00:00What went wrong with this stock and these earnings this morning?
00:02Yeah, so I'd say there was a lot of expectation movement down into the print.
00:06Some alternative data out there that Q2 sales growth might be somewhat weak.
00:10We did get that headline number of U.S. same-store sales growth, only 2.6%.
00:15There is some regulatory pharmacy issues in there.
00:18A lot of these drug prices got pushed down, part of the Inflation Reduction Act that's hitting now.
00:23So that was about 125 basis point headwind.
00:26But with such a high multiple on this stock, you've got to be pinpoint.
00:30You've got to hit your numbers each and every quarter.
00:32Even though there's some optics off here, it's just caught people by surprise.
00:36Is this a hiccup off the back of a change in leadership?
00:38What would you call this?
00:39I would say that there's probably some of that in here.
00:42I think there's a few factors, right?
00:44You had John Furner take over as the CEO.
00:46There's been some domino effect of other leaders leaving Walmart post that.
00:51Maybe there's a little bit of an operational disruption.
00:54If Target doing a lot better, I think maybe that's a little piece of this, Amazon getting into grocery.
01:01Then I'd also say just the lower income consumer stress that's been out there.
01:05Nothing totally new, but I think that ate a little more into Walmart this quarter.
01:09How much is this an economic story and how much is this a Walmart versus competitor story?
01:14Is the likes of Kroger's and Target reduce some of their prices to compete more significantly with Walmart?
01:21Yeah, great question.
01:21I think a lot of those price investments from these other grocers, I think that's reactionary to what Walmart's done
01:28over the past several years.
01:29It's more of them catching up.
01:31There's some fears of this price war starting up in grocery.
01:35Maybe there's a little element of that in Q2.
01:37But again, a bigger picture, Walmart seems like a bigger share taker, not just grocery, but other general merchandise type
01:44companies.
01:44That's where they've seen all this uptick.
01:46So you see this as more of an economic story, a broader story than just one of a competitive landscape.
01:51How much is this a read of a slower consumer?
01:54And how much is this a read of people's expectations just having been too high and a normal consumer?
02:00Yeah, I think it's more of the latter.
02:02So there's a little bit of the low-end consumer stress.
02:05I don't think that's necessarily gravitating up towards middle income or higher income just yet.
02:10I don't know if that happens, but for today, I don't think that's happening.
02:14And you've seen good numbers elsewhere.
02:15Costco had great July sales.
02:17Five Below is competent in the double-digit range.
02:20So it doesn't seem like a widespread consumer thing.
02:23Maybe just lapping some big numbers from Walmart, some of these pharmacy headwinds,
02:28almost a perfect storm that led to this, I'd say, worst-case scenario for the second quarter for Walmart.
02:33Maybe.
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