easier for them. We want people to shop at Wal-Mart how they ever they want to shop at Wal-Mart. So the things that we’re working on and the focus areas that we have in the Company are around creating that. We still have a lot of work to do around creating a seamless shopping experience, but I feel good about the progress we’ve made.

So I’ll talk a minute about our largest business Walmart U.S., probably the business the most people are most familiar with in the room. We continue to make good progress, you would have seen that in our Q1 results in various parts of our Walmart U.S. business and clearly the Walmart U.S. progress is a big part of the results that I discussed just a minute ago we talked about the consecutive quarters of positive comp traffic and positive comp sales and a 1% comp growth of the 1.5% traffic growth for the quarter.

Our neighborhood markets which are smaller primarily grocery format had comps of 7% in the last quarter some of those obviously are newer stores a little newer in their cycle, but we’re excited about the growth of neighborhood market. We’re also really excited that our customer scores continue to improve, so the investments that we’re making in wages certainly are part of that.

Our customers are telling us our stores are cleaner, faster to check out, they are friendlier and we’ve seen 80 straight weeks of improvement in our customers’ scores. So certainly we are very, very excited about that. And expanding our grocery to 40 – Grocery Pickup to 40 markets is a big piece again of what we want to try to do and a big part of I think of what we’re doing in Walmart U.S. So we’re encouraged by the progress we’re making and what is our largest business.

So talking just a couple minutes about Walmart International with another solid quarter with sales growth of 4.3% on a constant currency basis for Q1 and sales and promos really broad based. We talked about 10 out of 11 world markets have positive comps sales in the first quarter. I want to brag a little bit on WalMex not just because you’re sitting here. The WalMex is just been the leader for us over the past several quarters. Great momentum in the business, comp sales of 8.6% in the first quarter really across all divisions, regions, countries WalMex is having a stellar year.

Canada also very strong growth, 6.7% growth in the first quarter, very strong traffic growth in Canada. We’ve had I think great improvements in our merchandise assortment also in our price investment there which gave us good customer traffic growth. I’ll hit on three other markets that are certainly very key to the International segment start with China.

China is a market we’re very excited about long-term. We’ve made great progress in building a foundation there from a cost perspective to ensure that our growth there will be sustainable. We’re very focused on new stores as well and Sam’s Club has been a very nice addition to our portfolio mix in China we’re excited about the progress of Sam’s Club and also looking to expand our online grocery efforts and Grocery Pickup in China. So China continues you would imagine be a very important part of our business going forward.

Brazil is in a very challenging period Guilherme who just came from Brazil was CEO in Brazil experiencing his worst recession in 25 years a very difficult economic environment. The team that was making good progress with their stores also online. And our stores business we have positive comp sales in the first quarter so the team is continuing to find ways to serve that customer even in the phase of what are pretty challenging economic conditions in Brazil.

As most of you know we’ve got a lot of questions this morning, the UK is a very dynamic market and was in fact the only market we had in the first quarter that did not have positive comp sales. We’ve talked a lot about Project Renewal you’ve heard us talk about as well as our UK team talk about over the past year and what we’re doing around our customer offer by getting our cost structure right and assuming we invest in price and drive sales in the way that we always have there.

Certainly a challenging time in the market when you have deflation you have the competitive environment we have, but we have a strong leadership team in place and we’re very committed to as the long-term.

Most of you would have seen recent executive changes that we announced very excited about that I think it shows the depth that we continue to have around our company to be able to make changes like that I’m very excited about Dirk Van den Berghe move into Canada. Dirk is a great leader with European retail experience as well as U.S. retail experience. He is going to one of our most important markets in China, so very excited about that.

And Sean Clarke who’s coming to the U.K. some of you may remember Sean from his earlier days in the UK. I’ve known Sean my entire time in the company. He’s one of our most talented and certainly most traveled Senior Executives at Wal-Mart in the number of countries that he is been and I think that will provide a great backdrop and which for him to come back to the UK having grown up in the UK, but now having the experience and seeing the complexity of other markets now to take that fresh set of eyes in applying that as I think that will be great for the business so we’re excited about that.

So one of things I’m most proud about our company is what we do outside of our company and we’re in the other in which we make a difference not only just for our associates but our communities and the way that we use our strength to make a difference in the world. So you’ll see three things that we focus on opportunity, sustainability and community.

From an opportunity standpoint there are a number of things we’re doing around increasing economic opportunity for people. We’re looking at things like promoting local manufacturing, small businesses and one of our key initiatives around empowering women through sourcing from women owned businesses. And since 2011 we’ve committed over $16 billion to the sourcing initiative.

You would have read a lot about sustainability with Wal-Mart over the last 10 years and it’s been a great journey for us and there’s a number of things we do to try to make our supply chain more efficient try to make our supplier supply chains more efficient.

One of the ways we do that by reducing energy emissions and one example of that would be over the past decade we have a large truck fleet in the U.S. and over the past decade we have doubled the efficiency of that truck fleet so the number of cases that we’re able to deliver per mile. And that’s eliminated nearly 650,000 metric tons of emissions by just that one those changes that we made to our fleet and there’s a number of other examples I could give you about our sustainability efforts.

I’m very proud though the things we do in our community just over the past year we either donated in cash or in-kind $1.4 billion in our communities globally that’s for fighting hunger, creating economic opportunities, helping with natural disaster recovery. But I’m really, really proud of what we do as a Company and it’s the kind of thing that Wal-Mart has always stood for in the entire history of the company. Sam would be very proud of what we’re doing at Wal-Mart in this area.

So we are uniquely positioned I believe for a long-term success. I think we have the right leadership team in place we have great associates around the world I’ve been to a number of our countries almost all of our countries over the past several years with a number of them even in the past few months and I love the engagement that I’m saying, we just had our shareholders’ meeting two weeks ago and you could feel the engagement from our associates that it’s an exciting time for our Company.

We’re making choices which investors would expect us to do and we’re going to make investments long-term for the future. But we’re going to center those investments and choices around our customers we’ve always done that and will continue to do that. Wal-Mart those one of the strongest companies in the world and we believe our initiatives are going to create long-term value for our shareholders and we’re certainly focused on that.

So as we look ahead there’s always work to do if you followed Wal-Mart for any period of time, you know we’re never satisfied I think that’s helped make us successful and we’re still not satisfied, but we’re going to be opportunistic about our opportunities and we are very optimistic about the future as a Company.

So Paul with that I’ll turn it over for some questions.

Question-and-Answer Session

Q - Paul Trussell

Brett, thank you for those remarks. Maybe just to kick off Q&A, maybe two part question regarding the U.S. To start and you did speak a bit on this in the presentation, but to what extent as some of your recent success in traffic perhaps come from some of the macro factors benefiting your core consumer versus your success from your in-store initiatives, if you can maybe decipher and just kind of outline for us what you truly attribute that success to? And then the second part of the question is really big picture, what is your view of the health of the U.S. consumer?

Brett Biggs

Our traffic results, we talked about that in the first quarter 1.5% traffic growth when you look at any kind of numbers on Walmart scale that’s a big number. As you look at a number like traffic there’s no way to know exactly where that various elements of where you’re getting the growth from. I’ll mention a couple of things that I feel very strongly relating to that.

One would be what you talked about is our customer scores which I think have been driven in part by the wage investment that we’ve been making in the U.S. Your customers like what you do and intend they’re going to come more to your stores. And so we see the consumer scores going up and I think that works pretty well with the traffic increases you’re seeing.

I think you always have to say fuel prices, as you look at traffic, fuel prices are always going to be an element of that is fuel prices change, you can see a change in traffic which means you got to look at traffic and take it together. Our in-stock is better and that’s in conjunction with our inventory, Walmart U.S. comp inventory being down 5.7% in the first quarter with in-stocks being up. Customers are telling us they’re finding product they want on our shelves and so I think that’s a big part of it as well.

I think another part is the seamless shopping experience that we’ve been talking about, so as we put together these assets and today we have a pretty sizable e-commerce business, a very big stores business, but being able to put those together, creating that opportunity again for Walmart for customers to get in the Walmart ecosystem whether they want to pickup something in our stores, they’ll pick it up on the curb outside our stores, have somebody put in their trunk want to order online. We want to be there for that customer, so I would attribute I think the traffic growth to a lot of different things, but customers say they like our stores better.

From a consumer standpoint I probably would have said a year ago, I may have said a year ago actually that the consumer was a little bit of a mixed bag. And I don’t think it’s changed significantly over the last six to 12 months and I’ll speak specifically about the U.S. I think that’s where your question was leaning towards the U.S.

There are a number of things when you look at it from a metric standpoint, so unemployment is low. I think you have to look through some of the unemployment numbers, unemployment is low, interest rates are low, inflation is low, gas prices are low. And all of that would say the consumer should feel pretty good about where they’re at and I think the consumer feels okay. We know they’re saving more. We know consumers continue to pay down debt and I think some of that you would say as a holdover from 2008, 2009, 2010 where the consumer remembers they didn’t feel as good back then and I think are taking more opportunities to pay down debt and do other things.

You know for us for Wal-Mart, it’s always about just taking care of that customer wherever they’re at. If you look at our customer, they span pretty broadly across the demographics of the U.S., and so there’s always segments of the consumer that will be better than others and we want to just ensure that we’re doing the right things to take care of them. If you can get your stores cleaner, friendlier and faster that tends to look good in most economies.

Paul Trussell

So just a follow-up maybe staying in the U.S. market. Last year you spoke to making a few billion dollars of investment in price over the next few years. Maybe just give us a little bit more clarity on what we should be looking for or what categories are you focused on, is this a different pace of investment than in prior years?

Brett Biggs

Yes. You mentioned a comment we made back in – on October of last year and that was the first time at least that I remember. Paul, we talked a little longer term about the business, so maybe the first – the first time I remember we talked longer term about price investment. So one thing to just clarify Wal-Mart always invests in price, we’re an EDLP retailer that’s what we’re all about. We save people money so they can live better, so we always invest in price. So it’s not an on/off switch with us on price.

There’s a lot of things that go in determining how you think about prices, as you imagine we have a big team in Bienville that’s pretty much what they do is focused on price and how you strategically put that into play. If you look at I think you look at – as you look at the margin there’s a lot of different components of margin, so there’s – the cost you buy it at the price you sell it at, there is shrink, there’s logistics as other things that go into that margin.

I think when you look at our business you need to look both at margin rate as well as margin dollars. And if you think about the productivity loop for us it’s about getting our cost structure right, so that you can invest in price, so that you can grow comp sales and that loop continues. That’s a productivity loop, that’s what Wal-Mart has been known for.

For the last couple years, we’ve stepped back a little bit as we’ve made investments and we telegraph those investments what we’re doing to investors to get our business in position where we want to long-term. We will be thoughtful about price investment. We did talk about in the first quarter that we did bring some of it forward. We’re always testing different things from a price investment standpoint. How do you do it? By what category, timing all of that.

So we have opportunities to test those things before we do them, but people should always feel – should understand that no customer should feel certain that they will come into Wal-Mart and get the lowest priced basket of goods on a regular basis and that will always be important part of what we deliver as a Company.

Paul Trussell

And then my last question before handing the mic over to the crowd, Brett a lot of the investors here in this room have a bit of a front row seat to the competition going on in the UK within the Grocery business.

Brett Biggs

We did get a question or two about that this morning.

Paul Trussell

Indeed. If you can maybe just dig a little bit deeper you certainly touched on it in the presentation, but what are the steps that Asda is taking and it’s looking to take on a go forward basis to improve its competitive position?

Brett Biggs

It’s a very dynamic market I mentioned that earlier certainly with when you have the combination of deflation along with the competitive environment in the UK, probably one of the most competitive environments globally. It’s an exciting market. Like our long-term standing in the UK, we’ve been a partner with Asda for 17 years it’s been a great partnership.

There is a number of things the business has been doing. They talked a lot in the last year about Project Renewal and some of the things that they’re doing around as always ensuring that they’re investing in price wisely that they’re getting the cost structure right in order to do that.

They’ve done a number of things around cost analytics, so they’re looking at – are we buying correctly are we doing it in the right way. You’ve seen places where Asda is decided to go down I mean back stream as far as how they source goods both from a quality and a price perspective. And they several years ago really started getting their cost structure in a good place. So they’ve taken a lot of steps that are I think are good and healthy for the business.

Certainly the last couple of quarters have not been what we wanted from a result standpoint. I’m excited to see Sean come over and Roger as well. I think they’ll be a great team for Asda. We have a really good team already in place at Asda and I think the combination of all those resources will be good together.

A number of things that we’ve been doing in the business through the Project Renewal, we’ll continue to do. Sean will take a different look at it, probably will take a different spin on it, every new leader will take an opportunity to look at it differently, but we’re very committed and want to do the right thing for the business long-term.

Paul Trussell

We’ll bring the mic to you if you have a question just please raise your hand.

Unidentified Analyst

A few years ago you expanded into Africa. Given the changing macro you are still committed to that region or you looking to leave it?

Brett Biggs

Africa has been a really interesting market for us and it’s interesting from the standpoint of – there’s very types of economics in that market as well as formats, as you know Massmart has a number of different formats. So there has been something certainly that we’ve learned from that market from a format perspective as well as serving different demographics of customers. It’s an investment we made several years ago that we really enjoy, we like the management team that we have at Massmart and continue to believe Africa is a good long-term opportunity for us.

Unidentified Analyst

I have a question about investments that you will have to make in wages given the new regulation around minimum wages in this States. Who is going to pay for it? Is it U.S.? Is it the customer? So will the cost of that higher wage eventually end up? Thank you.

Brett Biggs

Yes. So I’d separate two issues. There are a number of minimum wage elements that you’ve mentioned in the States, but the investments that we made – thank you Paul, we started those investments last year, so I’d pull those apart. As investments that we believe will payoff long-term through whether it’s lower attrition rates in the stores, better motivated associates we think we will see the benefits from that.

Earnings have gone – we’ve had earnings go down for a couple years, we talked about that in October that we anticipated that would happen, we anticipate that earnings will go up after that for the next couple of years. So as to who pays that there is a lot of different elements of a retail business. There’s elements of gross margin. There’s elements of SG&A for us and I’ll get back to it it’s really about that productivity loop.

While we did add some expenses to the business over the last couple of years, over time our business is built around leveraging expenses and then taking that leverage and investing it back for our customers and that that part of our business and that DNA of Wal-Mart has not changed.

Unidentified Analyst

Just wanted to follow-up on the question about Africa and apologies on laboring the issue, but that business earned less nor than what it did five, six years ago when you bought it, so I’m surprised that you happy with it?

Brett Biggs

I’ve talked about it, we’re very committed to Africa long-term, we also talked about we’re never satisfied. We always want better results. I think when you look at performance and we’re long-term investors in businesses, you’re going to look at performance over a long period of time. South Africa particularly is going through some challenges from a macroeconomic perspective, but we think the team there is making good adjustments in managing the business well. It’s been a bit of a challenging market particularly over the last couple of years from an economic standpoint, but long-term we believe in Africa.

Unidentified Analyst

Thank you.

Paul Trussell

Front row.

Unidentified Analyst

Thank you. Most of the consumer staples companies that are presented over the last day and a half or so are big customers of yours and big suppliers of yours. Obviously seeing this shift online that consumers the demanding whether it would be through your own websites or competitors or their own websites. And so how do you sort of deal with it from your side of things. Can you favor the suppliers who are more committed to your business over their own online offerings or do you just say that’s part of the evolution and deal with it or that the Wal-Mart perspective from the other side?

Brett Biggs

Yes, sure. I mean dynamics the partnerships with suppliers changes all the time based on time, economic conditions, competitive nature, so it’s always evolving. We’ve had great long-term partnerships with suppliers both large and small and there’s a role for both of them large suppliers, small suppliers as we move forward as a Company.

We still present globally a large element of growth certainly from a retail perspective. We talked about even a 1% comp in Walmart U.S. is a $3 billion growth. So it’s a big number even on a 1% comp and when you look globally growing $4.6 billion excluding currency in the first quarter, we represent a lot of growth. So we think that still bodes really well for us as well as our suppliers. From suppliers we asked those things today that we’ve always asked which is we want a good price; we want a fair price so that we can deliver for our customers, we want innovation and they want innovation.

So there is nothing where – there’s no element where we don’t really have the same goal in mind which is to sell more, so the dynamics would evolve over time, but there is role for all kind of suppliers for us going forward and we present I think a really nice growth for them.

Unidentified Analyst

And going back to the UK and NASDAQ, I feel that you’ve indicated in your presentation in your answers that your feeling is that Project Renewal is enough. However, with the loss you posted – like going backward mid single digit is that a wrong assumption or do you think more really needs to be done to turnaround your sales performance?

Brett Biggs

I think the elements of Project Renewal are correct. The local management team has got a front row seat to this and certainly we will decide and have a huge say and how we tackle each element of Project Renewal. We are dedicated doing what’s right long-term for that business in the UK, I think you need to look at success over a longer period of time for the last couple of quarters I said we’re not pleased with the comp performance.

Over a long period of time as it has been very successful and the things they did made a very successful now the things change over time I get that. We want to be very balanced about how we view this market. We’re not going to under react to the environment, but we want to be balanced to be thoughtful about how we approach the market.

Unidentified Analyst

That’s okay. Can I ask about M&A and with your thinking of any or you are happy with your jurisdictions?

Brett Biggs

You can ask about it.

Unidentified Analyst

Yes. Just you do have a - you have a connection to a large supermarket chain in another country when you look at your Executives and your Board and they’re struggling. So I’m wondering what you think of that?

Brett Biggs

If you look at the countries that we’re in today if my memory serves me correctly the countries are in today represent about 75% of the retail growth, if you look at future projections. So the countries we’re in today there is a lot of growth to be had, end of the day we want to serve customers how they want to be served, where they want to be served, we want to serve them in a way where needed in a market and where we have a good proposition for that market that would always determine how we think about our geography, but the markets we’re in today represent really good growth opportunities for us.

Unidentified Analyst

How do you think about the evolution of online delivery of groceries and over time to over the next five years? How big is that going to be and how are you thinking about your position competitively with some of the non-physical based retailers that are your competitors?

Brett Biggs

Yes it’s going to evolve certainly. You’re seeing an evolution even in the last couple of years. We feel like we have a good competitive advantage already being in the grocery business, we are the largest grocer in the world. The early reach from our online grocery business are good, customer satisfaction scores have been good.

We have the right focus on our fresh business which will be very important as you look at that. I think some of what will be evolving is whether it’s delivery to home or pick up in the stores; we’re seeing really good receptivity to pick up in the stores. Busy moms tend to be out a lot they’re not home very often.

So actually delivery at home may not be as convenient as going and picking up your groceries that’s what we’re hearing from customers they like while they’re out being able to come pick up their groceries. So it’s an area that will evolve a lot we think we have a good competitive position where we’re at and I think it’ll be a big part of our future.

Unidentified Analyst

How big is it going to be?

Brett Biggs

I don’t think anybody knows that for sure. We like the growth that we’re seeing in our business.

End of Q&A

Paul Trussell

And with that, I want to thank everyone for attending the Wal-Mart Stores.

Brett Biggs

Thanks for your interest. Appreciate it.

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