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Item 2. Management’s Discussion and Analysis

2024-12-06 compared with 2024-08-30 · 102 added, 101 removed, 287 unchanged (41% 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, 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 and six months ended July 31, 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.

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 and nine months ended October 31, 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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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 six months ended July 31, 2024 and 2023, were as follows:

Three Months Ended July 31, Six Months Ended July 31,

Calendar comparable sales, as well as the impact of fuel, for the three and nine months ended October 31, 2024 and 2023, were as follows:

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

2024 2023 2024 2023 2024 2023 2024 2023

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4.9 % 4.6 % (0.7) % 0.0 % 4.7 % 5.5 % (0.3) % (0.6) %

Comparable sales in the U.S., including fuel, increased 4.3% and 4.6% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Comparable sales in the U.S., including fuel, increased 4.9% and 4.7% for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The Walmart U.S.

segment had comparable sales growth of 4.2% and 4.6% for the three and six months ended July 31, 2024, respectively, driven by growth in transactions, with strong sales in grocery and health and wellness.

segment had comparable sales growth of 5.1% and 4.7% for the three and nine months ended October 31, 2024, respectively, driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness.

The Walmart U.S.

segment's eCommerce net sales positively contributed approximately 2.9% to comparable sales for both the three and six months ended July 31, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Comparable sales at the Sam's Club segment increased 4.7% and 4.6% for the three and six months ended July 31, 2024, respectively, driven by 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 2.2% and 1.9% to comparable sales for the three and six months ended July 31, 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

segment's eCommerce net sales positively contributed approximately 2.8% to comparable sales for both the three and nine months ended October 31, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Comparable sales at the Sam's Club segment increased 3.8% and 4.3% for the three and nine months ended October 31, 2024, respectively, driven by growth in transactions and unit volumes, including strong sales in grocery and health and wellness.

The Sam's Club segment's eCommerce sales positively contributed approximately 2.7% and 2.1% to comparable sales for the three and nine months ended October 31, 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and 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.

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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

Six Months Ended

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

(Amounts in millions) 2024 2023 2024 2023

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Operating income as a percentage of net sales 4.0 % 3.9 % 4.3 % 4.2 %

Gross profit as a percentage of net sales ("gross profit rate") increased 43 basis points for both the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Gross profit as a percentage of net sales ("gross profit rate") increased 21 and 35 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily driven by the Walmart U.S.

segment due to managing prices aligned to our competitive price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 35 and 38 basis points for the three and six months ended July 31, 2024, respectively.

The increase for the three months ended July 31, 2024 was primarily driven by higher marketing expenses and higher variable pay as a result of exceeding planned performance.

The increase for the six months ended July 31, 2024 was primarily driven by higher variable pay as a result of exceeding planned performance, higher marketing expenses and business reorganization costs of $0.3 billion incurred during the first quarter of fiscal 2025.

Operating income increased $0.6 billion or 8.5% and $1.2 billion or 9.0% for the three and six months ended July 31, 2024, respectively, primarily due to the factors described above as well as from strong growth in membership income globally.

segment due to managing prices aligned to our competitive price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories and the timing of Flipkart's The Big Billion Days ("BBD") sales event in the Walmart International segment, which shifted from the fourth quarter of fiscal 2024 to primarily in the third quarter of fiscal 2025.

Operating expenses as a percentage of net sales increased 19 and 32 basis points for the three and nine months ended October 31, 2024, respectively.

The increase for the three months ended October 31, 2024 was primarily driven by hurricane-related recovery expenses incurred in the Walmart U.S.

and Sam's Club segments, higher marketing expenses and higher variable pay as a result of exceeding planned performance.

The increase for the nine months ended October 31, 2024 was primarily driven by higher variable pay as a result of exceeding planned performance, higher marketing expenses and business reorganization costs of $0.3 billion incurred during the first quarter of fiscal 2025.

Operating income increased $0.5 billion or 8.2% and $1.7 billion or 8.8% for the three and nine months ended October 31, 2024, respectively, 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.

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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 6.4% and 5.6% for the trailing 12 months ended July 31, 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 partially offset by changes in the fair value of our equity and other investments.

ROI was 15.1% and 12.8% for the trailing 12 months ended July 31, 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.

ROA was 7.8% and 6.5% for the trailing 12 months ended October 31, 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.

ROI was 15.1% and 14.1% for the trailing 12 months ended October 31, 2024 and 2023, respectively.

The increase in ROI was the result of an increase in operating income, primarily due to improvements in business performance as well as lapping business reorganization and restructuring charges incurred in the comparative trailing 12 months, 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.

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Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA.

Although ROI is a standard financial measure, numerous methods exist for calculating a company's ROI.

Although ROI is a standard financial measure, numerous methods exist for calculating ROI.

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

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 July 31,

For the Trailing Twelve Months Ended October 31,

(Amounts in millions) 2024 2023

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(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 July 31,

As of October 31,

2024 2023 2022

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The following table provides additional detail regarding our capital expenditures:

(Amounts in millions) Six Months Ended July 31,

(Amounts in millions) Nine Months Ended October 31,

Allocation of Capital Expenditures 2024 2023

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New stores and clubs, including expansions and relocations 267 48

14,529 12,802

Walmart International 2,167 1,872

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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 $16.4 billion for the six months ended July 31, 2024, which represents a decrease of $1.8 billion when compared to the same period in the prior year.

The decrease was primarily due to timing of certain payments and increased inventory purchases, partially offset by an increase in cash provided by operating income.

Free cash flow for the six months ended July 31, 2024 was $5.9 billion, which represents a decrease of $3.1 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 $1.3 billion in capital expenditures to support our investment strategy.

Net cash provided by operating activities was $22.9 billion for the nine months ended October 31, 2024, which represents an increase of $3.9 billion when compared to the same period in the prior year.

The increase was primarily due to an increase in cash provided by operating income and lapping the payment of accrued opioid legal charges in the prior year comparable period, partially offset by increased inventory purchases.

Free cash flow for the nine months ended October 31, 2024 was $6.2 billion, which represents an increase of $1.9 billion when compared to the same period in the prior year.

The increase in free cash flow was due to the increase in net cash provided by operating activities described above, partially offset by an increase of $2.0 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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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 provided by or used in financing activities.

Six Months Ended July 31,

Nine Months Ended October 31,

(Amounts in millions) 2024 2023

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Consolidated Results of Operations

Three Months Ended July 31, Six Months Ended July 31,

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

(Amounts in millions, except unit counts) 2024 2023 2024 2023

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Retail square feet at period end 1,050 1,050 1,050 1,050

Our total revenues, which are mostly comprised of net sales but also include membership and other income, increased $7.7 billion or 4.8% and $17 billion or 5.4% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Our total revenues, which are mostly comprised of net sales but also include membership and other income, increased $8.8 billion or 5.5% and $25.7 billion or 5.4% for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to strong positive comparable sales in our U.S.

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

Net sales for the three and six months ended July 31, 2024 were negatively affected by $0.3 billion and positively affected by $0.1 billion, respectively, in fluctuations in currency exchange rates.

Membership and other income increased $0.2 billion or 16.0% and $0.5 billion or 18.5% for the three and six months ended July 31, 2024, respectively, primarily due to strong growth in membership income globally.

Gross profit rate increased 43 basis points for both the three and six months ended July 31, 2024, when compared to the same periods in the previous fiscal year.

segments and international markets driven by growth in transactions and unit volumes, with strength in eCommerce as well as strong sales in grocery and health and wellness.

Net sales for the three and nine months ended October 31, 2024 were negatively affected by $1.2 billion and $1.1 billion, respectively, due to fluctuations in currency exchange rates.

Membership and other income increased $0.2 billion or 16.1% and $0.7 billion or 17.7% for the three and nine months ended October 31, 2024, respectively, primarily due to strong growth in membership income globally.

Gross profit rate increased 21 and 35 basis points for both the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily driven by the Walmart U.S.

segment due to managing prices aligned to our competitive price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 35 and 38 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increase for the three months ended July 31, 2024 was primarily driven by higher marketing expenses and higher variable pay as a result of exceeding planned performance.

Operating expenses as a percentage of net sales increased 19 and 32 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increase for the three months ended October 31, 2024 was primarily driven by hurricane-related recovery expenses incurred in the Walmart U.S.

and Sam's Club segments, higher marketing expenses and higher variable pay as a result of exceeding planned performance.

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 increases of $5.1 billion and $1.3 billion in other losses for the three and six months ended July 31, 2024, 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 24.2% and 24.4% for the three and six months ended July 31, 2024, respectively, compared to 24.9% and 25.8% for the same periods in the previous fiscal year.

The net decreases of $4.6 billion and $3.3 billion in other losses for the three and nine months ended October 31, 2024, 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 22.7% and 23.8% for the three and nine months ended October 31, 2024, respectively, compared to 29.7% and 26.1% for the same periods in the previous fiscal year.

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

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statutory rate.

As a result of the factors discussed above, consolidated net income decreased $3.3 billion and increased $0.1 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Accordingly, diluted net income per common share attributable to Walmart was $0.56 and $1.19 for the three and six months ended July 31, 2024, respectively, which represents a decrease of $0.41 and an increase of $0.01, respectively, when compared to the same periods in the previous fiscal year.

Three Months Ended July 31, Six Months Ended July 31,

As a result of the factors discussed above, consolidated net income increased $4.1 billion for both the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Accordingly, diluted net income per common share attributable to Walmart was $0.57 and $1.75 for the three and nine months ended October 31, 2024, respectively, which represents an increase of $0.51 for both periods when compared to the same periods in the previous fiscal year.

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

(Amounts in millions, except unit counts) 2024 2023 2024 2023

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Net sales for the Walmart U.S.

segment increased $4.5 billion or 4.1% and $9.3 billion or 4.3% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were due to comparable sales of 4.2% and 4.6% for the three and six months ended July 31, 2024, respectively, driven by growth in transactions, with strong sales in grocery and health and wellness.

segment increased $5.5 billion or 5.0% and $14.7 billion or 4.5% for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were due to comparable sales of 5.1% and 4.7% for the three and nine months ended October 31, 2024, respectively, driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness.

The Walmart U.S.

segment's eCommerce sales positively contributed approximately 2.9% to comparable sales for both the three and six months ended July 31, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Gross profit rate increased 51 and 48 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

segment's eCommerce sales positively contributed approximately 2.8% to comparable sales for both the three and nine months ended October 31, 2024, which was primarily driven by store-fulfilled pickup and delivery.

Gross profit rate increased 42 and 46 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily driven by managing prices aligned to our competitive price gaps and growth in higher margin businesses, partially offset by mix shifts into lower margin merchandise categories.

Operating expenses as a percentage of net sales increased 41 and 44 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to increased marketing and depreciation expenses, as well as higher variable pay as a result of exceeding planned performance.

Additionally, business reorganization costs of $0.1 billion incurred during the first quarter had a negative impact for the six months ended July 31, 2024.

As a result of the factors discussed above, operating income increased $0.5 billion and $0.8 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Operating expenses as a percentage of net sales increased 33 and 41 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increase for the three months ended October 31, 2024 was primarily due to hurricane-related recovery expenses and increased marketing and depreciation expenses.

The increase for the nine months ended October 31, 2024 was primarily related to increased marketing and depreciation expenses, as well as higher variable pay as a result of exceeding planned performance.

As a result of the factors discussed above, operating income increased $0.5 billion and $1.3 billion for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Walmart International Segment

Three Months Ended July 31, Six Months Ended July 31,

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

(Amounts in millions, except unit counts) 2024 2023 2024 2023

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Retail square feet at period end 271 271 271 271

Net sales for the Walmart International segment increased $2.0 billion or 7.1% and $5.2 billion or 9.6% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to positive comparable sales in the majority of our international markets led by strength in eCommerce and food and consumables categories.

Net sales for the three and six months ended July 31, 2024 were negatively affected by $0.3 billion and positively affected by $0.1 billion, respectively, in fluctuations in currency exchange rates.

Gross profit rate increased 44 and 38 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily driven by improved eCommerce margins and growth in higher margin businesses, partially offset by ongoing channel and format mix shifts primarily in China.

Operating expenses as a percentage of net sales increased 11 and decreased 18 basis points for three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increase for the three months ended July 31, 2024 was primarily due to planned investments in associate wages and new-store operating costs in the Mexico and Central America market, partially offset by operational efficiencies in eCommerce and ongoing format mix shifts.

The decrease for the six months ended July 31, 2024 was primarily due to strong sales and disciplined expense management across markets, as well as ongoing format mix shifts primarily in China.

As a result of the factors discussed above, operating income increased $0.2 billion and $0.5 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Net sales for the Walmart International segment increased $2.3 billion or 8.0% and $7.5 billion or 9.1% for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to positive comparable sales in the majority of our international markets led by strength in eCommerce and the shift in timing of Flipkart's BBD sales event.

Net sales for the three and nine months ended October 31, 2024 were negatively affected by $1.2 billion and $1.1 billion, respectively, due to fluctuations in currency exchange rates.

Gross profit rate decreased 85 and 4 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The decreases for the three and nine months ended October 31, 2024 were primarily driven by the shift in timing of Flipkart's BBD sales event and ongoing channel mix shifts, partially offset by growth in the majority of our other international markets and ongoing business mix changes.

Additionally, for the nine months ended October 31, 2024, the decrease in gross profit rate was also partially offset by improved eCommerce margins across certain markets.

Operating expenses as a percentage of net sales decreased 86 and 42 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The decreases for the three and nine months ended October 31, 2024 were primarily due to strong sales, including the shift in timing of Flipkart's BBD sales event, and format mix shifts primarily in China, partially offset by investments in associate wages in the Mexico and Central America and Canada markets.

As a result of the factors discussed above, operating income increased $0.1 billion and $0.6 billion for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Sam's Club Segment

Three Months Ended July 31, Six Months Ended July 31,

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

(Amounts in millions, except unit counts) 2024 2023 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 $1.0 billion or 4.7% and $2.0 billion or 4.6% for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to comparable sales, including fuel, of 4.7% and 4.6% for the three and six months ended July 31, 2024, respectively, driven by growth in transactions, including strong sales in grocery and consumables and health and wellness.

Sam's Club eCommerce sales positively contributed approximately 2.2% and 1.9% to comparable sales for the three and six months ended July 31, 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

Gross profit rate increased 22 and 39 basis points for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increase for the three months ended July 31, 2024 was primarily due to improved margins in fuel and lapping an inflation related LIFO charge in the prior year, partially offset by mix shifts into lower margin merchandise categories.

The increase for the six months ended July 31, 2024 was primarily due to lapping an inflation related LIFO charge in the prior year and improved margins in fuel, partially offset by mix shifts into lower margin merchandise categories.

Membership and other income increased 13.5% and 13.9% for the three and six months ended July 31, 2024, 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 3.9% and $2.8 billion or 4.4% for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were primarily due to comparable sales, including fuel, of 3.8% and 4.3% for the three and nine months ended October 31, 2024, respectively, driven by growth in transactions and unit volumes, including strong sales in grocery and health and wellness.

Sam's Club eCommerce sales positively contributed approximately 2.7% and 2.1% to comparable sales for the three and nine months ended October 31, 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

Gross profit rate increased 47 and 42 basis points for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increase for the three and nine months ended October 31, 2024 were primarily due to improved margins in fuel and lower markdowns as a result of disciplined inventory management, partially offset by eCommerce fulfillment costs.

Additionally, lapping inflation-related LIFO charges in the prior year had a positive impact on gross profit rate for the nine months ended October 31, 2024.

Membership and other income increased 15.1% and 14.3% for the three and nine months ended October 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

The increases were 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 26 and 21 basis points for the three and six months ended July 31, 2024, respectively, 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.

As a result of the factors discussed above, operating income increased $0.1 billion and $0.2 billion for the three and six months ended July 31, 2024, respectively, when compared to the same periods in the previous fiscal year.

Operating expenses as a percentage of net sales increased 63 and 36 basis points for the three and nine months ended October 31, 2024, respectively, 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.

Additionally, elevated technology spend in the three months ended October 31, 2024 had a negative impact on operating expenses as a percentage of net sales.

As a result of the factors discussed above, operating income increased slightly for the three months ended October 31, 2024, and increased $0.3 billion for the nine months ended October 31, 2024, when compared to the same periods in the previous fiscal year.

Liquidity and Capital Resources

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Net Cash Provided by Operating Activities

Six Months Ended July 31,

Nine Months Ended October 31,

(Amounts in millions) 2024 2023

Net cash provided by operating activities $ 22,918 $ 19,014

Net cash provided by operating activities was $16.4 billion as compared to $18.2 billion for the six months ended July 31, 2024 and 2023, respectively.

The decrease was primarily due to timing of certain payments and increased inventory purchases, partially offset by an increase in cash provided by operating income.

Net cash provided by operating activities was $22.9 billion as compared to $19.0 billion for the nine months ended October 31, 2024 and 2023, respectively.

Cash Equivalents and Working Capital Deficit

Cash and cash equivalents were $8.8 billion and $13.9 billion at July 31, 2024 and 2023, respectively.

Our working capital deficit was $18.8 billion as of July 31, 2024, which increased when compared to the $17.2 billion working capital deficit as of July 31, 2023, primarily driven by a net decrease in cash and cash equivalents, partially offset by a reduction in accrued liabilities due to payments related to the opioid legal settlement as well as lower short-term debt and commercial paper levels.

Cash and cash equivalents were $10.0 billion and $12.2 billion at October 31, 2024 and 2023, respectively.

Our working capital deficit was $15.6 billion as of October 31, 2024, which was relatively consistent with our $15.8 billion working capital deficit as of October 31, 2023.

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 July 31, 2024 and January 31, 2024, cash and cash equivalents of $3.6 billion and $3.5 billion, respectively, may not be freely transferable to the U.S.

As of October 31, 2024 and January 31, 2024, cash and cash equivalents of $3.6 billion and $3.5 billion, respectively, 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

Six Months Ended July 31,

Nine Months Ended October 31,

(Amounts in millions) 2024 2023

Net cash used in investing activities $ (12,661) $ (15,374)

Net cash used in investing activities was $10.1 billion as compared to $9.9 billion for the six months ended July 31, 2024 and 2023, respectively.

The increase of $0.2 billion for the six months ended July 31, 2024 is primarily the result of an increase in payments for property and equipment, partially offset by the change in other investing activities related to certain short-term investments.

Sale of Investment

The Company's Board of Directors approved the sale of its investment in JD.com, effective on August 20, 2024, with the securities being sold on the same day.

The Company received $3.6 billion in net proceeds which will be classified as cash provided by investing activities in our Condensed Consolidated Statement of Cash Flows for the nine months ending October 31, 2024.

See Note 8 to our Condensed Consolidated Financial Statements for further details on the transaction.

Net cash used in investing activities was $12.7 billion as compared to $15.4 billion for the nine months ended October 31, 2024 and 2023, respectively.

The decrease of $2.7 billion for the nine months ended October 31, 2024 is primarily due to net proceeds received from sales of certain strategic investments, including $3.6 billion related to the sale of our JD.com investment, partially offset by an increase in payments for property and equipment.

Business acquisition

In December 2024, the Company completed the acquisition of Vizio Holding Corp.

for net cash consideration of approximately $2 billion, which will be classified as cash used in investing activities in our Consolidated Statement of Cash Flows for the year ending January 31, 2025.

Net Cash Used in Financing Activities

Six Months Ended July 31,

Nine Months Ended October 31,

(Amounts in millions) 2024 2023

Net cash used in financing activities $ (9,673) $ (179)

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 $6.9 billion and $3.3 billion for the six months ended July 31, 2024 and 2023, respectively.

The increase of $3.6 billion for the six months ended July 31, 2024 is primarily due to lapping debt issuances in the prior year comparable period and lower short-term borrowings in the current year, partially offset by lapping the purchase of certain non-controlling interest in the prior year comparable period.

Net cash from financing activities generally consists of debt transactions, dividends paid, repurchases of Company stock and transactions with noncontrolling interest shareholders.

Net cash used in financing activities was $9.7 billion and $0.2 billion for the nine months ended October 31, 2024 and 2023, respectively.

The increase of $9.5 billion for the nine months ended October 31, 2024 is primarily due to lower short-term borrowings in the current year, lapping debt issuances in the prior year comparable period, and increased share repurchases, partially offset by lapping the purchase of certain non-controlling interest in the prior year comparable period.

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 July 31, 2024, all undrawn.

of $15.0 billion at October 31, 2024, all undrawn.

Long-term Debt

The following table provides the changes in our long-term debt for the six months ended July 31, 2024:

The following table provides the changes in our long-term debt for the nine months ended October 31, 2024:

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

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Other (9) 138 129

Balances as of July 31, 2024 $ 1,495 $ 35,364 $ 36,859

During the six months ended July 31, 2024, our total outstanding long-term debt decreased $2.7 billion primarily due to maturities of certain long-term debt.

Balances as of October 31, 2024 $ 3,246 $ 33,645 $ 36,891

During the nine months ended October 31, 2024, our total outstanding long-term debt decreased $2.7 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.

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December 13, 2024 January 6, 2025

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

The dividend installments payable on April 1, 2024, May 28, 2024 and September 3, 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 six months ended July 31, 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 July 31, 2024, authorization for $14.5 billion of share repurchases remained under the share repurchase program.

All repurchases made during the nine months ended October 31, 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 October 31, 2024, authorization for $13.5 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 six months ended July 31, 2024 and 2023:

Six Months Ended July 31,

The following table provides, on a settlement date basis, share repurchase information for the nine months ended October 31, 2024 and 2023:

Nine Months Ended October 31,

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

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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 July 31, 2024, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:

As of October 31, 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 , under " Mexico Antitrust Matter ," we also discuss a quasi-judicial administrative process initiated by the Comisión Federal de Competencia Económica of México against Walmex.

In Note 6 we also discuss a show cause notice and requests issued by the Directorate of Enforcement to Flipkart regarding Foreign Direct Investment rules and regulations in India.

In Note 6 we also discuss a show cause notice and requests issued by the Directorate of Enforcement to Flipkart regarding Foreign Direct Investment rules and regulations in India and an India Antitrust Matter.

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

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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