John David Rainey
Executive Vice President and Chief Financial Officer at Walmart
Thanks, Doug. We are excited about the progress we've made in growing and evolving our omnichannel platform in pursuit of our purpose to help people save money and live better. Our teams did a great job in the quarter, finishing the year strong. For the year, in constant currency, we achieved 5.6% net sales growth and over 8% adjusted operating income growth. We have strong underlying momentum exiting Q4 and are clear about the strategic initiatives we're seeing driving profitable growth in the years ahead. This is reflected in the sustained sales and operating income growth included in our FY '25 guidance.
I'll recap Q4 results using the framework we introduced at our Investor Community Meeting last year, growth, margins and returns. As a reminder, there's a supplemental presentation on our IR website with additional information beyond my remarks. First, growth. Constant currency sales increased nearly 5% or almost $8 billion in Q4, with strong growth from all three segments led by increased transactions across in-store, club and e-commerce channels.
International sales grew 13%, reflecting strength in Flipkart, Walmex and China. International e-commerce sales increased 44%, reaching a penetration level of 25%, which is a record high for us. This included Flipkart's largest ever Big Billion Days event with 1.4 billion customer visits over the eight-day period.
In the U.S., Walmart comp sales grew 4%, reflecting increased unit volume and share gains. Like-for-like sales inflation was about 1%, moderating approximately 160 basis points from Q3 levels. We saw better-than-expected holiday sales, including two record-breaking volume days leading up to Christmas. Store fulfilled delivery sales were up nearly 50%, and we reached a $2 billion monthly run rate. Delivery has been a key source of share gains among upper income households and is also the most productive channel for acquiring Walmart+ members.
Sam's Club U.S. delivered comp sales growth of 3.1%, excluding fuel, with strength in food, consumables and health categories. E-commerce sales increased 17%, and we gained grocery share in both units and dollars. E-commerce continues to be a key point of differentiation for Sam's, with delivery and curbside driving e-commerce growth and in-club scan and go penetration up over 270 basis points.
Turning to margins. Enterprise gross margins expanded 39 basis points. Customers are responding as we continue to manage pricing aligned to competitive historic price gaps. In addition, we had lower markdowns resulting from strong inventory management with Walmart U.S. inventory down 4.5%, Sam's down over 8%, and International relatively flat excluding currency.
This puts us in a good position to start the new fiscal year. The timing of Flipkart's Big Billion Days was a partial offset to gross margins. And while category mix pressure continued this quarter, we are encouraged to see sequential improvement versus Q3. SG&A expenses on an adjusted basis deleveraged 16 basis points, largely due to higher variable pay expenses in the U.S. relative to last year as a result of exceeding our planned performance.
One of the areas I'm most pleased about is the improvement in e-commerce profitability within the Walmart U.S. segment resulting from lower e-commerce fulfillment cost and densifying the last mile. Our store proximity to customers is an advantage as we increasingly use stores to fulfill e-commerce orders. We've lowered last mile store-to-home delivery cost by about 20% in the last year, even as we've shortened delivery times the same day from around 90% of stores.
Combining the fulfillment efficiencies with the improved product margins of e-commerce, we far exceeded the 200 basis point goal we outlined at our Investor Community Meeting and lowered e-commerce losses by more than 40% versus last year's level. We also saw another strong quarter from our portfolio of higher growth initiatives that reinforce our core omni-retail model.
Global advertising grew approximately 33%, led by International's 76% growth. International's growth benefited from the timing of Big Billion Days, but still delivered full year growth of about 30%. Sam's ad business achieved a new high with almost 50% more advertisers versus last year. Walmart U.S. Connect ad sales grew 22% with more than 50% growth from marketplace sellers. We are encouraged by the strong demand from new advertisers as active advertiser counts increased over 20%.
We are excited about our agreement with VIZIO to bring together their unique operating system and our Walmart Connect advertising business. This combination would create new opportunities for advertisers to connect with customers, empowering brands to realize greater impact from their advertising spend with Walmart. We believe the deal would close during FY '25. Due to certain transaction-related costs associated with the acquisition, including for talent retention and technology integration, we expect the deal to be slightly dilutive to EPS in the near term. We plan to finance the acquisition to use cash and/or debt. Importantly, we believe the transaction would be IRR accretive, delivering returns ahead of our expected ROI.
Within marketplace and fulfillment services, Flipkart's momentum continued with double-digit growth. In the U.S., Walmart's marketplace delivered strong holiday events, including Black Friday, our largest marketplace sales day ever. Over the past year, we've increased sellers 20% with approximately 30% of sellers using Walmart Fulfillment Services. And we're pleased with the trends in our membership programs around the world. Sam's Club U.S. reached another record high level for member counts and Plus member penetration, which led to membership income growth of 10% and Walmart+ continues to grow double digits.
Strong sales and margins led to fourth quarter adjusted operating income growth of more than 13%, while adjusted EPS of $1.80 increased 5.3%. Below the line, higher interest and non-controlling interest were headwinds to adjusted EPS.
Moving to returns, we generated over $35 billion in operating cash flow this year, an increase of nearly 24% due to strong business performance and improvements from working capital initiatives. Return on investment improved approximately 230 basis points to 15%, a level last achieved in 2017. Our stepped-up investments aimed at improving margins and productivity resulted in capital expenditures of $20.6 billion.
The magnitude of ROI improvements reflects some benefits from productivity initiatives that we initially expected to realize in FY '25. And as we announced this morning, we're pleased to raise the dividend by 9% this year, the largest increase in over a decade, reinforcing our commitment to strong cash returns to shareholders. And as we continue to execute on our long-range plan, we will continue to evaluate the appropriate payout ratio for our business.
We have a clear vision to deliver our financial framework of growing operating income faster than sales. I'd like to spend the next couple of minutes on the initiatives we believe will drive improved incremental margins in the years ahead, even as we stay customer and top line focused, deliver value for them and invest in our people. Beyond steady, broad-based sales growth across segments, incremental profits will be derived from four key areas, business mix productivity benefits from our supply chain transformation and automation improvements, product mix and geographic mix. These areas will contribute to improved e-commerce economics over the next several years.
Starting with business mix. As I noted previously, we are excited about how our newer higher-growth businesses are scaling. Together, these businesses have significantly higher structural margins than our core retail business, and they are growing significantly faster, which has the effect of bending our margin curve upward. Over the past year, global advertising grew 28% to about $3.4 billion. Walmart U.S. marketplace revenue grew 45%, with more than 35% of orders fulfilled by Walmart Fulfillment Services.
And lastly, global membership income grew 20%. Over our planning horizon, the growth of this portfolio is expected to be one of the largest drivers of operating income growing faster than sales. We believe global advertising and membership alone will represent 20% of annual operating income in FY '25. These profit streams allow us to fund investments in our core business while also expanding our operating margins.
Turning to supply chain transformation and automation. This was a significant year for the phased deployment of automated technologies to optimize our next generation supply chain. This program spans several years with activities stepping up in FY '25 and FY '26. To date, we've retrofitted 13 regional distribution centers with varying levels of automated storage and retrieval systems. This technology gets product to shelves faster and has meaningful benefits to productivity both in our DCs and stores. With the progress we've made over the past year, we're on track toward our goal of having approximately 55% of our fulfillment center volume and roughly 65% of supercenters serviced by automation by the end of FY '26. Already around 1,500 stores are receiving palletized freight from these DCs.
There are also exciting benefits from technology being realized in our stores. We are using applications to drive speed and proficiency, including RFID and computer vision, as well as digital displays and labels to remove friction for both customers and associates. New digital tools that automate repetitive tasks or eliminate heavy lifting have increased associate productivity and customers are benefiting from improved in-stock rates and associate accessibility, leading to customer experience scores up over 140 basis points in FY '24. We expect to begin seeing the enterprise financial benefits of upstream automation and cost to fulfill inventory efficiency, store productivity and wage leverage as we move through FY '25 with a more pronounced benefit in the second half.
On product mix. Continuing to expand our e-commerce assortment is critical to earning first position consideration among customers. This is particularly true for general merchandise, including our marketplace. We've accelerated visit frequency and built incredible trust through core essentials like food and consumables. In fact, weekly active e-commerce customers grew 17% this last year.
We are building on this trust by improving our general merchandise assortment both on and offline. General merchandise also benefits as U.S. store remodels continue to perform well. We'll execute another 650 in Walmart U.S. in FY '25 on top of the nearly 700 remodels completed this year. We're also excited to be returning to store growth in the U.S. as Doug mentioned.
Our supercenter Store of the Future design is resulting in stronger four-wall sales, while also delivering a sales lift in the surrounding trade area, as these modernized stores offer more capacity for pickup and delivery, are more engaging to shop, and are improving customer perception about Walmart, especially in general merchandise, where we are encouraged by the share gains we're seeing. For general merchandise categories that surged during 2020 and '21 and have longer replacement cycles such as electronics and housewares, we expect relative weakness to persist in FY '25, although are hopeful to see directional improvement in the second half as comparisons ease.
Lastly, geographic mix. Our International portfolio is accretive to sales and profit growth and is expected to be a larger contributor to enterprise performance. We are on pace to achieve our goals to reach approximately $200 billion in GMV and more than double profits by FY '28 from the FY '23 base. This implies high single-digit annual sales growth for the segment. In FY '24, International grew constant currency sales 10.6% and adjusted operating income over 15%.
India, Walmex and China are the sales growth leaders. These three markets are expected to account for approximately three-fourths of International growth over the next several years. In India, Flipkart's growth continues to compound in the double digits, while PhonePe is now processing more than 6 billion monthly transactions and has reached 1.4 trillion in annual total payment volume, about 40% higher than one year ago. And Walmex continues to go from strength to strength.
Turning to guidance. Relative to prior years, we are introducing a slightly wider range of potential outcomes, given the size of our business and a greater degree of variability we've seen. There are three nuanced factors to consider for FY '25. First, FY '25 is a leap year, which adds an additional day in Q1. I'll refer to this effect in our Q1 guidance shortly. Second, we'll experience a 53rd week for comp sales in Q4. We've included a slide in our presentation to help with modeling this. And third, on January 30, we announced that the Board approved a three-for-one stock split effective February 23. We're offering full year and first quarter EPS guidance on a pre- and post-split basis.
For FY '25, we expect net sales on a constant currency basis to grow between 3% and 4%, and for operating income to grow 4% to 6%. We expect Walmart U.S. and Sam's Club U.S. net sales growth to fall in line with the enterprise and for International growth to be above enterprise growth. We expect all three segments to contribute to operating income growth, led by Walmart U.S., Walmart International, and then Sam's U.S.
At our Investor Day last April, we outlined a multi-year plan of growing sales approximately 4% and growing operating income even faster. We depicted that as a range of 4% to 8%. Looking at our growth over a two-year period, combining FY '24 actuals and our guidance for FY '25 at the midpoint suggests we will grow sales more than 5% and operating income over 8% on average annually. This is aligned with the framework we laid out, and we are pleased with how we are executing on this plan.
At the enterprise level, we expect sales to grow faster than operating income in the first half due primarily to the timing of technology spent. In the second half, we expect operating income growth to exceed our sales growth. And on a full year basis, we expect operating income growth to exceed sales growth by 150 basis points at the midpoint. This spread between operating income growth and sales growth in FY '25 is similar to what we experienced in FY '24.
Adjusted operating income grew 250 basis points faster than sales, including a benefit of approximately 90 basis points from LIFO. As we've noted in the past, this relationship of operating income growing faster than sales won't occur every quarter, but we aim for the framework to hold on an annual basis at the enterprise level. We provided additional detail on guidance for interest, tax rate, and non-controlling interest in our press release.
We expect FY '25 EPS in a range of $6.70 to $7.12 on a pre-split basis and $2.23 to $2.37 on a post-split basis. As we continue the multi-year investment in technology and innovation to optimize our supply chain and stores, we expect capex to range between 3% to 3.5% of sales for the next couple of years. Importantly, we have good visibility to the ROI on these investments, and we're encouraged by what we're already seeing.
For Q1, we expect sales growth of 4% to 5% and operating income growth of 3% to 4.5%. The leap year benefit is estimated to be approximately 100 basis points to sales growth. Operating income growth is expected to be below sales growth this quarter, reflecting the timing of technology expenses mentioned previously. We expect Q1 EPS in the range of $1.48 to $1.56 on a pre-split basis and $0.49 to $0.52 on a post-split basis.
In closing, our FY '24 results demonstrated our ability to reshape our sales and operating income growth trajectory, and our guidance for FY '25 assumes operating income growing faster than sales again. Our value proposition is resonating with customers. We are deploying capital to proven and scalable investments in our people and platform, and our business model is evolving towards higher margins and returns.
I'd like to thank our 2.1 million associates worldwide who are indeed making the difference in bringing our purpose and business strategy to life every day. We're excited that by making our stock more accessible to them, more of our associates can become owners and align their interest with our external stakeholders.
I'll now turn the call over to the operator for questions. Thank you.
