John David Rainey
Executive Vice President and Chief Financial Officer at Walmart
Thanks, Doug. I want to start with thanking our team for delivering on a good quarter. We're pleased with our results and the continued progress we're making executing our strategy. Since we shared our financial outlook at our Investor Day in April of last year; on average, we've increased our quarterly sales by more than 5%, and our quarterly operating income by 9%. These financial results reflect that our value proposition extends beyond great prices into convenience. Our combination of price, trust, assortment, and experience has made us more relevant with our customers and members than ever before.
Q2 sales, operating income, and EPS all exceeded the top end of our guided ranges. Second quarter total net sales growth was 4.9% on a constant currency basis, with all three operating segments outperforming our expectations, aided by strong global eCommerce growth of 21%. In Walmart U.S., comp sales growth of 4.2% was driven primarily by strong traffic and unit growth across both stores and digital channels. Customers continue to be discerning and choiceful, looking for value to maximize their budgets while leaning into seasonal celebrations. The pace of sales was largely consistent by month during the quarter. Across categories, we're providing low prices and winning customer consideration, including in general merchandise, with Walmart U.S. comp sales growth in hardlines, home and fashion.
We're also seeing higher engagement across income cohorts, with upper-income households continuing to account for the majority of gains even while we grow sales and share among middle- and lower-income households. We're seeing private brand penetration continue to increase. And we're highly encouraged by customer uptake of our new food brand, bettergoods, and the early excitement surrounding the relaunch of our young adult fashion brand, No Boundaries.
ECommerce sales in Walmart U.S. were up 22%, and weekly active customers increased 20%. In addition to the great progress we're making in our fulfillment centers, the close proximity of our stores to customers has also unlocked new capabilities and enabled faster delivery times. Store-fulfilled delivery was up about 50% in Q2, with customers increasingly choosing and paying for delivery of their eCommerce orders in under one hour or under three hours.
Our International business delivered constant currency sales growth of 8.3%, reflecting strength in Walmex, China, and Flipkart. Across markets, sales were strongest in food and consumables categories, and we're encouraged that general merchandise growth has improved year over year. Our private brand penetration increased in multiple markets as customers continue to focus on value. In our Bodega and Walmart formats in Mexico, nearly half of customer orders included a private brand item in Q2.
ECommerce sales in our international markets were up 18%. Customers are responding favorably to the increased convenience as we scale pickup and delivery capabilities. In China, we increased eCommerce orders delivered within one hour by 28% to 59 million orders. And in India, Flipkart grocery grew over 50%, while providing next-day delivery in over 200 cities. And in Canada, our Delivery Pass members drove more than 40% of grocery delivery sales, with order frequency significantly higher than that of nonmembers.
Sam's Club U.S. comp sales ex-fuel increased 5.2%, including eCommerce growth of 22%. Digital engagement remains strong, with Scan & Go penetration surpassing 30%. And with our increased convenience of our Just Go technology now operational in 325 clubs, over 50% of our members can exit without a check, improving member NPS by more than 800 basis points compared to the clubs without this technology. The Member's Mark private brand continues to drive excitement as sales and digital penetration increased during the quarter. Sam's is also growing membership across all income levels and with younger demographics, with Gen Z and millennials constituting about half of new members in Q2, a positive signal about the future growth of the business.
From a margin standpoint, consolidated gross margins expanded 43 basis points, led by Walmart U.S. and International segments. We're focused on providing everyday low prices for our customers and members, and we're managing U.S. pricing aligned to competitive price gaps. Customers and members are responding to our value proposition. We're seeing continued sales growth, share gains and higher gross margins. We're demonstrating that we're able to grow our business on a sustained basis in the absence of price inflation. Global eCommerce losses continue to narrow, most notably in our Walmart U.S. and Flipkart businesses. While improved business mix is helping, we're also encouraged by the progress in core eCommerce margins due largely to another quarter of nearly 40% reduction in U.S. net delivery costs per order. Flipkart's contribution margin also expanded significantly in the quarter. Scale and delivery density are key. As more customers are shopping with us more often across more categories, we're improving delivery density and transaction-level margins.
With improving business mix, we're continuing to reshape our profit composition as we scale growth drivers such as advertising, membership, marketplace and fulfillment, and data analytics and insights. Our advertising businesses around the world continue to scale, with global advertising up 26%. This was driven by another strong quarter from Walmart Connect in the U.S., which grew 30%.
We're also pleased with the trends in our membership programs. In the U.S., Walmart Plus membership income grew double-digits again this quarter, and Sam's Club U.S. reached another record-high level for member counts and Plus member penetration, resulting in 14.4% membership income growth. Within International, membership income in China from our Sam's Club business grew 26% as member count continues to increase. And in May, we opened our 48th club in China, and we welcomed around 50,000 people on opening day.
For Marketplace and Walmart Fulfillment Services; in the U.S., we've now seen more than 30% growth in each of the past four quarters as we continue to increase seller counts on the platform by double-digits. Growth from sellers using our marketplace fulfillment services increased 800 basis points in Q2, surpassing 40% penetration. Sales in fashion, toys, hardlines, and home all grew more than 20%. Outside the U.S., we're seeing similar trends as we enhance our capabilities and product assortment. For example, Flipkart delivered double-digit top-line growth and more than double the number of units they delivered same-day. In Mexico, we grew marketplace items and sellers by around 60%. And in Chile, we launched cross-border trade, adding sellers from China and the U.S. to our local marketplace offering.
Within data analytics and insights, Walmart Data Ventures continues to see strong results as clients value the insights we provide, bringing together consumer behavior with omnichannel sales and inventory trends across our platform.
Our client base has increased nearly 200% versus last year as we launch new tools and enter new markets, including the expansion of our Walmart Luminate product in Mexico in May.
We're also optimizing our business model to deliver greater efficiency. I've been encouraged by how our teams have renewed our long-standing, everyday low cost operating mindset. Ideas are being implemented across the organization and they're beginning to yield tangible results. By leveraging our scale as a global enterprise, we're finding savings in supplies, transportation, storage, third-party service contracts and various other expense categories. In other areas, we're maximizing the utilization of our assets and using tech to streamline our operational processes. Together, these efforts translate into meaningful savings.
We're also making good progress on our supply chain transformation, and we're seeing the direct benefits to customer experience. In Walmart U.S., more than 45% of our eCommerce fulfillment center volume is now automated, and we have about 1,800 stores receiving some level of freight from 15 of our regional distribution centers that are in varying stages of automation implementation. And as a result, our supply chain teams are processing more units through our DCs and FCs. And while we're spending more on capex than we have historically, we're pleased with the returns from these investments, particularly the automation of our supply chain. We expect these investments to yield returns that will allow us to increase our return on invested capital each year.
Importantly, our evolving business model, with more diversified and durable sources of profit, has provided the ability to fund investments and prices for our customers, wages and benefits for our associates, and leading-edge technologies to power our growth, all while delivering on our financial framework of operating income growing faster than sales.
Wrapping up Q2 results, consolidated adjusted operating income grew 7.4% in constant currency, reflecting strong growth in sales, gross margins and membership income, partially offset by expense deleverage across segments largely related to increased marketing and higher variable pay expenses tied to our above-plan performance. Operating income also benefited from reduced eCommerce losses during the quarter. Adjusted EPS of $0.67 per share was above the upper end of our guidance of $0.62 to $0.65.
Turning to guidance. For the first half of the year, we reported net sales growth of more than 5%, and adjusted operating income growth of almost 10%. We are raising our full year guidance to reflect strong first half results. Looking at the second half of the year, we expect the business to achieve sales growth in line with our financial framework and for sustained structural improvements in incremental margins. This should result in operating income growing slightly faster than sales when looking at the second half in total. We now expect full year FY '25 sales growth of 3.75% to 4.75%, and operating income growth of 6.5% to 8% versus our prior guidance of growth of 3% to 4% and 4% to 6%, respectively. Adjusted EPS is expected to be $2.35 to $2.43 versus prior guidance of $2.23 to $2.37.
We're focused on executing on the things that we can control, focused on our business and serving our customers and members. But the economic and geopolitical backdrop that we operate in is perhaps more uncertain than normal, and we're not completely immune from the volatility that can result from this. And while we have not seen any additional fraying of consumer health in our business, other economic data out there, as well as the state of affairs globally, would suggest that it's prudent to remain appropriately cautious with our outlook.
Reflecting these considerations, our guidance is for growth in Q3 sales of 3.25% to 4.25%, and operating income of 3% to 4.5%, with EPS expected to be $0.51 to $0.52. There are two primary factors influencing Q3 operating income growth. First, as is the case in most years, the timing of festive events in our International segment has a bearing on sales and profits by quarter and can affect year-over-year comparability in growth rates. And second, the timing of planned expenses is more concentrated in Q3 versus Q4.
In closing. With the results we've delivered through the first half, we're in a good position to achieve our financial goals for the year. Our business model is delivering strong momentum. eCommerce is sustaining its strong growth and pulling new value streams and profit pools along with it. Simply put, our value proposition is broader and more relevant to our customers and members than ever before.
We appreciate your interest in Walmart and are now ready to take your questions.
