John David Rainey
Executive Vice President Chief Financial Officer at Walmart
Thanks Doug. I'm excited to discuss our fourth quarter and full year performance, provide some context on how we're executing against our strategic priorities and offer our outlook for the first quarter and full fiscal year 2026. Let's start with the headline Walmart delivered another strong quarter, exceeding our sales, profit and earnings expectations.
This performance reflects the strength of our business model and the dedicated work of our associates around the globe. Our focus remains on delivering value to customers and members while driving sustainable growth for shareholders. Customers continue to respond to our value proposition as we provide lower prices, a broader assortment and greater levels of convenience. With improved customer experience, we're earning their trust and seeing share gains as a result.
Looking at the full year, Consolidated revenue grew 5.6% in constant currency, adding approximately $36 billion versus last year. Adjusted operating income increased nearly 10% in constant currency and adjusted EPS was up 13%. Currency was a headwind to reported sales of approximately $3.2 billion or 50 basis points to growth and pressured EPS by about $0.02. Our business model is delivering as it's designed to do.
This is the second consecutive year that we've grown sales more than 5% and operating income meaningfully faster relative to our plan. Outperformance has been broad based across segments. E commerce economics continue to improve, most notably in Walmart us. Our newer digital businesses have contributed to faster growth and more diversification of our product mix. Over the last year, Global advertising grew 27% to about $4.4 billion.
Walmart US marketplace revenue grew 37% with nearly 45% of orders fulfilled by WFS. And lastly, global membership income grew 21% to about $3.8 billion 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.
These new profit streams allow us to fund investments in our core business while also expanding our operating margins. Return on Investment improved approximately 50 basis points to 15.5%, a level last achieved in 2016. CapEx totaled $23.8 billion. Our investments in stores and clubs through remodels and new construction have improved customer and member experience and have enabled us to broaden our last mile catchment area for digital orders.
Investments in supply chain, automation and productivity are expected to lower our cost to serve, which supports our EDLP commitment. Cash flow remains strong and as we announced this morning, we're pleased to raise the dividend by 13%. This year, the largest increase in over a decade, reinforcing our commitment to strong cash returns to shareholders. Our business has transformed over the past five years and we're benefiting from the investments we've made in our core Omni retail business. Global E Commerce Penetration is now 18% of sales, about 1100 basis points higher than it was in FY20 in the U.S. Specifically, we've built marketplace capabilities to broaden our assortment while also growing the average number of E Commerce orders fulfilled from stores by over 500 million orders without new store growth during that time period. We're utilizing our stores in new ways to serve more customers and maximize returns, but we obviously don't have a stores only approach for fulfillment. We're growing our fulfillment center capacity including through investments in FC automation. In parallel, while the shift in channel mix creates some cost pressure as we fulfill more orders through E Commerce, we've seen improved profitability during this period with efficiencies gained as we densify our delivery routes and with the contributions from newer businesses that are enabled by E Commerce growth. We've achieved this despite the margin pressure from merchandise category mix of sales shifting toward grocery and health and wellness and away from general merchandise as consumer wallets have been stretched over the past couple of years. The way we've designed and grown our evolving business model with more diversified and durable sources of profit like advertising and membership has enabled us to grow operating income faster than sales despite these headwinds. Turning to our quarterly performance for the fourth quarter, consolidated revenue increased more than 5% in constant currency driven by strong results across segments aided by 16% E commerce growth. Currency headwinds reduced reported sales by over $2 billion or 120 basis points of growth. Walmart US comp sales increased 4.6% including e commerce sales growth of 20% with ongoing share gains across categories. Comp growth was led by increased customer transactions in both stores and E Commerce Grocery remains a standout category with mid single digit growth and we saw mid teens growth in health and wellness due largely to GLP1 sales which contributed about a point to the segment comp consistent with prior quarters. We're encouraged by the improvement in general merchandise where we had low single digit comp sales growth for the second consecutive quarter, including strength in hardlines, toys, home and fashion. US customers remain resilient, exhibiting behaviors that have been largely consistent over the past year. As always, people are looking for value and they want to save time. Becoming more convenient is helping to drive our growth during the quarter we expanded our store fulfilled delivery catchment areas to now reach 93% of U.S. households with same day delivery. The popularity of expedited delivery has resulted in more than. Than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their scheduled delivery in less than one hour or less than three hours. We're also encouraged by the initial response to our launch of same day pharmacy delivery. We're the first to integrate pharmacy, general merchandise and grocery in a single online order and have gained new pharmacy customers with this service. Our focus on bringing down pricing through rollbacks continues despite pockets of food inflation in areas like eggs, bacon and ground beef like for like pricing in general merchandising consumables was deflationary while food remained inflationary in the low single digits. We're seeing higher engagement across income cohorts with upper income households continuing to account for the majority of share gains. Our international business in constant currency delivered sales growth of 5.7% reflecting strength in China, Walmax and Canada. While operating income grew faster. We saw positive traffic and unit growth across markets with sales strength in general merchandise during festive events. As expected, the timing of Flipkart's big Billion Days event negatively affected year over year sales comparisons. Outside of India, E Commerce sales grew more than 20% across all markets. Speed of delivery continues to be important to customers. In the past 12 months, International delivered over 2.3 billion items same day or next day, which is an increase of over 30% with about 45% of those items delivered in under three hours. And our business in China continued to grow double digits with strength in Sam's Club and e commerce. Sam's Club US comp sales exfuel increased 6.8% with strong growth in transaction and unit volumes including increased penetration of members. Mark e commerce grew 24% including triple digit growth in club fulfilled delivery as new perks like express delivery and the elimination of curbside pickup fees for the club. Membership level continued to resonate with members with tech enabled convenience prevalent both inside the club. Through Scan and Go and Jesco exit towers as well as via E Commerce, we are deploying digital solutions to differentiate ourselves in the warehouse club channel. From a margin standpoint, consolidated gross margin expanded 53 basis points. In our press release and earnings presentation you'll see new disclosure regarding gross margins by segment. In Walmart us, improved gross margins reflected strong inventory management as well as lower levels of markdowns and improvement in business mix that has allowed us to manage pricing aligned to competitive price gaps and offset sustained merchandise category mix pressure. Gross margins and international benefited from the timing shift of Flipkart's big Billion Days event. As our business model evolves, it's encouraging to see our profitability improve from a diverse set of offerings globally. We. E Commerce economics continued to improve in Q4, aided by an approximately 20% reduction in US net delivery cost per order. We also continued to diversify our profit composition through business mix as we scaled advertising, membership, marketplace and fulfillment, and data analytics and insights. Our global advertising business increased 29%, led by 24% growth from Walmart Connect in the U.S. we're making good progress on expanding the number of U.S. marketplace sellers that also utilize Walmart Connect advertising with seller advertising counts up about 50% versus last year. We're also excited about the addition of Visio and its SmartCast operating system to our portfolio of advertising capabilities. Visio will help us serve customers in new ways to enhance their shopping journeys while also creating new opportunities for advertisers to connect with customers and boost product discovery, empowering brands to realize greater impact from their advertising spend. With Walmart membership income was up 16% across the enterprise. In the U.S. sam's Club continued to grow membership count and increase its penetration of plus members resulting in more than 12% membership income growth while Walmart plus membership income grew double digits. Within International membership income from Sam's Club China grew grew more than 35% as member counts continue to increase, helped by the opening of four new clubs in Q4 for Marketplace and Walmart. Fulfillment services in the U.S. marketplace grew 34% continuing the strong trends we've seen all year with the broader assortment of the general merchandise brands and items customers want. Marketplace sales and home management, automotive and seasonal all grew more than 20%. And with our low cost fulfillment offering for sellers, WFS penetration reached record highs of nearly 50% which is up nearly 600 basis points versus last year. Outside the US we're seeing similar encouraging trends. In both Mexico and Canada, the number of WFS sellers increased over 20% and sales of items delivered through WFS grew over 85%. Within data analytics and Insights, Walmart Data Ventures continues to grow rapidly with net sales up double digits. Our client base nearly doubled over the past year and we're excited about continuing to broaden our reach to new markets. With the launch of the platform in Canada, SG&A expenses deleveraged 46 basis points in the quarter. Walmart US deleverage was primarily driven by the timing of tech investments, increased variable pay as we exceeded planned performance and higher marketing and utilities cost. Transaction related expenses for the Vizio acquisition also impacted the quarter and were not considered in our guidance. In addition, International was impacted by the timing shift of Flipkart's BBD event and Sam's Club US was affected by the previously announced wage investments. While wage. Investments will pressure profit at SAMS for a couple of quarters. We're pleased with the memory response tied to increased renewals as well as the improvement in associate turnover. We're continuing to optimize our business to deliver greater efficiency, and we're committed to balancing ongoing investments with improved returns for customers, associates and shareholders. Our business model provides the ability to fund wage investments for associates and price investments for customers while also delivering on our financial framework. Summarizing the quarter in constant currency sales grew over 5% and adjusted operating income grew more than 9%, both exceeding the upper bound of our guided ranges. Adjusted EPS of $0.66 compared favorably to our expectations and reflected strong underlying business performance and lower tax expense. Reported EPS included headwinds of approximately $0.01 from currency and nearly $0.01 from costs related to the acquisition of Visio. Now let me turn to guidance. We've been operating in a highly dynamic backdrop for several years, and we expect this year to be no different. Our outlook assumes a relatively stable macroeconomic environment, but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions. As a result, we've taken a similar approach to our initial guidance view for the year as we have in the past couple of years, balancing known risk with what we can control. We remain confident that Walmart is well positioned to navigate as it has over the last several years, while continuing to deliver value for customers and shareholders alike. For fiscal year 2026, we expect consolidated net sales growth of approximately 3 to 4%, including the negative impact from lapping leap year and the favorable contribution from Visio sales. Operating income is projected to grow faster than sales at 3.5% to 5.5%, including 150 basis points of negative impacts for the Visio acquisition related to integration, investments and transition costs, as well as from lapping leap year. Adjusted EPS is expected to be in the range of $2.50 to $2.60. This includes a headwind from currency of approximately $0.05 per share and a higher effective tax rate compared to last year. Recall that we guide sales and operating income growth on a constant currency basis. Volatility in currency rates had a meaningful impact on last year's results. If current exchange rates were to prevail for the full year, we would expect a headwind of approximately 100 basis points to sales growth and approximately 150 basis points to operating income growth, with more significant headwinds in the first half. Given the degree of change in exchange rates versus last year, we expect CapEx to range between 3 and 3.5% of sales as we invest in technology to optimize our supply chain, remodel stores and open new stores and clubs in both the US and certain international markets. For the first quarter. It's important to note that our year over year comparisons can have an outsized impact on quarterly growth rates. We expect consolidated net sales growth of 3 to 4% in constant currency. This includes the negative effect of approximately 100 basis points to sales growth from lapping leap year and accounts for the shift in easter timing from Q1 into Q2. In our international portfolio, namely Walmecs, operating income is projected to grow 0.5% to 2% in constant currency including the approximately 70 basis point headwind from the Vizio acquisition as well as the 250 basis point headwind to growth from lapping leap day. Our operating income guidance also takes into account the Easter timing shift in lapping last year's consumer stimulus timing in Q1 for WALMECS. All of these items affect the year over year growth rates, but let me emphasize our core business is still performing very strong on a two year stack basis. The midpoint of our guidance would suggest operating income growth of 15% reflecting strength and consistency in the underlying business. We expect enterprise net sales and operating income growth to be relatively consistent across quarters after adjusting for calendar impacts. Additionally, we expect first half sales and operating income to grow in the range of our full year guidance. Notably, if current exchange rates were to stay where they are for the entire first quarter, we would expect a headwind of approximately 150 basis points to sales growth and approximately 250 basis points to operating income growth. First quarter EPS range is expected to be $0.57 to $0.58. This includes a headwind from currency of approximately $0.02 per share and a higher effective tax rate versus last year. As we've said in the past, the relationship of operating income growing faster than sales may not occur every quarter that we expect the framework to hold on an annual basis at the enterprise level. Before I turn it over to questions, I want to take a moment to thank our associates around the world for their hard work this past quarter and throughout fiscal year 2025. Their dedication and commitment to serving our customers and members every day is what makes Walmart such a special company. As we look ahead to fiscal year 2026 and I speak for the whole team here, we're incredibly excited about our business. It's not to say that there aren't challenges ahead, but our strategy is the right one. This team is executing on it. We're serving our customers and members better than ever before and our associates and shareholders are benefiting. And yet in some ways it feels like we're just getting started. We appreciate your interest in our company and are now ready to take your questions. Thank you.
