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Item 2. Management’s Discussion and Analysis

2024-06-07 compared with 2023-11-30 · 121 added, 132 removed, 266 unchanged (49% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion, which presents Walmart Inc.'s ("Walmart," the "Company," "our," or "we") results for periods occurring in the fiscal year ending January 31, 2024 ("fiscal 2024") and the fiscal year ended January 31, 2023 ("fiscal 2023"), should be read in conjunction with our Condensed Consolidated Financial Statements as of and for the three and nine months ended October 31, 2023, and the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of and for the year ended January 31, 2023, the accompanying notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the year ended January 31, 2023.

This discussion, which presents Walmart Inc.'s ("Walmart," the "Company," "our," or "we") results for periods occurring in the fiscal year ending January 31, 2025 ("fiscal 2025") and the fiscal year ended January 31, 2024 ("fiscal 2024"), should be read in conjunction with our Condensed Consolidated Financial Statements as of and for the three months ended April 30, 2024, and the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Consolidated Financial Statements as of and for the year ended January 31, 2024, the accompanying notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the year ended January 31, 2024.

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes.

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Walmart's definition of comparable sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as eCommerce sales.

We measure the eCommerce sales impact by including all sales initiated digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our strategy, such as our Walmart Connect advertising business.

We measure the eCommerce sales impact by including all sales initiated digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our ecosystem, such as our Walmart Connect advertising business.

Sales at a store that has changed in format are excluded from comparable sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than five percent.

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Each, however, has generally maintained a relatively consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates.

We operate in the highly competitive omni-channel retail industry in all of the markets we serve.

We operate in a highly competitive omni-channel retail industry in all of the markets we serve.

We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as eCommerce businesses and companies that offer services in digital advertising, fulfillment and delivery services, health and wellness, and financial services.

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catastrophic events, weather and other risks related to climate change, global health epidemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain and inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment.

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs.

However, like other retail companies, we have experienced continued inflation that impacts our merchandise costs.

Merchandise costs continued to be impacted by inflation, however at a lower rate than we experienced in recent years.

The impact to our net sales and gross profit margin is influenced in part by our pricing and merchandising strategies in response to cost increases.

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Other Information ."

We expect continued uncertainty in our business and the global economy due to pressure from inflation, a challenging macro environment, geopolitical conditions, supply chain disruptions, volatility in employment trends and consumer confidence.

We expect continued uncertainty in our business and the global economy due to inflationary trends, a challenging macro environment, geopolitical conditions, supply chain disruptions, volatility in employment trends and consumer confidence.

For a detailed discussion on results of operations by reportable segment, refer to " Results of Operations " below.

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retail market where there is a single currency, one inflationary market and generally consistent store and club formats from year to year.

Calendar comparable sales, as well as the impact of fuel, for the three and nine months ended October 31, 2023 and 2022, were as follows:

Three Months Ended October 31, Nine Months Ended October 31,

Calendar comparable sales, as well as the impact of fuel, for the three months ended April 30, 2024 and 2023, were as follows:

Three Months Ended April 30,

2024 2023 2024 2023

With Fuel Fuel Impact With Fuel Fuel Impact

With Fuel Fuel Impact

4.9 % 7.5 % 0.0 % (0.2) %

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4.9 % 7.1 % 0.0 % (0.6) %

Comparable sales in the U.S., including fuel, increased 4.6% and 5.5% for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

Comparable sales in the U.S., including fuel, increased 4.9% for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The Walmart U.S.

segment had comparable sales growth of 4.9% and 6.1% for the three and nine months ended October 31, 2023, respectively, driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness.

The increases were partially offset by a modest decrease in general merchandise sales.

segment had comparable sales growth of 4.9% for the three months ended April 30, 2024, driven by growth in transactions, with strong sales in grocery and health and wellness.

The Walmart U.S.

segment's eCommerce sales positively contributed approximately 2.8% and 2.7% to comparable sales for the three and nine months ended October 31, 2023, respectively, which was primarily driven by store pickup and delivery.

Comparable sales at the Sam's Club segment increased 2.9% and 2.4% for the three and nine months ended October 31, 2023, respectively.

Growth in comparable sales benefited from growth in transactions and average ticket, including strong sales in

grocery and health and wellness.

Comparable sales for the nine months were partially offset by lower fuel sales due to deflation in this category.

The Sam's Club segment's eCommerce sales positively contributed approximately 1.4% and 1.6% to comparable sales for the three and nine months ended October 31, 2023, respectively, which was primarily driven by Curbside Pickup and Ship to Home.

segment's eCommerce net sales positively contributed approximately 2.9% to comparable sales for the three months ended April 30, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Comparable sales at the Sam's Club segment increased 4.6% for the three months ended April 30, 2024, which benefited from growth in transactions, including strong sales in grocery and consumables and health and wellness.

The Sam's Club segment's eCommerce sales positively contributed approximately 1.7% to comparable sales for the three months ended April 30, 2024, which was primarily driven by curbside pickup and club-fulfilled delivery.

Our objective of prioritizing margin focuses on growth with a focus on incremental margin accretion through a combination of productivity improvements, as well as category and business mix.

We invest in technology and process improvements to increase productivity, manage inventory, and reduce costs, and we operate with discipline by managing expenses and optimizing the efficiency of how we work.

Additionally, we focus on our mix of businesses, including the expansion of connected value streams with higher margins, such as advertising.

Additionally, we focus on our mix of businesses, including the expansion of connected value streams with higher margins, such as advertising and membership income.

Our objective is to achieve operating income leverage, which we define as growing operating income at a faster rate than net sales.

Three Months Ended

Nine Months Ended

(Amounts in millions) 2024 2023

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Operating income $ 6,841 $ 6,240

Percentage change from comparable period 9.6 % 17.3 %

Operating income as a percentage of net sales 4.3 % 4.1 %

Gross profit as a percentage of net sales ("gross profit rate") increased 32 and 22 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to the timing of Flipkart's The Big Billion Days ("BBD") sales event in the Walmart International segment, which shifted from the third quarter of fiscal 2023 to the fourth quarter of fiscal 2024, a reduction in inflation related LIFO charges in the Sam's Club segment and a slight improvement in gross profit rate in the Walmart U.S.

Operating expenses as a percentage of net sales decreased 182 and 70 basis points for the three and nine months ended October 31, 2023, respectively.

The decreases were primarily driven by the lapping of opioid-related legal settlements of $3.3 billion recorded in the third quarter of fiscal 2023.

Operating income as a percentage of net sales increased 211 and 85 basis points for the three and nine months ended October 31, 2023, respectively, due to the factors described above.

As we execute our strategic priorities, focusing on high return investments that drive operating leverage, we believe our return on capital will improve over time.

Gross profit as a percentage of net sales ("gross profit rate") increased 42 basis points for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was primarily driven by the Walmart U.S.

segment, due to managing prices aligned to our competitive price gaps, lower markdowns as a result of disciplined inventory management and favorable business mix, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 40 basis points for the three months ended April 30, 2024.

The increase was primarily driven by higher compensation related expenses in our U.S.

segments, including higher variable pay as a result of exceeding our planned performance as well as previously announced wage investments, and business reorganization costs, partially offset by expense leverage from strong sales growth in our International segment.

Operating income increased $0.6 billion or 9.6% for the three months ended April 30, 2024, primarily due to the factors described above as well as from strong growth in membership income globally.

As we execute our financial framework, we believe our return on capital will improve over time.

We measure return on capital with our return on investment and free cash flow metrics.

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Trends in ROI can fluctuate over time as management balances long-term strategic initiatives with possible short-term impacts.

ROA was 6.5% and 3.7% for the trailing twelve months ended October 31, 2023 and 2022, respectively.

The increase in ROA was primarily due to an increase in consolidated net income during the trailing twelve month period primarily due to lapping the opioid legal charges incurred in the prior year comparable period.

ROI was 14.1% and 12.8% for the trailing twelve months ended October 31, 2023 and 2022, respectively.

The increase in ROI was the result of an increase in operating income primarily due to lapping the opioid legal charges incurred in the prior year comparable period, partially offset by an increase in average invested capital primarily due to higher purchases of property and equipment.

We define ROI as operating income plus interest income, depreciation and amortization, and rent expense for the trailing twelve months divided by average invested capital during that period.

ROA was 7.9% and 4.5% for the trailing 12 months ended April 30, 2024 and 2023, respectively.

The increase in ROA was primarily due to an increase in consolidated net income during the trailing 12 month period, as a result of higher operating income and changes in the fair value of our equity and other investments.

ROI was 15.0% and 12.7% for the trailing 12 months ended April 30, 2024 and 2023, respectively.

The increase in ROI was the result of an increase in operating income, primarily due to lapping opioid legal charges as well as business reorganization and restructuring charges incurred in the comparative trailing 12 months, as well as improvements in business performance, partially offset by an increase in average invested capital primarily due to higher purchases of property and equipment.

We define ROI as operating income plus interest income, depreciation and amortization, and rent expense for the trailing 12 months divided by average invested capital during that period.

We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and amortization, less average accounts payable and average accrued liabilities for that period.

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The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:

For the Trailing Twelve Months Ending October 31,

For the Trailing Twelve Months Ending April 30,

(Amounts in millions) 2024 2023

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Return on investment (ROI) 15.0 % 12.7 %

(1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2.

As of October 31,

(1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by two.

As of April 30,

2024 2023 2022

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The following table provides additional detail regarding our capital expenditures:

(Amounts in millions) Nine Months Ended October 31,

(Amounts in millions) Three Months Ended April 30,

Allocation of Capital Expenditures 2024 2023

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New stores and clubs, including expansions and relocations 67 4

12,802 10,302

Walmart International 461 474

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Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.

See Liquidity and Capital Resources for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities.

See Liquidity and Capital Resources for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash provided by or used in financing activities.

We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period.

Net cash provided by operating activities was $19.0 billion for the nine months ended October 31, 2023, which represents an increase of $3.3 billion when compared to the same period in the prior year.

The increase is primarily due to timing of certain payments and moderated levels of inventory purchases, partially offset by payment of the remaining accrued opioid legal charges.

Free cash flow for the nine months ended October 31, 2023 was $4.3 billion, which represents an increase of $0.7 billion when compared to the same period in the prior year.

The increase in free cash flow is due to the increase in operating cash flows described above, partially offset by an increase of $2.6 billion in capital expenditures to support our investment strategy.

Net cash provided by operating activities was $4.2 billion for the three months ended April 30, 2024, which represents a decrease of $0.4 billion when compared to the same period in the prior year.

The decrease was primarily due to changes in working capital assets and liabilities, including timing impacts, partially offset by an increase in cash provided by operating income.

Free cash flow for the three months ended April 30, 2024 was negative $0.4 billion, which represents a decrease of $0.6 billion when compared to the same period in the prior year.

The decrease in free cash flow was due to the decrease in net cash provided by operating activities described above and an increase of $0.2 billion in capital expenditures to support our investment strategy.

Walmart's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions.

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As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities.

Nine Months Ended October 31,

Three Months Ended April 30,

(Amounts in millions) 2024 2023

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$ (4,409) $ (4,860)

Net cash used in financing activities (179) (5,581)

Net cash provided by (used in) financing activities

(1) "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

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Consolidated Results of Operations

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

(Amounts in millions, except unit counts) 2024 2023

Total revenues $ 160,804 $ 152,813 $ 474,737 $ 447,241

Percentage change from comparable period 5.2 % 8.7 % 6.1 % 6.5%

Net sales $ 159,938 $ 151,004

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calendar comparable sales increase 4.9 % 7.1 %

Membership and other income $ 1,570 $ 1,297

Percentage change from comparable period 21.0 % 1.2 %

Total revenues $ 161,508 $ 152,301

Percentage change from comparable period 6.0 % 7.6 %

Gross profit margin as a percentage of net sales 24.1 % 23.7 %

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Other (gains) and losses $ (794) $ 2,995

Consolidated net income (loss)

Consolidated net income

$ 5,307 $ 1,896

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Retail square feet at period end 1,051 1,051

Our total revenues, which are mostly comprised of net sales but also include membership and other income, increased $8.0 billion or 5.2% and $27.5 billion or 6.1% for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to strong positive comparable sales for the Walmart U.S.

and Sam's Club segments, which were driven by growth in transactions, combined with growth in average ticket, including strong sales in grocery and health and wellness, along with positive comparable sales in most of our international markets.

Net sales were positively impacted by $1.4 billion and $1.7 billion of fluctuations in currency exchange rates for the three and nine months ended October 31, 2023, respectively.

Gross profit rate increased 32 and 22 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to the shift in timing of the BBD sales event in the Walmart International segment, a reduction in inflation related LIFO charges in the Sam's Club segment and a slight improvement in gross profit rate in the Walmart U.S.

Operating expenses as a percentage of net sales decreased 182 and 70 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The decreases were primarily driven by the lapping of opioid-related legal settlements of $3.3 billion recorded in the third quarter of fiscal 2023.

Our total revenues, which are mostly comprised of net sales but also include membership and other income, increased $9.2 billion or 6.0% for the three months ended April 30, 2024 when compared to the same period in the previous fiscal year.

The increase was primarily due to strong positive comparable sales in our U.S.

segments and international markets driven by growth in transactions, including strong sales in grocery as well as strength in eCommerce.

Net sales were also positively affected by an extra day in February 2024 due to a leap year which increased net sales by approximately 1%, as well as $0.4 billion of fluctuations in currency exchange rates for the three months ended April 30, 2024.

Membership and other income increased $0.3 billion or 21.0% for the three months ended April 30, 2024, primarily due to strong growth in membership income globally.

Gross profit rate increased 42 basis points for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was primarily driven by the Walmart U.S.

Operating expenses as a percentage of net sales increased 40 basis points for the three months ended April 30, 2024 when compared to the same period in the previous fiscal year.

The increase was primarily driven by higher compensation related expenses in our U.S.

Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period.

The net increase of $1.1 billion and net decrease of $1.5 billion in other losses for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year, were primarily due to changes in the fair value of our equity and other investments driven by changes in their underlying stock prices.

Our effective income tax rate was 29.7% and 26.1% for the three and nine months ended October 31, 2023, respectively, compared to (23.5)% and 32.4% for the same periods in the previous fiscal year.

The increase in effective tax rate for the three months ended October 31, 2023, when compared to the same period in the previous fiscal year is primarily due to tax expense on a quarterly pre-tax loss during the third quarter of fiscal 2023, which included charges related to opioid-related legal settlements and net losses in fair value of our investments.

The decrease in effective tax rate for the nine months ended October 31, 2023 when compared to the same period in the previous fiscal year was primarily due to the tax impact of charges associated with opioid-related legal settlements and net losses in fair value of our investments.

The net increase of $3.8 billion in other gains for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year, was primarily due to changes in the fair value of our equity and other investments driven by changes in their underlying stock prices.

Our effective income tax rate was 24.6% for the three months ended April 30, 2024, compared to 29.5% for the same period in the previous fiscal year.

The decrease in effective tax rate was primarily due to the tax impact on changes in fair value of our investments.

Our effective income tax rate may fluctuate from quarter to quarter as a result of factors including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix and size of earnings among our U.S.

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statutory rate.

As a result of the factors discussed above, consolidated net income increased $2.4 billion and $5.1 billion for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

Additionally, net income attributable to noncontrolling interest increased $0.2 billion and $0.5 billion for the three and nine months ended October 31, 2023, respectively, which included stronger results from our Walmex operations.

Accordingly, diluted net income per common share attributable to Walmart was $0.17 and $3.71 for the three and nine months ended October 31, 2023, respectively, which represents respective increases of $0.83 and $1.74 when compared to the same periods in the previous fiscal year.

Three Months Ended October 31, Nine Months Ended October 31,

As a result of the factors discussed above, consolidated net income increased $3.4 billion for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

Accordingly, diluted net income per common share attributable to Walmart was $0.63 for the three months ended April 30, 2024, which represents an increase of $0.42 when compared to the same period in the previous fiscal year.

Three Months Ended April 30,

(Amounts in millions, except unit counts) 2024 2023

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Net sales for the Walmart U.S.

segment increased $4.6 billion or 4.4% and $17.4 billion or 5.7% for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were due to comparable sales of 4.9% and 6.1% for the three and nine months ended October 31, 2023, respectively, driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness.

The increases were partially offset by a modest decrease in general merchandise sales.

segment increased $4.8 billion or 4.6% for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was due to comparable sales of 4.9% for the three months ended April 30, 2024, driven by growth in transactions, with strong sales in grocery and health and wellness.

The Walmart U.S.

Gross profit rate was relatively flat, having increased by 5 and 3 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

Operating expenses as a percentage of net sales increased 35 basis points for the three months ended October 31, 2023 and was relatively flat for the nine months ended October 31, 2023, when compared to the same periods in the previous fiscal year.

The increase for the three months ended October 31, 2023 was primarily due to increases in wage related expenses, store remodel costs and legal expenses.

As a result of the factors discussed above, operating income decreased $0.1 billion and increased $0.8 billion for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

segment's eCommerce sales positively contributed approximately 2.9% to comparable sales for the three months ended April 30, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Gross profit rate increased 46 basis points for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was primarily driven by managing prices aligned to our competitive price gaps and lower markdowns as a result of disciplined inventory management, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 48 basis points for the three months ended April 30, 2024, when compared to the same periods in the previous fiscal year, primarily due to increased compensation related expenses, including higher variable pay as a result of exceeding our planned performance and previously announced wage investments, as well as business reorganization costs.

As a result of the factors discussed above, operating income increased $0.3 billion for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

Walmart International Segment

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

(Amounts in millions, except unit counts) 2024 2023

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Retail square feet at period end 272 272

Net sales for the Walmart International segment increased $2.7 billion or 10.8% and $8.8 billion or 12.0% for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to positive comparable sales in most of our international markets and positive fluctuations in currency exchange rates of $1.4 billion and $1.7 billion for the three and nine months ended October 31, 2023, respectively.

The increases were partially offset by the shift in timing of the BBD sales event.

Gross profit rate increased 151 and 44 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year, primarily driven by the shift in timing of the BBD sales event, partially offset by ongoing format and channel mix shifts and category mix shifts to food and consumables.

Operating expenses as a percentage of net sales increased 75 basis points for the three months ended October 31, 2023 when compared to the same period in the previous fiscal year, primarily driven by the shift in timing of the BBD sales event, partially offset by format mix shifts in certain markets.

Operating expenses as a percentage of net sales decreased 53 basis points for the nine months ended October 31, 2023 when compared to the same period in the previous fiscal year, primarily due to strong sales, format mix shifts and operating efficiencies in most of our markets, partially offset by the timing of the BBD sales event.

As a result of the factors discussed above, operating income increased $0.3 billion and $0.8 billion for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

Additionally, the increase in operating income for the nine months ended October 31, 2023 was partially offset by the lapping of a benefit in membership and other income related to an insurance settlement for Walmart Chile in the previous year.

Net sales for the Walmart International segment increased $3.2 billion or 12.1% for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was primarily due to positive comparable sales in each of our international markets driven by strong sales in food and consumables as well as strength in eCommerce.

Net sales benefited from the timing of certain seasonal events, along with positive fluctuations in currency exchange rates of $0.4 billion for the three months ended April 30, 2024.

Gross profit rate increased 32 basis points for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was primarily driven by improved eCommerce profitability and favorable business mix, partially offset by ongoing format and channel mix shifts in certain markets, and price investments.

Operating expenses as a percentage of net sales decreased 47 basis points for the three months ended April 30, 2024 when compared to the same period in the previous fiscal year, primarily due to strong sales across markets, disciplined expense management and ongoing format mix changes in certain markets.

As a result of the factors discussed above, operating income increased $0.4 billion for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

Sam's Club Segment

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

(Amounts in millions, except unit counts) 2024 2023

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Volatility in fuel prices may continue to impact the operating results of the Sam's Club segment in the future.

Net sales for the Sam's Club segment increased $0.6 billion or 2.8% and $1.4 billion or 2.2% for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to comparable sales, including fuel, of 2.9% and 2.4% for the three and nine months ended October 31, 2023, respectively.

Growth in comparable sales benefited from growth in transactions and average ticket, including strong sales in grocery and health and wellness.

Comparable sales for the nine months were partially offset by lower fuel sales due to deflation in this category.

Sam's Club eCommerce sales positively contributed approximately 1.4% and 1.6% to comparable sales for the three and nine months ended October 31, 2023, respectively, which was primarily driven by Curbside Pickup and Ship to Home.

Gross profit rate increased 16 and 64 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increase in gross profit rate for the three months ended October 31, 2023 was primarily due to a reduction in inflation related LIFO charges, partially offset by product mix shifts into lower margin categories and investments in price.

The increase in gross profit rate for the nine months ended October 31, 2023 was primarily due to the lapping of elevated supply chain costs and a reduction in inflation related LIFO charges.

Membership and other income increased 4.5% and 5.4% for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

The increases were due to growth in the membership base, Plus penetration and Plus renewals.

Operating expenses as a percentage of segment net sales increased 13 and 57 basis points for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year, primarily due to elevated technology spend and higher facilities costs.

In addition, lower fuel sales contributed to the increase in operating expenses as a percentage of net sales during the nine months ended October 31, 2023.

As a result of the factors discussed above, operating income was relatively flat and increased $0.1 billion for the three and nine months ended October 31, 2023, respectively, when compared to the same periods in the previous fiscal year.

Net sales for the Sam's Club segment increased $0.9 billion or 4.6% for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was primarily due to comparable sales, including fuel, of 4.6% for the three months ended April 30, 2024, which benefited from growth in transactions, including strong sales in grocery and consumables and health and wellness.

Sam's Club eCommerce sales positively contributed approximately 1.7% to comparable sales for the three months ended April 30, 2024, which was primarily driven by curbside pickup and club-fulfilled delivery.

Gross profit rate increased 58 basis points for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase in gross profit rate for the three months ended April 30, 2024 was primarily due to lapping inflation related LIFO charges in the prior year, and lower markdowns as a result of disciplined inventory management.

Membership and other income increased 14.3% for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

The increase was due to growth in the membership base and Plus penetration.

Membership income also benefited from lapping a prior year promotional offering related to previous membership fee increases.

Operating expenses as a percentage of net sales increased 17 basis points for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year, primarily due to increased compensation related expenses, including higher variable pay as a result of exceeding our planned performance, and elevated technology spend.

As a result of the factors discussed above, operating income increased $0.2 billion for the three months ended April 30, 2024, when compared to the same period in the previous fiscal year.

Liquidity and Capital Resources

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Generally, some or all of the remaining available cash flow has been used to fund dividends on our common stock and share repurchases.

We believe our sources of liquidity will continue to be sufficient to fund operations, finance our global investment activities, pay dividends and fund our share repurchases for at least the next 12 months and thereafter for the foreseeable future.

Net Cash Provided by Operating Activities

Nine Months Ended October 31,

Three Months Ended April 30,

(Amounts in millions) 2024 2023

Net cash provided by operating activities $ 4,249 $ 4,633

Net cash provided by operating activities was $19.0 billion as compared to $15.7 billion for the nine months ended October 31, 2023 and 2022, respectively.

The increase is primarily due to timing of certain payments and moderated levels of inventory purchases, partially offset by payment of the remaining accrued opioid legal charges.

Net cash provided by operating activities was $4.2 billion as compared to $4.6 billion for the three months ended April 30, 2024 and 2023, respectively.

The decrease was primarily due to changes in working capital assets and liabilities, including timing impacts, partially offset by an increase in cash provided by operating income.

Cash Equivalents and Working Capital Deficit

Cash and cash equivalents were $12.2 billion and $11.6 billion at October 31, 2023 and 2022, respectively.

Our working capital deficit was $15.8 billion as of October 31, 2023, which increased when compared to the $13.7 billion working capital deficit as of October 31, 2022, primarily driven by timing of certain payments and an increase in short-term borrowings, partially offset by a decrease in current maturities of long-term debt.

Cash and cash equivalents were $9.4 billion and $10.6 billion at April 30, 2024 and 2023, respectively.

Our working capital deficit was $18.9 billion as of April 30, 2024, which increased when compared to the $17.0 billion working capital deficit as of April 30, 2023, primarily driven by an increase in short-term borrowings and an increase in accounts payable to support business growth, partially offset by a decrease in accrued liabilities due to payments related to the opioid legal settlement.

We generally operate with a working capital deficit due to our efficient use of cash in funding operations, consistent access to the capital markets and returns provided to our shareholders in the form of payments of cash dividends and share repurchases.

As of October 31, 2023 and January 31, 2023, cash and cash equivalents of $3.6 billion and $2.9 billion, respectively, may not be freely transferable to the U.S.

As of April 30, 2024 and January 31, 2024, cash and cash equivalents of $3.5 billion may not be freely transferable to the U.S.

due to local laws or other restrictions or are subject to the approval of the noncontrolling interest shareholders.

Net Cash Used in Investing Activities

Nine Months Ended October 31,

Three Months Ended April 30,

(Amounts in millions) 2024 2023

Net cash used in investing activities $ (4,409) $ (4,860)

Net cash used in investing activities was $15.4 billion as compared to $13.0 billion for the nine months ended October 31, 2023 and 2022, respectively.

The increase of $2.4 billion for the nine months ended October 31, 2023 is primarily the result of an increase in payments for property and equipment.

Net Cash Used in Financing Activities

Nine Months Ended October 31,

Net cash used in investing activities was $4.4 billion as compared to $4.9 billion for the three months ended April 30, 2024 and 2023, respectively.

The decrease of $0.5 billion for the three months ended April 30, 2024 is primarily the result of the change in other investing activities related to certain short-term investments, partially offset by an increase in payments for property and equipment.

Net Cash Provided by (Used in) Financing Activities

Three Months Ended April 30,

(Amounts in millions) 2024 2023

Net cash used in financing activities $ (179) $ (5,581)

Net cash used in financing activities generally consists of transactions related to our short-term and long-term debt, dividends paid and the repurchase of Company stock.

Transactions with noncontrolling interest shareholders are also classified as cash flows used in financing activities.

Net cash used in financing activities was $0.2 billion as compared to $5.6 billion for the nine months ended October 31, 2023 and 2022, respectively.

The decrease in net cash used in financing activities is primarily due to fewer repurchases of Company stock and an increase in short-term borrowings, partially offset by the purchase of certain noncontrolling interests and payments of long-term debt.

Net cash provided by (used in) financing activities $ (321) $ 1,940

Net cash provided by or used in financing activities generally consists of transactions related to our short-term and long-term debt, dividends paid and the repurchase of Company stock.

Transactions with noncontrolling interest shareholders are also classified as cash flows provided by or used in financing activities.

Net cash used in financing activities was $0.3 billion as compared to net cash provided by financing activities of $1.9 billion for the three months ended April 30, 2024 and 2023, respectively.

The change in net financing cash flows is primarily due to lapping debt issuances in the prior year, partially offset by an increase in short-term borrowings.

In April 2024, the Company renewed and extended its existing 364-day revolving credit facility of $10.0 billion as well as its five-year credit facility of $5.0 billion.

In total, we had committed lines of credit in the U.S.

of $15.0 billion at October 31, 2023, all undrawn.

of $15.0 billion at April 30, 2024, all undrawn.

Long-term Debt

The following table provides the changes in our long-term debt for the nine months ended October 31, 2023:

The following table provides the changes in our long-term debt for the three months ended April 30, 2024:

(Amounts in millions) Long-term debt due within one year Long-term debt Total

Balances as of February 1, 2024 $ 3,447 $ 36,132 $ 39,579

Proceeds from issuance of long-term debt — 4,967 4,967

Repayments of long-term debt (1,574) — (1,574)

Reclassifications of long-term debt 2,832 (2,832) —

Other (8) (204) (212)

Balances as of October 31, 2023 $ 2,806 $ 36,342 $ 39,148

During the nine months ended October 31, 2023, our total outstanding long-term debt increased $0.3 billion primarily due to the issuance of new long-term debt in April 2023, partially offset by the maturities of certain long-term debt.

Refer to Note 4 to our Condensed Consolidated Financial Statements for details on the issuances and repayments of long-term debt.

Effective February 21, 2023, the Board of Directors approved the fiscal 2024 annual dividend of $2.28 per share, an increase over the fiscal 2023 annual dividend of $2.24 per share.

Balances as of April 30, 2024 $ 1,865 $ 35,928 $ 37,793

During the three months ended April 30, 2024, our total outstanding long-term debt decreased $1.8 billion primarily due to maturities of certain long-term debt.

Refer to Note 4 to our Condensed Consolidated Financial Statements for details on the repayments of long-term debt.

Effective February 20, 2024, the Company approved the fiscal 2025 annual dividend of $0.83 per share, an increase over the fiscal 2024 annual dividend of $0.76 per share.

For fiscal 2025, the annual dividend was or will be paid in four quarterly installments of $0.2075 per share, according to the following record and payable dates:

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December 13, 2024 January 6, 2025

The dividend installments payable on April 3, 2023, May 30, 2023 and September 5, 2023 were paid as scheduled.

The dividend installments payable on April 1, 2024 and May 28, 2024 were paid as scheduled.

Company Share Repurchase Program

From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Company's Board of Directors.

All repurchases made during the nine months ended October 31, 2023 were made under the current $20 billion share repurchase program approved in November 2022, which has no expiration date or other restrictions limiting the period over which the Company can make repurchases.

As of October 31, 2023, authorization for $18.1 billion of share repurchases remained under the share repurchase program.

All repurchases made during the three months ended April 30, 2024 were made under the current $20 billion share repurchase program approved in November 2022, which has no expiration date or other restrictions limiting the period over which the Company can make repurchases.

As of April 30, 2024, authorization for $15.5 billion of share repurchases remained under the share repurchase program.

Any repurchased shares are constructively retired and returned to an unissued status.

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We anticipate that a majority of the ongoing share repurchase program will be funded through the Company's free cash flow.

The following table provides, on a settlement date basis, share repurchase information for the nine months ended October 31, 2023 and 2022:

Nine Months Ended October 31,

The following table provides, on a settlement date basis, share repurchase information for the three months ended April 30, 2024 and 2023:

Three Months Ended April 30,

(Amounts in millions, except per share data) 2024 2023

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Total amount paid for share repurchases $ 1,059 $ 686

Purchase and Sale of Subsidiary Stock

During the nine months ended October 31, 2023, the Company paid $3.5 billion to acquire shares from certain Flipkart noncontrolling interest holders and settle the liability to former noncontrolling interest holders of PhonePe.

Additionally, during the nine months ended October 31, 2023, the Company received $0.7 billion related to new rounds of equity funding for the Company's majority-owned PhonePe subsidiary.

Material Cash Requirements

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We have strong commercial paper and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in capital markets.

As of October 31, 2023, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:

As of April 30, 2024, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:

Rating agency Commercial paper Long-term debt

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In Note 6 to our Condensed Consolidated Financial Statements, which is captioned "Contingencies" and appears in Part I of this Quarterly Report on Form 10-Q under the caption " Item 1.

Financial Statements ," we discuss, under the sub-captions " Settlement Framework Regarding Multidistrict and State or Local Opioid-Related Litigation, " and " Other Opioid-Related Litigation, " the Prescription Opiate Litigation, the Settlement Framework, and other matters, including certain risks arising therefrom.

Financial Statements ," we discuss, under the sub-captions " Settlement of Certain Opioid-Related Matters, " and " Ongoing Opioid-Related Litigation, " the Prescription Opiate Litigation, the Settlement Framework, and other matters, including certain risks arising therefrom.

In Note 6 , we also discuss, under the sub-caption " Asda Equal Value Claims " the Company's indemnification obligation for the Asda Equal Value Claims matter as well as under the sub-caption " Money Transfer Agent Services Matters " a United States Federal Trade Commission complaint related to money transfers and the Company's anti-fraud program and a government investigation by the U.S.

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In Note 6 , under the sub-caption " Mexico Antitrust Matter ," we also discuss a quasi-judicial process initiated by the Comision Federal de Competencia Economica of Mexico against Walmex.

We discuss various legal proceedings related to the Prescription Opiate Litigation, the Settlement Framework, DOJ Opioid Civil Litigation and Opioids-Related Securities Class Actions and Derivative Litigation;

We reference various legal proceedings related to the Prescription Opiate Litigation, the Settlement Framework, DOJ Opioid Civil Litigation and Opioids-Related Securities Class Actions and Derivative Litigation;

Asda Equal Value Claims;

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Legal Proceedings ," under the sub-caption "I.

Supplemental Information." We also discuss items related to the Foreign Direct Investment matter in India in Part II of this Quarterly Report on Form 10-Q under the caption " Item 1.

Supplemental Information." We also discuss items related to the Foreign Direct Investment Matters in India and the Driver Platform Matters in Part II of this Quarterly Report on Form 10-Q under the caption " Item 1.

Legal Proceedings ," under the sub-caption "II.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis