00:00Another solid quarter for Walmart in the fourth quarter, they did come out with conservative
00:06guidance, which is pretty typical for Walmart, come out with cautious guidance and then exceed
00:13it later in the year, which is sort of their playbook. And then their guidance was also paired
00:17with some warning signs or cautious outlook about the economy, which I found interesting.
00:24Yeah, I want to pick up on that idea because the CFO talked to Bloomberg and mentioned that
00:28tariff driven inflation has reached or is reaching its peak, which I thought was really
00:34interesting, given that there's so many people expecting rate cuts later on this year, given
00:39that inflation seems to have settled down. What more can they tell us about pricing?
00:44I think they told us that prices rose 1% in the quarter, which I think was the same as
00:50the last quarter. But they also mentioned other things like tepid job growth, student loan
00:57delinquencies rising, consumer sentiment being uneven, things that, you know, would give
01:03any CEO or CFO or company pause when they're trying to outlay what might happen in the coming
01:11year.
01:11And I've noticed over the last couple of years, they've talked about how maybe their customer
01:16base is changing a little bit. People, some middle class, maybe even upper income areas
01:20coming down to Walmart. They're seeing more and more of that. Is that still the case?
01:24I think, yes, that's definitely the case. And that's sort of their superpower right now
01:28that, you know, poor, this is the case shaped economy that we talk about a lot. Poor customers
01:35are pulling back in areas, but what they're seeing is wealthier clients, clientele who might
01:40not have come to Walmart in the past, shopping at Walmart, especially for things like their
01:46groceries, which they've invested in a lot in the last 10 years. You can now find organic
01:51groceries in Walmart, and that's really paying off.
01:55And they also have this Walmart Plus program, which they're really putting a lot of emphasis
01:59on. It's actually one of the benefits if you're an American Express Platinum cardholder, which
02:03speaks to that idea that they're really reaching for the higher income consumer.
02:07How's that going? And is it making any headway on stealing market share from Amazon with its Prime
02:13program?
02:13Yeah, they're seeing a huge growth in e-commerce. I think that was one of the major areas that
02:19grew this quarter. That is drawing in higher income shoppers who actually pay even more
02:25than the membership for faster deliveries, speedier pickup times. And that's helping them also
02:32grow market share among wealthier shoppers who are looking for convenience over everything
02:38else.
02:39So what are they saying about, did they even talk about on the conference called tariffs
02:43anymore? Is that still a discussion point? And what's the company saying about tariffs?
02:48Yeah, tariffs came up a little bit, but they said that they expect that tariff-driven inflation
02:57to peak now. I think they also benefit here, again, from their groceries. Groceries are a portion
03:05of their assortment that is less impacted by tariffs. And they're really benefiting from,
03:11I think, 60% of their sales come from groceries these days.
03:15You mentioned e-commerce. It sounds like Walmart will continue to invest in technology and automation.
03:21What were some of the things that they flagged that they're working on in terms of innovation
03:24and building on the technology that they have already implemented into their system?
03:29Yeah, it was interesting. They said most of their fulfillment in stores is now coming from
03:35automated warehouses. Most of their fulfillment for e-commerce is coming from automated warehouses.
03:41They have really made huge gains here to speed up fulfillment centers. And I think we should expect
03:49to see more of that in the coming quarters. They cited store remodels and automation as the main
03:55areas where they're going to be continuing to invest.
03:58You know, one of the things that's amazed me really for 10, 15 years about Walmart is how
04:03well their digital business has been, their e-commerce business. They have built that to not
04:08only, I mean, they can go toe-to-toe with Amazon.com on just about anything, it seems like. Is
04:13that still
04:14a growth story for them?
04:15Yeah, I think they said something like a third, they've seen a huge amount of shoppers are now
04:21actually interacting with their AI assistant on their app and on their website that's really
04:32helping people make shopping decisions faster. They're seeing an increasing spend from customers
04:38who interact with the AI shopping assistant, they said, which I think we can expect to see more of that.
04:45You know, just in the last five years, their EBITDA has roughly doubled, but their CapEx has tripled.
04:49Yeah. So there's that e-commerce build-out, that tech build-out.
04:52Yep. So, I mean, they're putting their money where their mouth is here.
04:55You know what Paul's dream job is, Emily? Must he mention this to you?
04:58No.
04:59Be a greeter at Walmart. See, I'm a nice, friendly guy.
05:02He wants the smock. He wants to wear the smock.
05:04But, you know, to that point, Walmart employs about 2.1 million people, which makes it a huge employer.
05:11Do we have a sense of whether they've been growing their employee base at all with
05:14this commitment to technology, to automation?
05:19I think they've definitely made a huge investment in technology.
05:23They have a lot more people working on tech than they ever have.
05:26And I think we could expect to see more of that for sure.
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