2017 Investment Community Meeting


WE’LL GIVE YOU A MINUTE FOR EVERYONE TO GET SETTLED. ALL RIGHT. I THINK EVERYBODY IS ABOUT SETTLED NOW. SO GOOD MORNING! WELCOME TO WAL-MART’S 2017 MEETING FOR THE INVESTMENT COMMUNITY. MY NAME IS STEVE SCHMITT. I LEAD THE INVESTOR RELATIONS TEAM HERE AT WAL-MART. ON BEHALF OF THE COMPANY, I’D LIKE TO WELCOME YOU ALL TO NORTHWEST ARKANSAS AND WAL-MART’S CAMPUSES HERE. I’D ALSO LIKE TO WELCOME EVERYONE LISTENING IN ON OUR WEBCAST TODAY. WE APPRECIATE YOUR INTEREST IN WAL-MART AND WE LOOK FORWARD TO SHARING OUR STRATEGIES WITH YOU TODAY. SO TODAY’S MEETING IS BEING WEBCAST. IT’S AVAILABLE ON OUR WEBSITE, stock.walmart.com. AND THE PRESENTATIONS WILL BE POSTED TO THE WEBSITE AS THEY’RE COMPLETED TODAY. TODAY’S PRESENTATION WILL INCLUDE FORWARD LOOKING STATEMENTS WHICH ARE SUBJECT TO FUTURE EVENTS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE STATEMENTS. PLEASE REFERENCE OUR ENTIRE SAFE HARBOR STATEMENT ON OUR WEBSITE AT stock.walmart.com AS WELL AS ANY NONGAAP RECONCILIATIONS. HOPEFULLY, YOU’VE HAD A CHANCE TO REVIEW THE PRESS RELEASE WE’VE ISSUED THIS MORNING. I’LL TAKE A MINUTE TO COVER SOME OF THE KEY MESSAGES. FIRST, WE RECONFIRMED OUR FISCAL YEAR 2018 ADJUSTED E.P.S. OUTLOOK OF 430 TO 440. SECOND, WE EXPECT NEXT YEAR, OUR FISCAL YEAR 2019 E.P.S. TO INCREASE APPROXIMATELY 5% FROM THIS YEAR’S ADJUSTED E.P.S. AND THIRD, THE BOARD OF DIRECTORS AUTHORIZED A NEW $20 BILLION SHARE REPURCHASE AUTHORIZATION WHICH WILL REPLACE THE CURRENT PROGRAM. SO LET’S TURN TO THE AGENDA. SO DOUG MCMILLON, WAL-MART’S PRESIDENT AND C.E.O. WILL KICK THINGS OFF IN A MINUTE TO TALK ABOUT THE GLOBAL STRATEGY. BRETT BIGGS, C.F.O. WILL REVIEW OUR FINANCIAL OUTLOOK. MARC LORE WILL GIVE YOU AN UPDATE ON THE eCOMMERCE PROGRESS AND STRATEGIES. WE’LL TAKE A SHORT BREAK. ONCE WE GET BACK, WE’LL GO THROUGH THE SEGMENT C.E.O. PRESENTATIONS. WE’LL START OFF WITH JOHN FURNER AND SAM’S CLUB, DAVE CHEESEWRIGHT WILL TAKE YOU THROUGH THE INTERNATIONAL STRATEGIES AND GREG FORAN WILL TAKE YOU THROUGH WAL-MART U.S. ABOUT NOON, WE’LL END THE WEBCAST AND FORMAL PRESENTATION AND THEN WE’LL HAVE LUNCH AND ANOTHER HOUR OR SO OF INTERACTION WITH THE MANAGEMENT TEAM BEFORE YOU GUYS HEAD OUT. WE’RE EXCITED TO BE HERE. WE THANK YOU FOR YOUR INTEREST IN WAL-MART. LET’S GET GOING.>>WAL-MART AND GOOGLE, A SURPRISING MARRIAGE IN THE BATTLES THAT SETTLES ONE OF THE LATEST eCOMMERCE TRENDS. VOICE SHOPPING. TALK ABOUT SAME DAY DELIVERY. WAL-MART HAS DISTRIBUTION CENTERS IN STORES IN EVERY COMMUNITY IN AMERICA. GOOD MORNING. WE’RE EXCITED THAT YOU GUYS ARE HERE. THANKS FOR MAKING THE TRIP TO COME DOWN. I HOPE YOU FOUND THE STORE VISITS YESTERDAY PRODUCTIVE. TODAY, WE’RE GOING TO SHARE SOME INFORMATION ABOUT WHY WE’RE EXCITED ABOUT OUR FUTURE. TALK ABOUT OUR PLAN TO WIN AND GIVE YOU SOME UPDATES ON THE PROGRESS THAT WE’RE MAKE. FIRST, I WANT TO STOP AND THANK THE WAL-MART LEADERSHIP TEAM. WE HAVE A STRONG SET OF LEADERS AND NOT ONLY ARE THEY DRIVING CHANGE, THEY’RE JUST MAKING A LOT HAPPEN, PERIOD, AROUND THE WORLD. AND I WANT TO THANK THEM. WANT TO THANK ALL THE ASSOCIATES THAT WE HAVE IN WAL-MART FOR DOING A GREAT JOB. WE’RE RECONFIRMING OUR GUIDANCE NEXT YEAR BECAUSE WE SEE SIGNS OF THE PRODUCTIVITY LOOP STARTING TO TURN GIVING US CONFIDENCE THAT WE’LL DELIVER ABOUT 5% E.P.S. GROWTH NEXT YEAR. WE’RE COMMITTED TO COST REDUCTIONS. AND WE THINK THAT TIMING IS RIGHT TO ACT ON COSTS IN A MORE AGGRESSIVE WAY. WE BELIEVE WE CAN DO SO WITHOUT HARMING THE MOMENTUM WE’RE DRIVING ON THE TOP LINE. WE HAVE STRONG CASH FLOW. AND THAT FINANCIAL STRENGTH GIVES US THE FLEXIBILITY WE NEED TO NAVIGATE THIS PERIOD OF SIGNIFICANT CHANGE. WE BELIEVE WE’RE STRIKING THE RIGHT AND HEALTHY BALANCE BETWEEN THE SHORT TERM AND THE LONG TERM. SO THE HEADLINES FOR TODAY ARE THAT WE HAVE A PLAN THAT PLAYS TO OUR UNIQUE STRENGTHS. IT’S RESULTING IN MOMENTUM. WE’RE ACTING FASTER AS A COMPANY. AND WE’RE BEING DISCIPLINED ABOUT COSTS AND CAPITAL AS WE GO. NO DOUBT, WE ARE IN A TRANSFORMATIONAL PERIOD OF HISTORY. BUSINESS IS TRANSFORMING AND WAL-MART IS TRANSFORMING, TOO. CREATIVITY, DECISIVENESS AND SPEED ARE OUR PRIORITIES. OUR FUTURE LOOKS MORE DIGITAL. WE USE TECHNOLOGY TO SERVE CUSTOMERS MORE EFFECTIVELY AND EFFICIENTLY. WE USE TECHNOLOGY TO EQUIP AND EMPOWER OUR ASSOCIATES. TO PREPARE FOR A LARGER TRANSFORMATION, WE STARTED BY TAKING STEPS TO STRENGTHEN OUR FOUNDATION. WE COMMITTED THAT OUR INVESTMENTS AND OUR PEOPLE AND IN OUR STORES WOULD LEAD TO A STRONGER POSITIONING FOR THE COMPANY AND WE BELIEVE THERE’S EVIDENCE OF THAT HAPPENING. WE’RE SETTING OUR ASSOCIATES UP FOR SUCCESS WITH BETTER INFORMATION, TOOLS AND TRAINING. WE’RE IMPROVING THE STORE EXPERIENCE. WE’RE LOWERING PRICES. WE’RE REDUCING EXCESS INVENTORY. WE’RE IMPROVING OUR eCOMMERCE OFFERING AND GROWTH HAS ACCELERATED. WE’RE SETTING PRIORITIES INCLUDING DIVESTING SOME NONCORE ASSETS AND WE’RE BUILDING ON THIS STRONGER FOUNDATION WITH INNOVATION AND YOU CAN SEE THAT WE’RE DOING IT WITH MORE SPEED. WE’VE BEEN AGGRESSIVE WITH ON-LINE GROCERY EXPANSION IN THE U.S. BUILDING ON OUR INTERNATIONAL EXPERIENCE. WE’VE BEEN EXPERIMENTING WITH DELIVERY IN THE U.S. WE CREATED A DIGITAL PAYMENT PLATFORM IN THE FORM OF WAL-MART PAY AND WE’RE TRYING THINGS LIKE AUTOMATED TOWERS TO SPEED THE IN STORE PICKUP EXPERIENCE. WE’RE DIGITIZING THE CHECKOUT EXPERIENCE WITH SCAN AND GO. WE’RE MAKING ANNCQUISITIONS TO IMPROVE OUR ON-LINE ASSORTMENT AND DIGITIZING EXPERIENCES IN STORE INCLUDING OUR PHARMACY AREA. WE’RE LEARNING HOW TO REWARD CUSTOMERS FOR BEHAVIOR THAT HELPS US LOWER COSTS AND SAVE THEM MONEY. PICKING THINGS UP AT STORE LEVEL FOR A DISCOUNT IS ONE EXAMPLE. WE’RE EXPANDING OUR DELIVERY CAPABILITIES IN CHINA AND OTHER MARKETS. WE’RE ENABLING EASY REORDER ON LINE AND LEARNING TO PARTNER WITH OTHERS IN NEW WAYS. WE’VE ALWAYS ENJOYED CREATING LASTING WIN-WIN RELATIONSHIPS AND THAT HASN’T CHANGED. THE COMMON THREAD IN THIS INNOVATION STORY IS AROUND THE CUSTOMER EXPERIENCE ESPECIALLY CONVENIENCE. WE’VE MADE PROGRESS ON VALUE. OUR PRICES ARE LOWER. ON ASSORTMENT, WE HAVE EVEN MORE CHOICE. AND WE’RE FOCUSED ON SAVING CUSTOMERS TIME AND MAKING IT EASIER TO SHOP WITH US. SO LET’S GO DEEP AND TALK ABOUT OUR STRATEGY. THE STRONGEST STRATEGIES ARE BUILT ON UNIQUE STRENGTHS AND ASSETS AND WE HAVE MANY. BUT SOME OF YOU MAY BE ASKING HOW RELEVANT ARE THEY TO THE FUTURE? WE THINK THAT DEPENDS ON HOW CUSTOMERS WILL WANT TO SHOP AND BE SERVED IN THE FUTURE. SO LET’S START WITH THAT. WE THINK THE FUTURE IS A COMBINATION OF DIGITAL AND PHYSICAL RETAIL. CUSTOMERS ARE SHOPPING IN STORE, ON LINE WITH APPS AND MOBILE. A LITTLE WITH THEIR VOICE AND IN TIME WITH A.R. AND V.R. AND WHATEVER COMES AFTER THAT AND THEY’LL DO SO SEAMLESSLY. THERE ARE TIMES WHEN IT’S EASIER TO SIT ON THE COUCH AND ORDER AN ITEM FOR DELIVERY TO YOUR HOUSE. THERE ARE TIMES WHEN IT’S MOST HELPFUL TO ORDER THE WEEKLY GROCERY TRIP ON OUR APP AND PICK IT UP AFTER SCHOOL WITHOUT HAVING TO GET THE KIDS OUT OF THE MINIVAN. AND THERE ARE TIMES WHEN IT’S HELPFUL TO BE IN A STORE AND BE REMINDED OF WHAT WE NEED OR BE PLEASANTLY SURPRISED BY SOMETHING WE DIDN’T EXPECT. THE SAME PERSON WILL SHOP IN DIFFERENT WAYS WITHOUT THINKING ABOUT CHANNELS. IT’S ALL JUST SHOPPING AT WAL-MART. WHAT MAKES US THINK THIS IS HOW PEOPLE WILL SHOP, WE SHARED OUR SWEET SPOT WITH YOU A COUPLE OF YEARS AGO. AND WHAT WE SHARED THEN IS STILL TRUE NOW. U.S. CUSTOMERS THAT SHOP US IN STORE AND ON LINE SPEND NEARLY TWICE AS MUCH, ALMOST 2X, AS CUSTOMERS THAT ONLY SHOP WITH US IN STORES. AND WHEN CUSTOMERS THAT ONLY SHOP IN OUR STORES BECOME WAL-MART.COM CUSTOMERS, THEY SPEND MORE IN STORES. THEIR LOYALTY TO WAL-MART STRENGTHENS OVERALL. AND FOR CUSTOMERS THAT SHOP IN STORE ONLY AND BEGIN TO USE ON-LINE GROCERY, THEY SPEND MORE WITH US IN TOTAL AFTER BECOMING AN ON-LINE GROCERY CUSTOMER. IT’S A SWEET SPOT FOR US BUT ALSO A SWEET SPOT FOR OUR CUSTOMERS. PLEASE NOTE A LOT OF WHAT WE’RE DISCUSSING IS ALSO TRUE OUTSIDE OF THE U.S. THE U.S. RETAIL MARKET ACCORDING TO FORRESTER’S IS FORECAST TO BE AROUND $3.5 TRILLION THIS YEAR FOR THE CATEGORIES THAT WE SELL WHICH WELCOME 3.8% GROWTH. THEIR ESTIMATES ARE THAT BRICK AND MORTAR SALES WILL MAKE UP $3.1 TRILLION, A LITTLE MORE THAN 2% GROWTH. AND eCOMMERCE AT APPROXIMATELY $450 BILLION WOULD GROW 14%. LET’S CLICK DOWN ANOTHER LEVEL. LOOK AT HOW BIG GROCERY IS IN EACH CASE. THIS IS FORRESTER’S DEFINITION OF GROCERY AND DOESN’T INCLUDE THE CONSUMABLES CATEGORIES LIKE PAPER GOODS THAT WE NORMALLY GROUP IN OUR FOOD AND CONSUMABLES NUMBERS THAT WE SHARE WITH YOU IN OUR RELEASES BUT THE POINT IS THE SAME. GROCERY IS UNDERDEVELOPED IN eCOMMERCE RELATIVE TO STORES. WHY? WELL, TO GROW A NATIONAL eCOMMERCE FOOD BUSINESS, IT TAKES A FEW INGREDIENTS. YOU HAVE TO BE ABLE TO KEEP PERISHABLE PRODUCTS FRESH, AVAILABLE AND AT THE RIGHT PRICE. TO DO THAT, YOU NEED A PERISHABLE SUPPLY CHAIN THAT SUPPORTS STORES THAT ARE NEAR CUSTOMERS AND GREAT STORE ASSOCIATES TO RUN THEM. TO DELIVER VALUE ACROSS A WIDE BASKET OF GOODS, IT’S HELPFUL TO SELL A LOT OF GENERAL MERCHANDISE AND APPAREL TO HELP WITH THE MARGIN MIX AND IT HELPS TO HAVE A LOT OF SCALE. BECAUSE VOLUME HELPS REDUCE MARKDOWNS AND THROWAWAYS THAT HELPS US SELL AT A LOWER PRICE. LOOKING AHEAD, THE COMBINATION OF STORE VOLUME, PICKUP VOLUME AND DELIVERY IS KEY. YOU NEED ALL THREE TO ACHIEVE MAX SCALE. LET ME SHOW YOU THE SAME THING ANOTHER WAY. LET’S TAKE A LOOK AT eCOMMERCE PENETRATION BY CATEGORY IN THE U.S. THIS SHOWS HOW eCOMMERCE HAS GROWN ITS SHARE BY CATEGORY OVER THE LAST DECADE. NOW, WE CARE ABOUT ALL OF THESE CATEGORIES. BUT LET ME DRAW YOUR ATTENTION TO THE BOTTOM OF THIS CHART WHERE FRESH FOOD, DRY GROCERY AND CONSUMABLES LIKE HEALTH AND BEAUTY AIDS, PAPER GOODS AND HOUSEHOLD CLEANING ARE. AGAIN, LET’S START WITH THE CUSTOMER VIEW OF ALL OF THIS. THEY PURCHASE THESE ITEMS IN BASKETS. NOT ONE AT A TIME IN EACH BECAUSE IT SAVES THEM TIME. CUSTOMERS BUY THESE ITEMS FREQUENTLY, AND THEY CARE ABOUT PRICES. FROM OUR POINT OF VIEW, WE CAN MOVE THESE CATEGORIES MORE EFFICIENTLY IN BULK. THINK TRUCKLOADS, PALLETS AND CASES. THE SAME ASSETS THAT I TALKED ABOUT EARLIER, STORES, D.C.s, PEOPLE IN SCALE HELP US SERVE CUSTOMERS WITH FRESHER PRODUCT AND LOWER PRICES. WE CAN SERVE THEM WITH STORES OR PICKUP BECAUSE WE CAN PICK FROM STORES LIKE THEIR D.C. AND LEARNING HOW TO DO IT MORE EFFICIENTLY. WE’VE DONE IT IN THE U.K. FOR A LONG TIME AND WE DO IT NOT ONLY IN THE U.S., BUT CHINA, CANADA AND SEVERAL LATIN AMERICAN MARKETS. AS WE LEARN HOW TO PICK EFFICIENTLY FROM STORES, WE CAN DELIVER TO FROM STORES TO HOMES EITHER FROM OUR OWN ASSOCIATES OR THIRD PARTY, UBER OR DELIV HERE IN THE U.S. THE GIG ECONOMY WILL PLAY A ROLE IN DELIVERY. MOST LIKELY, IT’S SOME COMBINATION OF PLATFORM WITH CONTRACTORS THAT ENABLE DELIVERY FOR US IN THE FUTURE. SO YOU CAN SEE THE SEQUENCING IT STARTS WITH GREAT STORES SUPPORTED BY AN EFFICIENT SUPPLY CHAIN AND WE LAYER ON AN eCOMMERCE FOOD BUSINESS. WE LEARN TO PICK IN STORES ENABLING PICKUP THAT ENABLES DELIVERY. WE CAN DELIVER FOR A FEE THAT COVERS OUR COSTS THAT ALMOST CERTAINLY FALLS OVER TIME. WE USE THE NEARLY 4,000 SUPERCENTERS AND DISCOUNT STORES, OVER 700 NEIGHBORHOOD MARKETS AND 660 SAM’S CLUBS IN THE U.S. THAT ARE WITHIN 10 MILES OF 90% OF THE POPULATION TO DELIVER TO THE HOME. FOR THOSE THAT WANT IT, ALL THE WAY INTO THE REFRIGERATOR, CABINETS OR PANTRY. THE NEWS YOU MAY HAVE HEARD RECENTLY ABOUT US TESTING THE ABILITY TO DELIVER ALL THE WAY INTO THE HOME IS WITH A CROWD SOURCE PLATFORM THROUGH DELIV IN PARTNERSHIP WITH AUGUST HOME. IN THE FUTURE, WE THINK WE WILL BE ABLE TO KEEP SOME OF OUR CUSTOMERS HOMES IN STOCK THE WAY THAT WE KEEP STORES IN STOCK TODAY. CUSTOMERS CAN CHOOSE ANY OF THESE SERVICE LEVELS AND PAY FOR THE SPEED THEY DESIRE. WE KNOW CUSTOMERS WANT OPTIONS ALL THE TIME. THEY FLEX IN THE MOMENT. AND WE DON’T HAVE TO PERFECTLY PREDICT WHAT THE PERCENTAGES WILL BE IN THE FUTURE. INSTEAD, WE HAVE TO BUILD THE CAPABILITIES TO PROVIDE THE SERVICE THEY WANT MORE EFFICIENTLY THAN OTHERS. WE’RE SEEING DELIVERY VIA STORE AND DARK STORE PICK EXPLODE IN CHINA WHERE THE COSTS ARE LOWER. AND I BELIEVE THAT GROCERY PICKUP AND DELIVERY IN THE U.S. WILL DRIVE A LOT OF GROWTH HERE BECAUSE THE EXPERIENCE IS IMPROVING, THE COSTS TO DO IT WILL DECLINE OVER TIME AND SOME PEOPLE FLAT OUT LOVE THE CONVENIENCE. AT THE SAME TIME, I BELIEVE THE VAST MAJORITY OF GROCERY VOLUME WILL BE DONE BY CUSTOMERS SHOPPING IN STORES FOR A LONG TIME TO COME. SO THE VOLUME FROM THE STORES HELPS US SUPPORT AND GROW THE REST. AS DELIVERY VOLUMES GROW AND WE ACHIEVE THE DENSITY WHICH WILL HAPPEN IN URBAN AREAS FIRST, DARK STORES AND MORE AUTOMATED PERFORMANCE CENTERS WILL BE MORE EFFICIENT. THAT’S WHAT WE’RE DOING IN THE U.K. AND WE’VE BEGUN TO DO IN CHINA. AS IT RELATES TO OUR eCOMMERCE STRATEGY, INCLUDING eCOMMERCE FOR FOOD AS WE SHARED WITH YOU LAST YEAR IN THIS MEETING, WE’RE OUT TO BUILD AN eCOMMERCE pBUSI BUSINESS. THAT’S WHY WE WERE ATTRACTED TO JET’S SMART CART. SO WE’LL WIN THE BOTTOM OF THE CATEGORY CHART. WE SHOWED YOU EARLIER. SELLING THOSE MOST FREQUENTLY PURCHASED ITEMS GIVES THE OPPORTUNITY TO SELL ITEMS HIGHER ON THE CHART LIKE APPAREL, TOYS AND TELEVISION. SO eCOMMERCE STRATEGY HAS FOOD AND CONSUMABLES TO FULFILLMENT CENTERS FOR THOSE CASES WHERE THE ECONOMICS AND SHIPPING TIMING DICTATE WE SHOULD SHIP IT STRAIGHT TO THE HOME. NOW, IF YOU THINK I’M JUST TRYING TO MAKE THE CASE FOR PHYSICAL RETAIL, I’M NOT. I’M EXPLAINING HOW WE BELIEVE CUSTOMERS WILL SHOP AND I’M SAYING THAT OUR ASSETS AND STRENGTHS ARE NECESSARY. IN FACT, THEY’RE FOUNDATIONAL. THE NEWER BUSINESS WILL MORE GROWTH WILL COME FROM AND WHERE THE CUSTOMER IS GOING ARE SUPPORTED BY THEM. WE’RE WELL POSITIONED TO WIN THE FUTURE OF RETAIL AND I WOULDN’T TRADE PLACES WITH ANYONE. NOW, I’D LIKE TO QUICKLY TAKE YOU THROUGH OUR STRATEGIC OBJECTIVES. WE USE THESE INSIDE THE COMPANY TO FOCUS OUR WORK, TO BUILD MORE DETAILED PLANS AND ASSIGN TARGETS. THE WAY WE THINK OF IT WE’RE A PURPOSE DRIVEN COMPANY, WE HAVE A SET OF FOUR CORE VALUES AND A CULTURE AND WE DO ALL THOSE THINGS TO CREATE SHARED VALUE. IN THE MIDDLE OF ALL OF THAT, WE’VE GOT FOUR STRATEGIC OBJECTIVES THAT WE USE TO FOCUS THE TEAM. THE FIRST ONE IS TO MAKE EVERY DAY EASIER FOR BUSY FAMILIES. WE WANT TO CHANGE HOW WE WORK, CHANGING FROM THE INSIDE. WE WANT TO DELIVER RESULTS AND OPERATE WITH DISCIPLINE AND WE WANT TO BECOME THE MOST TRUSTED RETAILER. I’LL CLICK DOWN ON EACH ONE OF THESE NOW. LET’S TALK ABOUT MAKING EVERY DAY EASIER FOR BUSY FAMILIES. WHY BUSY FAMILIES? IT’S A BIG PART OF THE MARKET. WHAT WE DO TO EFFECTIVELY SERVE THEM HELPS US SERVE EVERYBODY ELSE. SO THEY’RE THE CENTER OF THE BULL’S EYE. WHAT’S HAPPENING WITH THEM? WELL, YOU KNOW THEY’RE MORE CONNECTED. THEY’VE EMBRACED MOBILE IN A BIG WAY. IN FACT, GLOBAL LY AROUND THE WORLD, MOBILE COMMERCE HAS GROWN BY 80% IN TWO YEARS. WAY I THINK OF IT IS TECHNOLOGY IS BASICALLY BEING HIRED BY THE CUSTOMER TO DO ANYTHING THAT THEY DON’T WANT TO DO. SO IMAGINE ANY FRICTION IN THE SHOPPING EXPERIENCE, TECHNOLOGY IS GOING TO BE AIMED AT TAKING THAT OUT OF THE SYSTEM. TECHNOLOGY WILL HELP SERVE UP TO CUSTOMERS OF THINGS THEY MIGHT WANT TO DO. BECOMING MORE OF A DIGITAL NOT AND LEARNING HOW TO WORK WITH SPEED IS IMPORTANT TO US THROUGHOUT. WHEN WE THINK ABOUT SERVING THIS SET OF CUSTOMERS, WE BREAK IT INTO THREE PIECES. THE FIRST ONE IS PRICE AND VALUE. YOU KNOW WE’VE ALWAYS BEEN KNOWN FOR PRICE LEADERSHIP. OUR BUSINESS IS FOUNDED ON VALUE. THAT WILL BE THE CASE. IT’S IN OUR D.N.A. AND THE PURPOSE OF THE COMPANY. WE’LL STAY COMMITTED TO THAT. SECONDLY, WE WANT TO BE GREAT MERCHANTS. WE WANT TO ENABLE OUR BUYERS WITH IMPROVED DATA AND ANALYTICS. BUT WE ALSO WANT THEM TO BE INSTINCTIVE, INTUITIVE MERCHANTS. WE CAN DO THAT WITH NOT ONLY THE MERCHANTS THAT BUY FOR ALL OF OUR STORES BUT ALSO ALL THE WAY DOWN TO STORE LEVEL. FEW DAYS AGO, I WAS IN A PITTSBURGH STORE AND TALKING TO A DEPARTMENT MANAGER NAMED TARA. TARA WAS TELLING ME ABOUT HER DEPARTMENT AND WHICH ITEMS SHE HAD ORDERED MORE OF SO SHE COULD FEATURE AND DRIVE SALES BECAUSE SHE KNEW SHE COULD SELL IN OUR STORE. ALGORHYTHMS AREN’T PERFECT AND ARE NOT GOING TO BE PERFECT. HUMANS CAN MAKE DECISIONS AND DRIVE SALES WHETHER IT’S STORE LEVEL OR HERE. AND WE WANT TO LEVERAGE THAT BECAUSE WE’VE GOT A LOT OF EXPERIENCE IN THAT AREA. IN THE CATEGORY OF MERCHANDISING AND ASSORTMENT, WE’RE PLEASED WITH OUR PROGRESS ON FRESH FOOD QUALITY. IT’S EXCITING TO SEE PRIVATE BRANDS STARTING TO GROW. MEMBER’S MARK BRAND AT SAM’S CLUB IS AN $11 BILLION BRAND. ON THE COMMERCE SIDE, WE’RE ADDING ASSORTMENT LIKE CRAZY SO WE’RE THERE FOR CHOICE. WHEN CUSTOMERS COME TO US THROUGH THE APP OR SOME OTHER WAY, THEY CAN FIND WHAT THEY’RE LOOKING FOR. THAT’S KIND OF THE FOCUS AS IT RELATES TO BEING GREAT AMERICAN — MERCHANTS. THE WAY YOU FEEL WHEN YOU LEAVE A STORE WILL INFLUENCE HOW QUICKLY YOU COME BACK. BUT IT’S ALSO ABOUT USING TECHNOLOGY TO IMPROVE THE EXPERIENCE AND THE PICKUP TOWERS YOU SAW IN THE STORE VISITS ARE ONE EXAMPLE WHERE WE CAN GET AN ITEM TO A CUSTOMER IN ABOUT 40 SECONDS INSTEAD OF THE MINUTES THAT IT USED TO TAKE US. LET’S GO TO THE NEXT PILLAR WHICH IS CHANGING HOW WE WORK. AND I THINK THIS IS A REALLY IMPORTANT PART OF THE FUTURE OF WALMART. AS I MENTIONED A MINUTE AGO, FOR US TO BE EFFECTIVE ON THE OUTSIDE, WE HAVE TO CHANGE FROM THE INSIDE. AS IT RELATES TO INVESTING IN AND EMPOWERING OUR ASSOCIATES, THAT’S HAPPENING NOT ONLY AT THE STORE LEVEL BUT BEYOND THE STORE LEVEL AS WE HELP PEOPLE DEVELOP AND TEACH THEM AND TRAIN THEM. AND WE’RE GOING TO CONTINUE TO MAKE INVESTMENTS NOT ONLY IN ACADEMIES BUT ALSO IN TECHNOLOGY AND TRAINING SO THAT OUR ASSOCIATES ARE REALLY APPROXIMATELY PREPARED TO DO A GREAT JOB. AS IT RELATES TO CREATING A HIGH PERFORMANCE CULTURE, I MENTIONED EARLIER WE HAVE FOUR CORE VALUES. ONE, FOR EXAMPLE, IS RESPECT FOR THE INDIVIDUAL. ANOTHER ONE IS STRIVING FOR EXCELLENCE. ONE OF THE THINGS THAT BUILT THIS COMPANY WAS HIGH EXPECTATIONS. AND SOMETIMES, WE GET SO FOCUSED ON RESPECTING AND APPRECIATING PEOPLE THAT WE LET THE BAR BE LOWER THAN IT SHOULD HAVE BEEN. SO THERE’S JUST A PERFORMANCE ASPECT OF OUR CULTURE THAT WE’RE DIALLING UP. AND ALL FOUR OF THOSE CORE VALUES MATTER AND WE CAN DO THAT WHILE STILL BEING WHO WE ARE AND BEING RESPECTFUL. AS IT RELATES TO STRENGTHENING DIVERSITY AND INCLUSION, WE NEED CREATIVITY. WE WANT INNOVATION. WE KNOW THAT DIVERSE TEAMS OUTPERFORM THOSE THAT AREN’T. WE HAVE HAD AND STILL HAVE A DELIBERATE PROGRAM AROUND BECOMING MORE INCLUSIVE. AND WE’RE LEARNING THINGS ABOUT UNCONSCIOUS BIAS AND BIAS INTERRUPTORS IN OUR HIRING PRACTICES AND CONTINUING TO MATURE DOWN THIS PATH OF BECOMING AN EVEN MORE INCLUSIVE COMPANY AND THAT’S REALLY IMPORTANT TO US. AS IT RELATES TO BEING A DIGITAL ENTERPRISE, THE APPS ARE SHOWING UP ON TABLETS AT STORE LEVEL. YOU PROBABLY SAW SOME OF THOSE. WE HAVE SOME ROBOTS RUNNING UP AND DOWN THE AISLES IN TESTS NOW DOING THE SECTION WORK FOR US. CHECKING TO SEE WHETHER THE FACINGS ARE RIGHT. LOOKING TO SEE IF WE’RE IN STOCK. EVENTUALLY HELPING US WITH PRICE CHANGES. THAT’S HAPPENING IN THIS COUNTRY. IT WAS IN CHILE A FEW WEEKS AGO AND IT WAS HAPPENING THERE. WECHAT IS BEING USED BY OUR ASSOCIATES IN CHINA TO SHARE IDEAS ON HOW TO GROW SALES AND SAM’S CLUB IS USING WORKPLACE BY Facebook TO DO THE SAME. IT CUTS OUT THE MIDDLE MAN. THINGS DON’T FLOW UP TO THE HOME OFFICE. IT’S MORE OF A PLATFORM THAT ENABLES ONE CLUB TO TALK TO ANOTHER. SAY HEY, THIS WORKS. TRY THIS. IT’S A SOURCE OF PRIDE. SO WE CAN USE ALL FORMS OF TECHNOLOGY TO INCREASE THE SPEED AND EFFECTIVENESS OF THE COMPANY. ON TO THE NEXT PILLAR. AS WE DO THESE THINGS, WE HAVE TO DELIVER RESULTS AND OPERATE WITH DISCIPLINE. STRONG, EFFICIENT GROWTH MEANS TO US WE’RE GOING TO RELY MORE ON COMP STORE SALES AND eCOMMERCE SALES THAN NEW STORE GROWTH. BRETT WILL TALK WITH YOU MORE ABOUT THAT. MANAGING COSTS AS WE GO. LEARNING HOW TO SAY NO. STOPPING SOME THINGS AS WE WANT TO START SOME OTHER THINGS. WE’RE COMMITTED TO LEVERAGING THE COMPANY AS WE GROW. WE’VE GOT TO DRIVE TOP LINE GROWTH BUT WE CAN DO MORE THAN ONE THING AT A TIME. AND AS IT RELATES TO STRATEGIC CAPITAL ALLOCATION AS THE NEW STORE NUMBER COMES DOWN, WE’VE GOT A GROUP OF NEW STORES THAT WE BUILT YEARS AGO THAT WE’LL BE INVESTING IN REMODELS NEXT YEAR AND OVER THE NEXT FEW YEARS. THAT COMBINED WITH eCOMMERCE GROWTH AND SOME INVESTMENTS IN THE SUPPLY CHAIN ARE WHERE OUR PRIORITIES ARE AND WE’RE TRYING TO BE VERY CHOICEFUL ABOUT THE INVESTMENTS THAT WE MAKE BY GEOGRAPHY AND THE OTHER DIMENSIONS OF OUR BUSINESS. AS IT RELATES TO BUILDING TRUST, WE’RE ALL LIVING IN AN INCREASINGLY TRANSPARENT WORLD. THE THINGS WE THINK ABOUT HERE INCLUDE GLOBAL COMPLIANCE AND ETHICS AND WE’RE ALL REALLY PROUD OF THE PROGRESS WE’VE MADE OVER THE LAST FEW YEARS WITH TALENT, PROCESS AND SYSTEMS AS IT RELATES TO COMPLIANCE AND ETHICS. WE HAVE A STRONGER PROGRAM, INCREASED VISIBILITY AND ABILITY TO DETECT, REMEDIATE ISSUES AS THEY COME UP. WE’RE COMMITTED TO THAT. WE’RE GOING TO CONTINUE THAT GOOD WORK. AS IT RELATES TO SOCIAL ENVIRONMENTAL ISSUES, WE BELIEVE IN SHARED VALUE. WE BELIEVE THAT ALL THE STAKEHOLDERS THAT WALMART TOUCHES CAN BENEFIT AS A RESULT OF THE SYSTEM THAT IS WALMART. AS IT RELATES TO COMMUNITIES, WE WANT TO MAKE A DIFFERENCE ON THE GROUND. THAT REALLY BECOMES TANGIBLE WHEN WE HAVE THINGS LIKE HURRICANES AND EARTHQUAKES AND THIS WEEK FIRES AND YOU CAN SEE THE HUMANITY OF WALMART STEPPING UP AND MAKING A DIFFERENCE. BUT IT HAPPENS EVERY DAY, NOT JUST WHEN THERE IS A CRISIS. AND WE WANT TO TELL OUR STORY MORE EFFECTIVELY. WE FREQUENTLY WISH THAT THE WORLD WILL LOOK AT THE COMPANY AS IT IS TODAY. THE GOOD AND THE BAD. WE’RE NOT PERFECT. BUT THERE ARE A LOT OF GOOD THINGS GOING ON AT WALMART AND WALMART DOES A LOT OF GOOD THINGS FOR THE VARIOUS STAKEHOLDERS THAT WE SERVE. SO LET’S GO A LITTLE BIT DEEPER ON SUSTAINABILITY, IF WE COULD. WE SET GOALS A LITTLE OVER 10 YEARS AGO, YOU MAY REMEMBER TO BE SUPPLIED BY RENEWABLE ENERGY, TO SELL MORE SUSTAINABLE PRODUCTS AND SUSTAINABLE PACKAGING AND ELIMINATE WASTE AND WE’VE MADE SOME PROGRESS. WE RECENTLY ANNOUNCED WE HAD ACHIEVED OUR $20 MILLION METRIC GREENHOUSE GOAL THAT WE HAD SET A FEW YEARS AGO. DURING THAT PERIOD OF TIME, WE ELIMINATED 35 MILLION METRIC TONS OF GREEN HOUSE GAS OUT OF OUR SYSTEM. WE HAD SET A GOAL OF SOURCING $20 BILLION OF GOODS FROM WOMEN-OWNED BUSINESSES. WE RECENTLY ANNOUNCED THAT WE HAD ACHIEVED THAT GOAL. SO AS THINGS LIKE THAT ARE HAPPENING, WE’VE SET SOME NEW ONES. AS IT RELATES TO RENEWABLE ENERGY, WE WANT TO GET TO 50% BY 2025, WE’RE AT 26% NOW. AS IT RELATES TO SUSTAINABLE PRODUCTS, THE FORTUNE COVER THAT WAS ON THE PREVIOUS SLIDE WAS KIND OF HIGHLIGHTING THE WORK THAT WE’VE DONE ON HIGH PRIORITY CHEMICALS. BASICALLY, THE BUYERS ARE WORKING TO MAKE THINGS MORE SUSTAINABLE. ONE OF MY FAVORITES IS THIS PRISTINE GRAPE AND ON THE BACK OF THE PACKAGE, IT TALKS ABOUT HOW THE SUPPLIER IS USING 100% DRIP IRRIGATION SYSTEMS ON THEIR FARMS AND PACK HOUSES AND THEY’RE SUPPLIED BY 80% RENEWABLE ENERGY. ALL OF THEIR FARMS ARE CERTIFIED FOR SUSTAINABLE AGRICULTURAL PRACTICES AND THE GRAPES TASTE GOOD. AND THEY’RE A GOOD VALUE AT $2.28. SO THIS RELATES TO TELLING OUR STORY. IT ALSO RELATES TO SUSTAIN SF ABILITY AS THE BUYERS ARE JUST MAKING PROGRESS ACROSS THE BOARD. I THINK WE CAN DO A BETTER JOB OF COMMUNICATING AND I THINK ON PACK ON ONE GOOD WAY TO DO THAT. AS IT RELATES TO ELIMINATING WASTE, WE WANT TO GET TO FOUR OF OUR LARGER COUNTRYS TO GET TO ZERO WASTE IN 2025. AS IT RELATES TO CARBON, WE RECENTLY SET A GOAL THAT BY 2030, WITH OUR SUPPLIERS, WE WOULD TAKE OUT ONE GIGATON OF CARBON FROM OUR SYSTEM. SO PROGRESS IS CONTINUING HERE. LET’S GO ON TO THE NEXT ONE. AS IT RELATES TO COMMUNITIES, THERE’S A LOT OF GOOD WORK GOING ON. THIS COMMITMENT TO SOURCE GOODS MADE IN THE U.S.A., WE’RE ON TRACK TO ACHIEVE THE $250 BILLION NUMBER. WE SET THAT GOAL IN 2013. JUST LAST WEEK, GREG FORAN WAS IN SOUTH CAROLINA HELPING TO OPEN A TIRE FACTORY THAT’S GOING TO CREATE 1700 JOBS. THAT’S FUN TO DO. AS IT RELATES TO VETERANS, WE SET A GOAL OF HIRING 250,000 OF THEM. WE’RE AT 179,000 NOW AND 24,000 OF THEM HAVE BEEN PROMOTED ALREADY. SO THAT PROGRAM IS IN GOOD SHAPE. WE’RE STARTING TO REALLY SCALE THE ACADEMIES. AND AS IT RELATES TO DISASTER RELIEF, THE COMPANY WITH ALL THE THINGS THAT HAVE BEEN GOING ON RECENTLY HAS CONTRIBUTED $35 MILLION. CUSTOMERS STEPPED UP, TOO, AND CONTRIBUTED MORE THAN 35. WE’RE OVER $70 MILLION TOGETHER THAT WE’VE CONTRIBUTED. IT’S, AGAIN, AN EXAMPLE OF WALMART PEOPLE STEPPING UP AND MAKING A DIFFERENCE. AND THE STORIES I’VE HEARD OVER THE LAST FEW WEEKS OF WHAT OUR PEOPLE HAVE DONE IN PUERTO RICO AND FLORIDA AND TEXAS ARE JUST AMAZING STORIES. AND IT KIND OF REMINDS ME OF THE FACT THAT OUR PEOPLE HAVE MADE THE DIFFERENCE IN THIS COMPANY AND EACH IN A WORLD THAT’S INCREASINGLY INFLUENCED BY TECHNOLOGY, I THINK THAT’S WHAT OUR FUTURE LOOKS LIKE. WE’RE STILL PEOPLE LED. WE’RE JUST EVEN MORE TECH EMPOWERED. SO IT WILL BE OUR PEOPLE THAT WILL LEAD US INTO THE FUTURE. SO THE KEY TAKEAWAYS I WANTED TO SHARE WITH YOU, WE HAVE A PLAN AND IT REALLY DOES RELY ON THE UNIQUE ASSETS AND STRENGTHS THAT WE HAVE. WE’VE GOT SOME MOMENTUM. I’M PROUD OF THE FACT THAT WE’RE STARTING TO MOVE FASTER. I THINK WE PROBABLY NEED TO KEEP GOING AS IT RELATES TO GETTING FASTER. AND WE’LL BE DISCIPLINED WITH COSTS AND CAPITAL AS WE GO. WE LOOK FORWARD TO SHARING MORE INFORMATION WITH YOU AS WE GO THROUGH THE MORNING. THANK YOU.>>WALMART’S U.S. COMP SALES IS IN LINE WITH ESTIMATES AND THE 12TH STRAIGHT QUARTER OF U.S. COMP SALES GROWTH. TRAFFIC ALSO HIGHER FOR THE 11TH STRAIGHT QUARTER. NINE OF THE 11 OF WALMART COUNTRIES WHERE IT OPERATES SAW THEIR COMP SALES GROW. THAT’S WHAT YOU WANT TO SEE IN ORDER TO COMPETE WITH THE OTHER ON-LINE GIANTS SUCH AS AMAZON. YOU WANT TO SEE eCOMMERCE PICKING UP ON LINE. THAT’S WHAT’S IMPORTANT.>>THIS IS A COMPANY THAT IS GENERATING TRAFFIC NOT ONLY IN BRICKS AND MORTAR BUT ON eCOMMERCE. AND YOU JUST DON’T SEE THAT ANYWHERE IN RETAIL.>>THEIR IMPROVEMENT AND THE WAY THE STORES LOOK, THE ASSORTMENTS IN THE FOOD AREA, THE QUALITY, THE SERVICE, THE FRIENDLINESS, I’LL TELL YOU SOMETHING, DRAMATICALLY DIFFERENT THAN A YEAR AGO AND THAT WAS EVEN BETTER THAN THE YEAR BEFORE THAT.>>HAVE A RETAILER THAT’S TAKING SHARE IN PHYSICAL RETAIL AND GROWING eCOMMERCE. TO ME, THAT’S A WINNING COMBINATION.>>GOOD MORNING, EVERYBODY! HOW ARE YOU? GOOD TO EVERYBODY HERE IN NORTHWEST ARKANSAS AND FOR THOSE OF YOU ON THE WEBCAST, WELCOME AS WELL. I WANT TO THANK YOU FOR YOUR INTEREST IN WALMART. IT MEANS A LOT THAT YOU COME EVERY YEAR AS WE ENJOY TALKING ABOUT OUR COMPANY AND WE LOOK THIS MORNING TO SHARING MORE ABOUT WHAT WE’RE DOING HERE. THIS IS MY 17TH YEAR WITH THE COMPANY. AND I’M SO EXCITED ABOUT WHAT WE’RE DOING AND OUR MOMENTUM. WE HAVE GREAT OPPORTUNITIES IN FRONT OF US. AND WE HAVE THE WILL AND WE HAVE THE RESOURCES TO WIN NOW AND IN THE LONG TERM. AS DOUG TALKED ABOUT, MOST INDUSTRIES ARE UNDERGOING MORE CHANGES THAN WE’VE SEEN IN A LOT OF OUR TIME AND CERTAINLY IN RETAIL. BUT I THINK THIS GIVES US GREAT OPPORTUNITY. AND I’M AS OPTIMISTIC AS I’VE EVER BEEN ABOUT THE FUTURE OF WALMART. AND PART OF THE REASON I’M EXCITED ABOUT OUR FUTURE IS THAT WE CAN WIN. WITH BOTH CUSTOMERS AND SHAREHOLDERS. THOSE THINGS SHOULD GO HAND IN HAND, OF COURSE. AND YOU JUST HEARD DOUG TALK A LOT ABOUT HOW WE’RE GOING TO WIN WITH CUSTOMERS. AS WE WIN WITH CUSTOMERS, WE’RE ALSO FOCUSED ON WINNING WITH YOU. WITH OUR INVESTORS AND WITH OUR SHAREHOLDERS AND THAT’S WHERE I’M GOING TO SPEND MOST OF MY TIME THIS MORNING. WE HAVE SO MANY UNIQUE ASSETS AND RESOURCES THAT HAS POSITIONED US INCREDIBLY WELL NOW AND IN THE LONG TERM. AS YOU HEAR EACH OF US SPEAK TODAY, WE HOPE YOU’LL UNDERSTAND WHY WE BELIEVE WE CAN DO BOTH. MANY THINGS I’LL COVER IN THE NEXT FEW MINUTES YOU WOULD HAVE SEEN IN OUR RELEASE THIS MORNING. I’LL GIVE YOU A LITTLE MORE COLOR, AS YOU WOULD EXPECT. AND I’LL START WITH AN UPDATE ON OUR EXPECTATIONS FOR THE CURRENT YEAR FOR E.P.S., SALES GROWTH AND CAP X AND THEN I’LL PRESENT AN UPDATE ON GUIDANE FOR FISCAL YEAR 2019. ONE AREA WE’LL ALWAYS HIGHLIGHT IS OUR FINANCIAL STRENGTHS. WE ARE ROCK SOLID FINANCIALLY AND THAT JUST GIVES US OPTIONS THAT MANY OTHERS DON’T HAVE. NOW, FRAME THE DISCUSSION TODAY AROUND OUR FINANCIAL FRAMEWORK WHICH WE LAID OUT WITH YOU A YEAR AGO. LET’S GET STARTED. SO OUR FIRST HALF PERFORMANCE HAS BEEN SOLID. GOOD TOP LINE GROWTH AS WELL AS SLIGHT INCREASE IN OPERATING ECONOMY FOR WALMART U.S. AND INTERNATIONAL ON A CONSTANT CURRENCY BASIS WHICH ARE POSITIVE SIGNS THAT THE PRODUCTIVITY LOOP IS WORKING. NOW, WHILE WE HAVE DELEVERED EXPENSES A BIT OVERALL AS A COMPANY, WE HAVE LEVERAGE IN THE U.S. STORES AND IN INTERNATIONAL. WE CONTINUE TO MAKE SOME INVESTMENTS PARTICULARLY IN TECHNOLOGY WHICH HAS CREATED SOME EXPENSE HEAD WIND IN THE FIRST HALF. FROM A REVENUE PERSPECTIVE, NET SALES AND CURRENCY INCREASED 2.7% IN THE FIRST HALF OF THE YEAR. THIS WAS IMPACTED BY THE SALE OF YIHAODIAN LAST YEAR AND SUBURBIA THIS YEAR. IN THE FIRST HALF, WE CONTINUED WITH REALLY SOLID COMP PERFORMANCE IN WALMART U.S. AS WELL AS SOME OF THE KEY MARKETS IN INTERNATIONAL SUCH AS MEXICO AND CANADA. U.S. eCOMMERCE DELIVERED STRONG SALES GROWTH, AS YOU KNOW, OF JUST OVER 60%. NOW, AS WE START TO OVERLAP THE JET ACQUISITION IN THE THIRD QUARTER, WE WILL SEE THE GROWTH RATE DECREASE SOME. WE STILL EXPECT REALLY HEALTHY GROWTH FOR THE FULL YEAR. OUR CASH FLOW REMAINS VERY STRONG WITH 11.4 BILLION DOLLARS IN THE FIRST HALF OF THE YEAR AND WE CONTINUE TO MAKE GOOD STRIDES WITH WORKING CAPITAL MANAGEMENT. WE ALSO CONTINUE TO PROVIDE VERY STRONG CASH RETURNS TO OUR SHAREHOLDERS AS WE RETURN $7 1/2 BILLION VIA DIVIDENDS AND SHARE REPURCHASE. WE EXPECT FY2018 TO BE A SOLID YEAR OVERALL AND POSITIVE MOMENTUM SETS UP NICELY FOR THE NEXT YEAR AS WELL. IN SHORT, WE’RE DOING WHAT WE SAID WE WOULD DO. AS A REMINDER, WE UPDATED ADJUSTED E.P.S. GUIDANCE AT THE END OF Q2 TO BE IN A RANGE OF $4.30 TO $4.40 AND WE’RE REITERATING THAT GUIDANCE TODAY. WE EXPECT FULL YEAR SALES GROWTH AT APPROXIMATELY 3% CONSTANT CURRENCY AND EXCLUDEING THE IMPACTS OF DIVETURES OF YIHAODIAN AND SUBURBIA. NOW, WHILE THE RATE IT AT THE LOWER END OF WHERE WE GUIDED COMING INTO THE YEAR, I’M PLEASEED WITH THE QUALITY OF THE SALES GROWTH GIVEN THE COMPS AND THE TRAFFIC GROWTH THAT YOU’VE SEEN, WE’VE SEEN IN MANY PARTS OF THE BUSINESS. SO WHEN WE SAY AND TALK ABOUT STRONG, EFFICIENT GROWTH, WE’RE HEADING IN THAT DIRECTION. AND AS YOU CAN SEE, WE EXPECT CAP X EXCLUDEING ACQUISITIONS TO FINISH THE YEAR AROUND THE ORIGINAL GUIDANCE OF $11 BILLION. SO TWO YEARS AGO, WE PROVIDED GUIDANCE ON SOME METRICS FOR THE FOLLOWING THREE YEAR PERIOD WHICH IS A BIT UNUSUAL FOR US BUT GIVEN THE INVESTMENTS WE WERE GOING TO BE MAKING IN THE FUTURE WE WANTED TO GIVE AS MUCH FORWARD VISIBILITY AS WE COULD. LAST YEAR WE UPDATED THAT GUIDANCE. NOW YOU CAN SEE WHERE WE STAND ON THE GUIDANCE. WE’RE ALWAYS PUSHING TO DO BETTER. PRETTY GOOD SCORECARD. I’M GOING TO GO THROUGH EACH ONE OF THESE BRIEFLY. NOW, ANY TIME WE GIVE GUIDANCE, AS YOU KNOW, THERE ARE A NUMBER OF ASSUMPTIONS WE MAKE SUCH AS INFLATION, DEFLATION, CURRENCIES, TAX RATES, ECONOMIC CONDITIONS, ALL THAT STAYING RELATIVELY STABLE. OBVIOUSLY, WE’RE MONITORING THE U.S. TAX REFORM VERY CLOSELY AND UPDATE YOU IF THERE ARE ANY IMPLICATIONS FOR THE COMPANY AS WE GO FORWARD. AND WE KNOW, AS ALWAYS, YOU APPRECIATE THAT WE’RE GIVING YOU GUIDANCE AS REAL TIME AS WE CAN AND AS TRANSPARENTALLY AS WE CAN. AS WE ALWAYS DO, LET’S START WITH SALES. WE’VE STATED THAT SALES GROWTH WOULD BE 3% TO 4%. AS I SAID EARLIER ON A COMPARATIVE BASIS, THAT’S CONSTANT CURRENCY EXCLUDEING YIHAODIAN AND EXCLUDEING SU SUB SUBURBIA, WE’LL LIKELY BE AT THE LOWER END OF THAT RANGE AND EXPECT TO BE AT OR ABOVE THAT NEXT YEAR. THAT REPRESENTS STILL NEARLY $15 BILLION OF GROWTH WHICH, OF COURSE, IS SIZABLE GROWTH. WHILE WE’RE ON GROWTH, LET’S TALK TO eCOMMERCE. WHEN WE GAVE eCOMMERCE GUIDANCE PREVIOUSLY, WE WERE REFERRING TO A GLOBAL NUMBER. SINCE THEN, WE’VE BEEN DISCUSSING ON A WALMART U.S. NUMBER, WALMART eCOMMERCE NUMBER AS WE’VE GONE AND PUT OUT THE RELEASES. AS I MENTIONED EARLIER, WE EXPECT THE U.S. GROWTH LEVEL TO SLOW A LITTLE BUT TO BE ABOUT 40% NEXT YEAR AGAINST A PRETTY SIZABLE SALES BASE THIS YEAR OF ABOUT $11 1/2 BILLION. KEEP IN MIND, THIS INCLUDES ALL WEB INITIATED TRANSACTIONS INCLUDING THOSE THAT WALMART.COM, SHIP TO HOME, SHIP TO STORE, PICKUP TODAY AND ON-LINE GROCERY AS WELL AS TRANSACTIONS THROUGH JET.COM AND THE OTHER SITES IN OUR FAMILY OF BRANDS. NOW, AS A POINT OF REFERENCE, ON A GLOBAL BASIS, THIS INCLUDES SAMSCLUB.COM AND OUR eCOMMERCE OPERATIONS IN OUR INTERNATIONAL MARKETS. OUR GLOBAL eCOMMERCE SALES ARE EXPECTED TO BE ABOUT $17 1/2 BILLION IN THE CURRENT YEAR. RECALL THIS LOWER IS LOWERED BY THE DIVETURE IN YIHAODIAN LAST YEAR IN CHINA AND PARTNERING WITH JD.COM IN THAT MARKET. IT WOULD BE SOMEWHAT LARGER THAN . SO LET’S TALK ABOUT EXPENSE LEVERAGE. WE SAID LAST YEAR, WE WOULD SLIGHTLY LEVERAGE EXPENSES. WE’RE STILL IN THAT BALLPARK. IT’S GOING TO BE CLOSE, I THINK. I’M PLEASED WE’RE STARTING TO SEE LEVERAGE IN INTERNATIONAL. WE’VE TALKED ABOUT THAT IN WALMART U.S. STORES, LEVERAGING. SAM’S IS MAKING GOOD PROGRESS. WE HAVE CONTINUED TO LEAN IN ON SOME BACK END TECHNOLOGY AND WE’VE HAD SOME ADDITIONAL EXPENSES RECENTLY SUCH AS ONES WITH THE RECENT HURRICANES THAT ARE LIKELY GOING TO MAKE LEVERAGING A CLOSE CALL THIS YEAR. I FEEL MORE COMFORTABLE, THOUGH, THAT WE’LL LEVER EXPENSES NEXT YEAR ASSUMING THE SALES GUIDANCE THAT I JUST DISCUSSED. NOT ALL OF OUR COSTS ARE CAPTURED IN THAT AND I DON’T WANT TO MAKE LIGHT OF THE COSTS. WE’VE MADE IMPROVEMENT THROUGH BETTER MERCHANDISE COSTS AND BETTER TERMS IN THE LAST COUPLE OF YEARS AND WE HAVE SOLID TOP LINE MOMENTUM AND GENERATING A LOT OF GROWTH FOR OUR SUPPLIERS. THIS IS AN IMPORTANT PART OF WHAT WE DO IN THE PRODUCTIVITY LOOP. WE ALSO TALKED LAST YEAR ABOUT OUR INVESTMENTS IN eCOMMERCE BEING THE HEAVIEST THIS FISCAL YEAR. WE EXPECT OUR eCOMMERCE LOSSES TO BE SLIGHTLY LESS NEXT YEAR BUT WE WILL CONTINUE TO INVEST IN A THOUGHTFUL WAY IN THAT BUSINESS. LET’S TURN TO OPERATING MARGIN PERCENT. I SAID A YEAR AGO THAT THE OPERATING MARGIN PERCENT LAST YEAR AND THIS YEAR WOULD BE INDICATIVE OF THE RANGE OF THE MARGIN PERCENT IN THE NEAR TO MIDTERM. WE STILL BELIEVE THAT TO BE THE CASE. SOME COULD BE HIGHER AND SOME COULD BE LOWER. IN GENERAL, THE RANGE OF LAST YEAR AND THIS YEAR. ON E.P.S., RECENT GUIDANCE INDICATES ADJUSTED E.P.S. WILL BE RELATIVELY FLAT FOR FY2018 VS. FY2017 AND WE ANTICIPATE IT COMING IN — ANTICIPATE IT COMING IN THIS YEAR AS WELL. OUR FORECAST EXCLUDES THE IMPACT OF ANY CHANGE ASSOCIATED WITH THE DEBT TENDER WE JUST ANNOUNCED AND WOULD EXCLUDE ANY OTHER IMPACT OF OTHER STRATEGIC INITIATIVES THAT MIGHT OCCUR OVER THE BALANCE OF THE YEAR. I KNOW THE NUMBER HAS BEEN QUITE A FOCUS FOR YOU GUYS AND BEEN OUR E.P.S. GUIDANCE FOR NEXT YEAR OF AROUND 5%. WE’RE CONFIRMING THAT GUIDANCE TODAY AS BOTH STEVE AND DOUG MENTIONED. CERTAINLY, THERE’S HEAD WINDS AND TAIL WINDS, WE FEEL COMFORTABLE WITH THE GUIDANCE GIVEN THIS CURRENT MOMENTUM IN THE BUSINESS. OPERATING CASH FLOW HAS BEEN VERY STRONG. AND SHOULD EXCEED $80 BILLION OVER THIS THREE YEAR PERIOD WHICH IS AN INCREDIBLE NUMBER AND FINALLY CAP X WILL BE AROUND $11 BILLION THIS CURRENT YEAR EXCLUDEING ACQUISITIONS AND WE EXPECT NEXT YEAR TO BE IN THAT SIMILAR RANGE EXCLUDEING ACQUISITIONS. I MENTIONED EARLIER THAT WE ARE ROCK SOLID FINANCIALLY AND JUST GIVES WALMART MORE OPTIONS THAN SOME OTHERS. SO AS YOU TAKE A LOOK AT HIGHLIGHTS, WE’RE APPROACHING $500 BILLION IN REVENUE. YOU KNOW ALL THESE. I’LL SAY THEM ANYWAY. VERY STRONG BALANCE SHEET. RATED DOUBLE A. OVER 260 MILLION CUSTOMERS EVERY WEEK. BUT I WANT TO FOCUS ON THE RIGHT SIDE OF THE SLIDE AND I THINK LAST YEAR WAS AN EXCELLENT EXAMPLE OF OUR DISCIPLINE CASH MANAGEMENT ALONG WITH OUR FINANCIAL STRENGTH. SO LAST YEAR, WE ACQUIRED JET. WE INVESTED IN NEARLY $11 BILLION IN CAP X AND INVESTED IN JD.COM, WE PAID A MEANINGFUL DIVIDEND AND BOUGHT BACK A HEALTHY AMOUNT OF SHARES AND OUR NET DEBT DECLINED. THAT’S NOT A STATEMENT ABOUT FINANCIAL LEVERAGE. BUT RATHER IS A DEMONSTRATION OF OUR FINANCIAL STRENGTH AND THE OPTIONS THAT WE HAVE AS A COMPANY. THE FINANCIAL FRAMEWORK THAT WE PREVIEWED A YEAR AGO WITH YOU HELPS GUIDE OUR DECISIONS, HELPS GUIDE OUR DISCUSSIONS AS A COMPANY. AND THERE’S THREE KEY ELEMENTS AND WE’LL SPEND A FEW MINUTES ON EACH ONE. SO JUST AS A REMINDER, STRONG, EFFICIENT GROWTH. WE’RE GOING TO CONTINUE TO FOCUS ON THE MOST PRODUCTIVE AND PROFITABLE GROWTH OPPORTUNITIES BY PRIORITIZING COMP GROWTH AND eCOMMERCE GROWTH VS. NEW STORES. CONSISTENT OPERATING DISCIPLINE. WE NEED TO BE AT A LOWER COST TO SERVE AND NEED TO MOVE MORE QUICKLY IN THIS AREA. AND I’LL TALK MORE ABOUT THAT. WE CONTINUE TO MAKE INVESTMENTS WHERE WE NEED TO. AND WE’RE SEEING PROGRESS AND TAKING OUT COSTS ALSO WHERE WE NEED TO. AS A STRATEGIC CAPITAL ALLOCATION, WE HAVE AND WE WILL CONTINUE TO TAKE DECISIONS THAT IMPROVE OUR RETURNS OVER THE MID TO LONG TERM. SO LET’S GO FORWARD AND TALK ABOUT STRONG, EFFICIENT GROWTH. THIS WILL LOOK A LOT LIKE LAST YEAR AND YOU’LL SEE THAT WE CONTINUE TO PRIORITIZE COMP GROWTH AND ACCELERATING eCOMMERCE GROWTH VS. NEW STORES. WE’LL CONTINUE TO OPEN FEWER NEW STORES OVERALL PARTICULARLY IN THE U.S. AND OVER TIME, WE BELIEVE THAT’S GOING TO CONTRIBUTE TO AN IMPROVEMENT IN OUR RETURNS CAPITAL WHICH IS IMPORTANT. WE BELIEVE THIS IS THE RIGHT FORMULA COUPLED WITH THE ROBUST REMODEL PROGRAM WITHIN OUR STORES AND CLUBS. AS YOU KNOW OVER THE LAST SEVERAL YEARS, WE’VE MADE INVESTMENTS THAT ARE IMPORTANT TO THE OVERALL HEALTH OF THE BUSINESS BUT WE’RE NOT WHERE WE WANT TO BE FROM AN EXPENSE STANDPOINT AND WE HAVE TO GET BETTER NOW. WE HAVE TO DO IT IN A THOUGHTFUL PROCESS MINDED WAY. AS I MENTIONED EARLIER, WE EXPECT EXPENSES IN A PERCENTAGE OF SALES THIS YEAR TO BE NEAR A LEVERAGE POINT AND LEVERAGING NEXT YEAR. NOW, IN ORDER TO ACHIEVE EXPENSE LEVERAGE GOING FORWARD, WE NEED TO CHANGE THE WAY WE WORK. DURING THIS YEAR, WE MADE A DECISION TO FORMALIZE OUR COMMITMENT TO COST TRANSFORMATION. AS PART OF THAT WE’RE INSTITUTING A ZERO BASED BUDGETING APPROACH ACROSS MANY PARTS OF THE COMPANY ABOVE STORE LEVEL. WE’RE GOING ABOUT THIS IN A THOUGHTFUL WAY THAT WORKS INSIDE THE COMPANY AS CONSISTENT WITH OUR CULTURE AND ENSURING THAT WE MANAGE COSTS IN A VERY THOUGHTFUL WAY. BUT WE NEED TO MAKE PROGRESS AND WE BELIEVE THIS IS GOING TO HELP US IN MAKING PROGRESS MORE QUICKLY. OUR TEAMS ARE FOCUSED ON CHANGING HOW WE BUDGET ACROSS THE ORGANIZATION, ELIMINATING DUPLICATION, UTILIZING TECHNOLOGY IN NEW WAYS. ONE OF THE GREAT THINGS, THOUGH, ABOUT OUR SCALE AS A COMPANY, SOMETIMES SMALL CHANGES RESULT IN IMPORTANT REDUCTIONS IN COST. FOR EXAMPLE, A SIMPLE CHANGE TO OUR PLASTIC BAGS AT WALMART U.S. RESULTS IN AN ANNUALIZED SAVINGS OF APPROXIMATELY $20 MILLION. A DECISION TO SHORTEN THE LENGTH OF THE RECEIPTS SAVED OVER $7 MILLION. WE’RE ALSO SEEING EXAMPLES ACROSS THE GLOBE AND DAVE WILL TALK ABOUT SOME LATER THAT ARE HELPING MARKETS LIKE CHILE, CANADA AND THE U.K. LEVERAGE EXPENSES MEANINGFULLY. THERE ARE ALSO THINGS FROM A STRUCTURAL STANDPOINT THAT WE BELIEVE WILL LOWER OUR COST TO SERVE OVER TIME. AS AN EXAMPLE, EARLIER THIS YEAR, WE MERGED SHARED SERVICE WITH THE BACK END TECHNOLOGY GROUP TO FORM THE GLOBAL SERVICES GROUP WHICH SHOULD ALLOW US OVER TIME TO TAKE A MORE PRODUCT AGILE APPROACH TO BACK OFFICE FUNCTIONS IN STORES AND IN CORPORATE FUNCTIONS. IN GLOBAL BUSINESS SERVICES, WE’RE FOCUSED ON AUTOMATING PROCESSES, CHANGING PROCEDURES AND UTILIZING BOTS MORE THAN WE EVER HAVE. THE FOCUS ON EXPENSES IS GOING TO PROVIDE FUEL FOR THIS BUSINESS. AND WE’RE EXCITED ABOUT WHAT WE CAN DO WITH THAT FUEL. AS I MENTIONED EARLIER, OUR BUSINESS GENERATES SUBSTANTIAL CASH. WE’RE GOING TO INVEST IN THE BUSINESS AS OUR FIRST PRIORITY WHICH WE ALWAYS HAVE. WE HAVE A MEANINGFUL AND GROWING DIVIDEND. 44 CONSECUTIVE YEARS OF INCREASING OUR DIFR DENNED AND WE’RE COMMITTED TO THE SHARE REPURCHASE PROGRAM AS WE UTILIZE THE EXCESS CASH. WE INSTITUTED A NEW SHARE REPURCHASE PLAN THIS MORNING, AS WE GENERATE THE SIGNIFICANT AMOUNT OF CASH THAT WE DO, WE FEEL GOOD ABOUT INVESTING IN WALMART. AS WE MENTIONED IN THE RELEASE THIS MORNING, WE ESTIMATE UTILIZING THIS AUTHORITY OVER APPROXIMATELY TWO YEARS. THE PACE OF THE REPURCHASE, OF COURSE, WILL DEPEND ON THE CASH FLOW OF THE BUSINESS AS WELL AS OTHER POTENTIAL STRATEGIC USES OF CASH. BUT WE FEEL GOOD ABOUT THE LONG TERM VALUE OF WALMART. AS YOU KNOW, WHILE WE’VE CONTINUED TO GROW THE BUSINESS AND TRANSFORM TO THE FUTURE, WE HAVE RETURNED A SIGNIFICANT AMOUNT OF CAPITAL TO SHAREHOLDERS INCLUDING WHAT WE ESTIMATE THE RETURN FOR THE REMAINDER THIS YEAR, WE RETURN OVER $30 BILLION TO SHAREHOLDERS AND LAST YEAR AND THIS YEAR COMBINED WHICH IS QUITE A REMARKABLE FEAT GIVEN THE TRANSFORMATION PERIOD WE’RE IN AS A COMPANY. AS WE CONTINUE TO CHANGE AS A COMPANY, SO IS THE WAY WE ALLOCATE CAPITAL. OUR TOTAL SPEND HAS DECREASED SOME AND SHIFTED TOWARDS REMODELS, eCOMMERCE, SUPPLY CHAIN AND TECHNOLOGY. CERTAINLY WHAT STANDS OUT MOST CLEARLY IS THE SHIFT IN CAPITAL FROM NEW STORES AND CLUBS TO REMODELS OVER THE PAST FEW YEARS. AS WE LOOK TO GET MORE GROWTH FROM EXISTING STORES, THIS SPENDING FLOWS WITH THAT STRATEGY. SO LAST YEAR, WE OPENED NEARLY 60 SUPERCENTERS IN THE U.S. THIS YEAR, WE’RE GOING TO OPEN FEWER THAN 40 AND EXPECT NEXT YEAR TO OPEN FEWER THAN 15. WE WILL CONTINUE TO SPEND CAPITAL WHERE WE BELIEVE IT’S GOING TO MAKE THE MOST DIFFERENCE FOR OUR CUSTOMERS AS WELL AS HOW WE CONDUCT OUR BUSINESS AND HOW WE WORK IN THE FUTURE. SO ON-LINE GROCERY EXPANSION, PICKUP TOWERS, SCAN AND GO, SOME OF THAT YOU WOULD HAVE SEEN YESTERDAY IN YOUR TOURS, THOSE ARE ALL EXAMPLES OF WHAT I’M TALKING ABOUT. SO AS WE LOOK AT CAPITAL BY SEGMENT, THERE’S A COUPLE OF NOTES THAT I WOULD MAKE. FIRST, WE EXPECT CAPX BY SEGMENT TO BE PRETTY SIMILAR TO NEXT YEAR COMPARED TO THIS YEAR. OVER A PERIOD OF TIME, WHAT YOU’VE SEEN IS A SLIGHT DECREASE IN CAPX AT SAM’S AS WELL AS INTERNATIONAL OVER THAT PERIOD OF TIME. SO WHILE WE’RE BEING OPPORTUNISTIC FROM AN M&A PERSPECTIVE, YOU SEE IT LOOKS DIFFERENT THAN A YEAR AGO, WE’RE ALSO MORE FOCUSED AND OPEN TO TAKING ACTION ON ASSETS WITHIN OUR PORTFOLIO TO SIMPLIFY OUR BUSINESS. SUBURBIA IS A REALLY GOOD BUSINESS. ONE THAT JUST DIDN’T FIT AS WELL WITH OUR LONG TERM STRATEGY. SO WE’RE GOING TO CONTINUE TO CONSISTENTLY MONITOR OUR PORTFOLIO, WE’RE GOING TO ENSURE THAT WE HAVE THE RIGHT MIX OF ASSETS FOR OUR SHAREHOLDERS LONG TERM. WE’RE ALSO PARTNERING WITH GREAT COMPANIES TO MOVE FASTER AND LEVERAGE EXISTING PLATFORMS AND EXPERTISE RATHER THAN ALWAYS INVESTING CAPITAL AND TAKING THE TIME TO BUILD IT OURSELVES. THE PARTNERSHIPS WITH GOOGLE HOME AND JD.COM ARE GREAT EXAMPLES OF THAT. WE’RE GOING TO TEST SOME THINGS. WE’RE USING UBER TO TEST LAST MODEL DELIVERY IN ADDITION TO UTILIZING OUR OWN ASSOCIATES. WE’RE PARTNERING WITH AUGUST HOME AND LATCH TO DELIVER INTO CUSTOMERS’ HOMES. OUR STORES ARE CLOSE TO THE CUSTOMER AND WE NEED TO EXPERIMENT WITH OPTIONS TO TAKE ADVANTAGE OF OUR UNIQUE FOOTPRINT. WE WILL CONTINUE TO EXPLORE CREATIVE OPTIONS TO GROW THE BUSINESS. LET ME LEAVE YOU WITH JUST A FEW THOUGHTS THIS MORNING. WE’RE EXECUTING OUR STRATEGY, DELIVERING RESULTS, THE PLAN IS WORKING. WE’RE GOING TO BE MORE DISCIPLINED WITH EXPENSES, PROVIDING EVEN MORE FUEL FOR THIS BUSINESS. OUR PLANS DELIVER BALANCE AND EFFICIENT GROWTH, COMP STORES VS. NEW STORES, AND WE CONTINUE TO BE THOUGHTFUL ON HOW WE ALLOCATE CAPITAL AND MAKING DECISIONS WHETHER TO ACCELERATE WHICH YOU’VE SEEN AND ALSO WHAT TO STOP. YOU’VE SEEN THAT AS WELL. MOST IMPORTANTLY, WE’RE DOING THIS FROM A BASE OF INCREDIBLE FINANCIAL STRENGTH. I’M GOING TO FINISH WHERE I STARTED. WE REALLY LIKE OUR COMPETITIVE POSITION. I WOULDN’T WANT TO BE ANYWHERE ELSE. WE’RE CONFIDENT WE’LL WIN WITH CUSTOMERS. AND WE’RE COMMITTED TO GROWING THE VALUE OF THE COMPANY FOR OUR SHAREHOLDERS WHILE WE WIN WITH CUSTOMERS. WE CAN DO BOTH. WE CAN WIN WITH CUSTOMERS AND WE CAN WIN WITH SHAREHOLDERS. THANKS FOR YOUR TIME THIS MORNING AND YOUR INTEREST IN WALMART.>>WHAT WALMART JUST SAID IS YOU GET BETTER PRICES WITH US AND YOU DON’T HAVE TO PAY TO GET FREE SHIPPING.>>WORLD’S LARGEST RETAILER MALL — WALMART IS OFFERING NEW DISCOUNT TO ON-LINE SHOPPERS.>>DELIVERING ITEMS TO STORES BECAUSE IT SAVES ON THE COST OF SHIPPING IT TO YOUR DOOR.>>GOOD MORNING! WELCOME. HOPE YOU ENJOYED DINNER LAST NIGHT. I REALLY APPRECIATED ALL THE GREAT QUESTIONS. IT’S BEEN A LITTLE OVER A YEAR NOW. I THINK LAST YEAR, I WAS AT THIS MEETING, AND I WAS ON THE JOB ABOUT 17 DAYS. AND HAD A CHANCE TO SHARE SOME OF MY EARLY SORT OF THINKING. AND AS YOU CAN SEE, THE LAST YEAR, THE TEAM HAS BEEN REALLY BUSY. WE’VE GOT A LOT OF STUFF ACCOMPLISHED AND FEELING REALLY GOOD ABOUT WHERE WE ARE. WE LAUNCHED THE TWO DAY FREE SHIPPING WITH NO MEMBERSHIP. WE LAUNCHED EASY REORDER. THE PICKUP DISCOUNT. WE ACQUIRED FIVE COMPANIES. WE CREATED STORE NUMBER EIGHT. WE STARTED TO DO SOME INNOVATION AROUND TESTING ASSOCIATE DELIVERY, TESTING IN HOME INTO THE FRIDGE DELIVERY. WE DID A DEAL WITH GOOGLE TO PARTNER WITH THEM. WE’VE BEEN BUSY ON A LOT OF FRONTS WITH RESPECT TO TRYING TO DO THINGS TO IMPROVE THE CUSTOMER VALUE PROPOSITION. BUT UNDER — YOU KNOW, BENEATH ALL THAT, WE’RE WORKING HARD TO BUILD THE FOUNDATION AND REALLY BUILD THE INFRASTRUCTURE. SPEND A LOT OF TIME RESTRUCTURING THE ORGANIZATION. WE BUILT IT TO MOVE FASTER. IT’S MORE CUSTOMER CENTRIC NOW. I HAVE THE HEAD OF CUSTOMER EXPERIENCE AND THE HEAD OF CUSTOMER SERVICE REPORTING DIRECT TO ME. THEY WERE BEFORE IN THE ORGANIZATION. WE’VE MADE SOME GREAT HIRES OVER THE YEAR AND I FEEL REALLY GOOD ABOUT THE TEAM THAT WE HAVE IN PLACE AND I THINK WE’RE SET UP WELL FOR SUCCESS. FIRST HALF PERFORMANCE, YOU KNOW THE NUMBERS. 62% SALES GROWTH FOR THE FIRST HALF. THAT COMPARES TO 12% FOR THE SAME PERIOD LAST YEAR. AND AS YOU KNOW, MOST OF THAT GROWTH CAME FROM ORGANIC. IN TERMS OF LOOKING AHEAD TO NEXT YEAR, WE SEE 40%, THERE ABOUT GROWTH NEXT YEAR OFF A BASE OF $11.5 BILLION. THIS IS $11.5 BILLION JUST IN THE U.S. SO NEXT YEAR, APPROXIMATELY $16 BILLION WILL BE THE NUMBER. IN TERMS OF THE BOTTOM LINE, I THINK BRETT SAID THIS BEFORE, BUT THIS YEAR SHOULD BE THE LARGEST LOSS IN eCOMMERCE AND WE’LL SEE SLIGHT IMPROVEMENT NEXT YEAR. SO WE’RE HAPPY WITH THE GROWTH. OBVIOUSLY, eCOMMERCE IS A SCALE GAME SO WE HAVE A LOT OF WORK TO DO. BUT WE LIKE THE DIRECTION THAT WE’RE HEADING. WHAT IS THE DIRECTION? WE WANT TO BE THE DESTINATION FOR CUSTOMERS TO SAVE MONEY NO MATTER HOW THEY WANT TO SHOP. WHETHER IT BE PICK UP, DELIVERY IN TWO DAYS OR DELIVERY IN TWO HOURS. THE IDEA IS TO SAVE CUSTOMERS MONEY AT ANY SERVICE LEVEL. AT THE END OF THE DAY, DOUG SAID IT BEFORE, WE WANT TO MAKE EVERY DAY EASIER FOR BUSY FAMILIES. THAT’S OUR VISION. SO HOW ARE WE GOING TO GET THERE? THE STRATEGIES ACTUALLY IS QUITE SIMPLE. IT’S GOT THREE PARTS. FIRST, WE WANT TO NAIL THE FUNDAMENTALS. WE’RE GOING TO SPEND A LOT OF TIME DOING THAT. THEN WE WANT TO LEVERAGE OUR UNIQUE STRENGTHS AND THIS IS REALLY ABOUT PLAYING OFFENSE AND THIS IS THE PART THAT GETS ME REALLY EXCITED. AND THEN ALSO AT THE SAME TIME, WE’RE GOING TO BE INNOVATING FOR THE FUTURE. LET’S FOCUS IN ON NAIL THE FUNDAMENTALS. THIS IS WHERE WE’RE GOING TO BE SPENDING THE MAJORITY OF OUR TIME. SO HOW ARE WE GOING TO DO IT? WE’VE CREATED THIS INDEX WE CALL THE CUSTOMER VALUE INDEX AND IT COMPRISES FIVE BELLWETHER METRICS THAT WE TRACK. HAVE IT, FIND IT, DISPLAY IT, PRICE IT, DELIVER IT. WE CALL IT THE FIVE ITs. DO WE HAVE THE PRODUCTS THAT CUSTOMERS WANT? CAN THEY FIND THE PRODUCTS EASILY WHEN THEY SEARCH ON THE WEBSITE? ARE THE PRODUCTS DISPLAYED WITH ALL THE CONTENT, PICTURES, DESCRIPTIONS TO MAKE AN INTELLIGENT DECISION? ARE THEY PRICED RIGHT AND DELIVERED ON TIME AND FAST? SO WE’RE SORT OF MANAICIALLY IN GETTING THOSE BELLWETHERS WHERE THEY NEED TO BE AND IMPROVE IT. THEY BREAK DOWN INTO TWO SEPARATE BUCKETS. THEY BREAK INTO MERCHANDISING AND LOGISTICS. I THINK IF YOU WOULD HAVE ASKED PEOPLE WHAT eCOMMERCE WAS ALL ABOUT, PEOPLE WOULD SAY THAT’S WHEN YOU SHIP PRODUCTS TO YOUR HOME. BUT FOR ME, WHEN I THINK ABOUT IT, THAT WASN’T THE STEP CHANGE. WE WERE DELIVERING PRODUCT TO PEOPLE’S HOMES FOR DECADES BEFORE THE INTERNET. THROUGH CATALOG. THE STEP CHANGE IS REALLY ONE AROUND MERCHANDISING. THE INTERNET UNLOCKED THE ABILITY TO MERCHANDISE PRODUCTS IN A WAY THAT COULD EVER BE DONE IN A CATALOG. BASICALLY, MILLIONS OF PRODUCTS WITH REALLY RICH PRODUCT CONTENT, DESCRIPTIONS AND PICTURES AND REVIEWS FROM OTHER CUSTOMERS, THAT NEVER COULD HAVE BEEN DONE IN A CATALOG BEFORE AND DYNAMIC PRICING ON TOP OF THAT. WHEN I THINK ABOUT MERCHANDISING, I THINK ABOUT THAT AS BEING THE STEP CHANGE IN eCOMMERCE. WE’LL BE LASER FOCUSED ON FIXING MERCHANDISING AS WELL AS LOGISTICS. SO HOW ARE WE GOING TO IMPROVE MERCHANDISING? IT’S REALLY BROKEN DOWN INTO TWO SEPARATE BUCKETS. THE TOP MILLION SKEWS AND THE LONG TAIL WHICH IS EVERYTHING ELSE. AND THE REASON WHY WE BREAK IT DOWN INTO TWO BUCKETS LIKE THAT IS BECAUSE OF THE TACTICS ARE DIFFERENT. WITH RESPECT TO THE TOP MILLION SKEWS, IT’S REALLY MORE ABOUT BEING HUMAN POWERED WHERE THE LONG TAIL IS BEING TECH EMPOWERED. ON THE TOP MILLION, WE’RE TAKING THIS VERY FOCUSED EFFORT ON BRINGING IN CATEGORY SPECIALISTS THAT HAVE RESPONSIBILITY FOR A VERY NARROW SET. I THINK LIKE 500. CATEGORY COULD BE FOOD STORAGE BAGS OR COULD BE TREADMILLS. COULD BE VACUUM CLEANERS. VERY, VERY NARROW CATEGORY. TODAY, THE AVERAGE MERCHANT MIGHT HAVE, YOU KNOW, 10,000 PRODUCTS THEY’RE RESPONSIBLE FOR. WE’RE GOING TO SORT OF NARROW THAT DOWN TO 500 SO THE TOP MILLION CAN BE COVERED BY 2,000 SPECIALISTS AND THE SPECIALIST SPENDS ALL DAY EVERY DAY FOCUSING ALL THE DETAILS TO PERFECT THE EXPERIENCE OF THAT CATEGORY. IT MEANS PERFECTING THE DESCRIPTIONS, GETTING ALL THE RIGHT IMAGES AND MAKING SURE THE ATTRIBUTES AND FILTERS ARE PERFECT. WE EVEN HAVE THE ABILITY OF CATEGORY SPECIALIST NOW TO ACTUALLY SHOW EXACTLY WHAT THE 10 RESULTS SHOULD BE FOR ANY SPECIFIC KEYWORD SEARCH TERM AND THEY CAN MOVE AROUND THE RESULTS DEPENDING ON HOW HOT NEW PRODUCTS COME IN THAT MAYBE AREN’T RECOGNIZED BY THE SEARCH ENGINE RIGHT AWAY. PRODUCT THEY WANT TO MERCHANDISE BECAUSE THEY HAVE A PARTICULARLY GOOD MARGIN AND THINK CUSTOMERS REALLY LIKE THE PRODUCT. WE’RE HIRING ABOUT 40 TO 50 NEW SPECIALISTS PER MONTH. WE’RE ALSO INVESTING PRETTY AGGRESSIVELY IN MERCHANDISING TOOLS TO MAKE THESE CATEGORY SPECIALISTS, YOU KNOW, MORE EMPOWERED AND BE ABLE TO DO MORE FASTER. THAT’S HOW WE’RE GOING TO, YOU KNOW, KILL THE TOP MILLION SKUs. WITH RESPECT TO THE LONG TAIL, IT’S ABOUT MARKETPLACE. AND OVER THE LAST YEAR, WE’VE GROWN SKUs FROM ABOUT 15 MILLION TO OVER 60 MILLION PRODUCTS. WE FEEL GOOD ABOUT THE MOMENTUM THAT WE’RE SEEING THERE. ALSO, TO HELP IN THE LONG TAIL, WE’VE MADE THREE ACQUISITIONS IN HAYNEEDLE AND TWO OTHERS. ALL THREE ARE IN THE LONG TAIL CATEGORIES WHERE WE FELT IT WAS EASIER TO ACCELERATE THROUGH ACQUISITION THAN DO IT ORG ORGANICALLY. WHAT THEY’VE BROUGHT IS REALLY RICH PRODUCT CONTENT, HAYNEEDLE HAS OVER A MILLION HOME SKUs AND TAKEN MOST OF THEIR OWN PICTURES SO THE CONTENT IS REALLY RICH. THEY’VE GOT THOUSANDS OF RELATIONSHIPS WITH BRANDS AND WE’RE ALSO REALLY FOCUSED ON CREATING THESE VERTICAL SHOPPING EXPERIENCES THAT ARE MORE ABOUT BROWSE AND DISCOVERY THAN JUST STRAIGHT TRANSACTIONAL AND THE FOCUS IS GOING TO BE ON HOME AND FASHION. AND WE’VE HIRED TWO REALLY STRONG LEADERS IN THOSE AREAS AND SO EXPECT TO SEE THOSE EXPERIENCES OVER THE NEXT YEAR OR TWO GET ELEVATED. AND, OF COURSE, JET.COM WE’RE SORT OF POSITIONING JET TO BE MORE GEARED TOWARDS THE AFFLUENT HIGHER INCOME URBAN MILLENNIAL CUSTOMER. AND AS WE DO THAT, WE’LL START PUSHING UP THE ABILITY TO ATTRACT MORE PREMIUM BRANDS. WE’VE ALREADY STARTED TO ATTRACT MORE PREMIUM BRANDS ON THERE. IT WILL GET MORE SO AS WE CONTINUE TO PUSH THE BRAND MORE UPSCALE AND THAT WILL HELP BUILD A BRIDGE TO BRING THESE BRANDS ULTIMATELY TO WALMART.COM. ON TO THE LOGISTICS. WITH RESPECT TO LOGISTICS, A LOT OF THE GROUNDWORK WAS ALREADY LAID BEFORE I GOT HERE. THE WAREHOUSES ARE THE RIGHT SIZE. THEY’RE IN THE RIGHT LOCATION AND HAVE THE RIGHT LEVEL OF AUTOMATION. AND FROM THE NETWORK THAT WE HAVE TODAY, WE CAN SHIP 99% OF THE COUNTRY VIA GROUND. IN TWO DAYS. AND 87% OF THE COUNTRY OVERNIGHT VIA GROUND. SO THAT’S HOW WE’RE ABLE TO OFFER THE FREE TWO DAY SHIPPING WITH NO MEMBERSHIP. THE REASON YOU HAVEN’T SEEN THAT FLOW THROUGH IS BECAUSE WE HAVE NOT YET MIRRORED INVENTORY IN ALL THE LOCATIONS. THAT’S WHAT WE’RE FOCUSED ON DOING THIS YEAR. GET INVENTORY MIRRORED IN THE DIFFERENT LOCATIONS AND MAKE SURE THAT WE HAVE HIGH IN STOCK RATES AND MAKE SURE THAT EVERYTHING THAT COMES IN GETS OUT AND FULFILLED AND SHIPPED AS SOON AS IT COMES IN. IF WE CAN DO THAT, WE’LL BE ABLE TO CREATE A VERY MAGICAL EXPERIENCE ON WALMART.COM. THAT’S REALLY HOW WE’RE GOING TO FIX THE FUNDAMENTALS AND WE’RE REALLY FOCUSED ON DOING THAT. THIS NEXT PART OF THE STRATEGY IS WHAT GETS ME REALLY EXCITED AND WHY I’M SO HAPPY TO BE AT WALMART. IT’S REALLY ABOUT LEVERAGING UNIQUE ASSETS TO PLAY OFFENSE. AND I THINK WALMART HAS A SET OF ASSETS THAT CAN’T BE MATCHED ANYWHERE. AND GREG FORAN AND I AND OUR TEAMS ARE WORKING VERY CLOSELY TOGETHER. IN COMMUNICATION WITH GREG ON ALMOST A DAILY BASIS AND WE’RE THINKING ABOUT HOW DO WE LEVERAGE THESE ASSETS TO CREATE A MAGICAL EXPERIENCE FOR CUSTOMERS? I THINK 90% OF AMERICANS LIVE WITHIN 10 MILES OF A WALMART. THERE’S 1.4 MILLION ASSOCIATES AND WALMART IS THE LARGEST GROCER IN THE U.S. WHEN WE THINK ABOUT SOME OF THESE ASSETS AND THINK ABOUT PLAYING OFFENSE, WE THINK ABOUT IT ACROSS THREE DIMENSIONS. PRICE, ASSORTMENT, AND EXPERIENCE. SO LET ME START WITH PRICE. WHEN YOU’RE THINKING ABOUT PRICE AND THINKING ABOUT OUR ASSETS, IT HAS TO START WITH THE STORES. FOR LOW PRICE POINT ITEMS, NO WAY TO HAVE A LOWER COST TO SERVE. THAT 72 CENT BAKING SODA HAS CENTS OF MARGIN, THERE’S NO WAY TO PICK THAT IN A FULFILLMENT CENTER NEVER MIND THE SHIPPING COST ALONE. THERE’S NO CHEAPER WAY TO GET THESE PRODUCTS TO CONSUMERS THAN HAVE THEM COME IN THE STORE AND PICK IT OFF THEIR SHELVES THEMSELVES. THAT’S A GREAT STARTING POINT. CUSTOMERS DON’T WANT TO COME IN THE STORE AND PICK IT OFF THE SHELVES. THAT’S WHY WE’VE GOT, YOU KNOW, TWO DAY FREE SHIPPING ON ALL YOUR HEAD CONSUMABLE ITEMS AND WE’RE ABLE TO LEVERAGE THE SMART CAR TECHNOLOGY ON JET TO EMPOWER CUSTOMERS TO BUILD BIGGER, SMARTER BASKETS OF PRODUCT SO WE CAN PULL SUPPLY CHAIN COSTS OUT AND GIVE CUSTOMERS EVEN LOWER PRICES. SO IF THEY WANT TO COME IN THE STORE AND PICK IT OFF THE SHELF, SAVE MONEY, THAT’S GREAT. THEY WANT IT SHIPPED TO THEIR HOME IN TWO DAYS, WE’LL GIVE THEM THE BEST PRICE BECAUSE WE’LL LEVERAGE THE SMART CAR TECHNOLOGY. OVER THE NEXT YEAR, YOU’LL SEE THE SMART CAR TECHNOLOGY ON JET MIGRATE ON TO WALMART.COM. THAT’S ABOUT THE HEAD OF THE ASSORTMENT. WHEN YOU THINK ABOUT THE LONG TAIL, WE CAN ALSO LEVERAGE THE STORE ASSETS TO BRING LOWER PRICES TO CONSUMERS. YEP, AGAIN, WE CAN SHIP IT TO HOME. BUT IF YOU’RE WILLING TO COME TO THE STORE TO PICK IT UP, WE HAVE LAST MODEL DELIVERY COSTS WHICH IS THE VAST DELIVERY COSTS. IT GIVES THEM A LOWER PRICE AND WE MAKE THE SAME PROFIT AND AT THE SAME TIME, WE’RE SENDING TRAFFIC TO THE STORE. AND THE CYCLE SORT OF KICKS IN. SO WE FEEL REALLY GOOD HOW TO POSITION OUR ASSETS WITH RESPECT TO PRICE. ON THE ASSORTMENT SIDE, WALMART HAS MANY BILLION DOLLAR PRIVATE LABEL BRANDS. IN FACT, THREE OF THE TOP FIVE PRIVATE LABEL BRANDS IN AMERICA ARE WALMART BRANDS. AND SO IT’S AN INCREDIBLE ASSET. WE’VE ALREADY STARTED TO LEVERAGE THAT ASSET. WE’VE JUST RECENTLY ANNOUNCED THAT WE’RE LAUNCHING UNIQUELY J WHICH IS PRIVATE LABEL BRAND AT JET. IT WILL HAVE HUNDREDS OF PRODUCTS MORE PREMIUM ACROSS THE ENTIRE RANGE OF CATEGORIES AND THEN THE DIGITALLY NATIVE BRANDS. THIS IS PART OF OUR STRATEGY. WE’VE BOUGHT IT, RUNNING OUR DIGITALLY NATIVE BRAND STRATEGY. AND WE’RE INCUBATING ADDITIONAL BRANDS. WE BELIEVE WHEN THERE ULTIMATELY BECOMES PARODY ON THE ASSORTMENT, THIS WILL BE A DIFFERENTIATOR FOR US. THESE BRANDS CONNECT WITH MILLENNIAL SHOPPERS AND THEY OFFER ASSORTMENT THAT YOU CAN’T FIND ANYWHERE ELSE. AND THE MARGIN STRUCTURE IS FANTASTIC. THAT’S ASSORTMENT. EXPERIENCE. THIS IS THE ONE AREA THAT GETS ME, I THINK, MOST EXCITED. THIS IS WHERE WE CAN REALLY LEVERAGE THE ASSETS TO CREATE AN EXPERIENCE THAT YOU CAN’T FIND ANYWHERE ELSE. LET’S TALK ABOUT GROCERY PICKUP. 1,000 STORES TODAY, IN OVER P2, YEAR. CUSTOMERS ABSOLUTELY LOVE THIS EXPERIENCE. THE NET PROMOTER SCORE IS IN THE 80’S WHICH IS UNHEARD OF. IT’S AN INCREDIBLE VALUE PROPOSITION TO THE CONSUMERS. SO YOU KNOW CUSTOMERS LOVE THE PICKUP. BUT NOW THAT WE HAVE PICKING CAPABILITY IN 1,000 AND EVENTUALLY 2,000 STORES, WE’RE REALLY WELL SUITED TO BE ABLE TO DO SAME DAY OR TWO HOUR DELIVERY. IN FACT, WHEN YOU THINK ABOUT DELIVERY AND YOU THINK ABOUT THE COST OF DOING SAME DAY AT TWO HOUR, THERE’S NOT A LOT OF VOLATILITY IN SORT OF THE ACTUAL COST OF DOING THE DELIVERY. THE REAL DIFFERENTIAL COMES FROM CAN YOU FORWARD DEPLOY INVENTORY TO 4600 WAREHOUSES AND CAN YOU GET THE PRODUCT THERE IN FULL TRUCKLOAD QUANTITY? THAT’S WHAT WALMART HAS, 4600 WAREHOUSES WHERE THE PRODUCT IS GETTING THERE IN FULL TRUCKLOAD QUANTITIES. YOU REALLY CAN’T GET A LOWER COST TO SERVE THAN THAT. AND THESE WAREHOUSES, THEY’RE PROFITABLE. SO EACH MARGINAL DOLLAR THAT COMES OUT OF THERE SHIP TO HOME IS COMING AT A REAL ATTRACTIVE MARGINAL RATE. THAT’S WHERE THE REAL POWER OF THE OMNI COMES TOGETHER. SO WE’RE DOING TESTS RIGHT NOW ON TWO DOZEN STORES. WE’RE USING UBER, DELIV AND EVEN OUR OWN ASSOCIATES. AND SO WE’RE GOING TO TAKE SORT OF THE BEST OF IN DIFFERENT SITUATIONS IT MAY MAKE SENSE TO USE ASSOCIATES AND OTHERS JUST STRAIGHT CROWD SOURCING. WE’VE ALSO BOOKED PARCEL WHICH IS REALLY GOING TO BE FOCUSED IN URBAN AREAS AND SPECIFICALLY TO START IN NEW YORK CITY WHICH IS A NICE COMPLEMENT TO THE 4600 STORE NETWORK THAT WE HAVE. IN ADDITION, TWO DAYS AGO, WE ANNOUNCED MOBILE EXPRESS RETURNS WHICH IS ANOTHER BIG ADVANTAGE OF THE STORES. IT MAKES IT VERY EASY FOR CUSTOMERS TO RETURN PRODUCT. AND NOW, THEY CAN DO IT IN LESS THAN A MINUTE. SO WE’RE REALLY EXCITED ABOUT LEVERAGING THOSE ASSETS. SO THAT’S IT. THAT’S REALLY ABOUT HOW WE’RE GOING TO PLAY OFFENSE. THE THIRD PART OF OUR STRATEGY IS REALLY ABOUT INNOVATING FOR THE FUTURE. SO THAT’S REALLY ABOUT STORE EIGHT. AT STORE EIGHT, WE’RE INCUBATING BUSINESSES ACROSS THE COUNTRY THAT HAVE THE POTENTIAL TO SHAPE THE FUTURE OF RETAIL. IN THE FUTURE, WE BELIEVE THAT SHOPPING WILL BE MORE PERSONALIZED AND IMMERSIVE, INTERACTIVE AND ON DEMAND. WE’RE VALUING EVERYTHING FROM ARTIFICIAL TECHNOLOGY, VOICE, A.R., V.R., DRONES, AUTONOMOUS VEHICLES AND LOOKING TO REDEFINE THE BRICK AND MORTAR SHOPPING EXPERIENCE OF THE FUTURE. STORE EIGHT IS NOT A SANDBOX. IT’S ABOUT INCUBATING BUSINESSES THAT HAVE A CLEAR VISION, A MISSION, SET OF VALUES, HIRING GREAT PEOPLE TO RUN THESE BUSINESSES AND THE IDEA IS TO SET US UP NICELY FOR THE FUTURE. SO AGAIN, IN SUMMARY, THE STRATEGY IS VERY SIMPLE. WE’RE GOING TO BE FOCUSED ON JUST NAILING THE FUNDAMENTALS, WE’RE GOING TO LOOK FOR WAYS TO PLAY OFFENSE BY LEVERAGING UNIQUE ASSETS. AND WE’RE GOING TO BE FOCUSED ON INNOVATING FOR THE FUTURE. IT’S BEEN A GREAT FIRST YEAR. I’M REALLY EXCITED TO BE HERE. DOUG AND THE BOARD HAVE REALLY EMPOWERED ME AND THE REST OF THE TEAM. AND THAT HAS REALLY ENABLED US TO MOVE FAST. AND I KNOW PEOPLE DON’T ALWAYS BELIEVE ME WHEN I SAY IT BUT IT FEELS LIKE A START-UP. WE’RE ABLE TO MOVE AS FAST AS WE WERE MOVING WHEN WE’RE A STAND ALONE BUSINESS. SO I COULDN’T BE MORE EXCITED ABOUT NEXT YEAR. FEW THINGS I WANT TO LEAVE YOU WITH. EXPECT US TO CONTINUE TO WORK CLOSELY WITH THE STORE’S TEAM, GREG FORAN. WE HAVE A LOT OF IDEAS ON HOW TO BRING THE EXPERIENCES OF BOTH ON LINE AND IN STORE EXPERIENCE. WE’RE GOING TO BE LASER FOCUSED ON GETTING THE FUNDAMENTALS RIGHT AND LOOK FOR US TO CONTINUE TO PLAY OFFENSE AND CONTINUE TO INNOVATE. THANK YOU. [APPLAUSE]>>YOU GOT AN APPLAUSE. NICE JOB. ALL RIGHT. SO WHY DON’T WE TAKE 20 MINUTES AND GET BACK HERE AT 9:25 AND YOU’LL HEAR FROM ALL THE DIVISION C.E.O.s, THANKS. SO WE’RE GOING TO GET STARTED HERE IN A COUPLE OF MINUTES. IF PEOPLE COULD PLEASE FIND THEIR WAY TO THEIR SEATS. ALL RIGHT, GOOD. SO ONE OF THE THINGS THAT MAKES ME REALLY PROUD TO PUT MY WALMART BADGE ON IN THE MORNING IS THAT AS A COMPANY, WE’VE MADE IT A PRIORITY TO BE THERE FOR COMMUNITIES WHEN AND WHERE THEY NEED US AROUND THE WORLD. OUR RESPONSES TO THE RECENT HURRICANES IS AN EXAMPLE OF THIS. HAVE A LOOK AT THIS VIDEO.>>WALMART OPENED ITS STORES UP TO MYSELF AND ALL THE OTHER OFFICERS AND FIRST RESPONDERS IN THE AREA. THAT WAS BIG FOR US!>>I’VE BEEN A WALMART ASSOCIATE FOR 17 YEARS. AND EVERY TIME THERE’S A DISASTER, WALMART IS ALWAYS THERE. I’LL DO WHATEVER I HAVE TO HELP THESE GUYS. THIS IS HOME. THIS IS WHERE WE DO, THIS IS WHAT WALMART DOES.>>AS WE’RE ALL WORKING THROUGH THE RECOVERY FROM HURRICANE HARVEY AND PREPAREDNESS EFFORTS AHEAD OF HURRICANE IRMA, THE MORE WE CAN DO BEFORE THE STORM, THE FASTER WE CAN RECOVER.>>WALMART SAYS IT IS SENDING 1300 SEMI TRUCK LOADS OF BOTTLED WATER TO FLORIDA.>>SERVING THE COMMUNITY IN THE GULF AREA.>>OPENED UP POP-UP DONATION AREAS THAT ARE SERVING AS TEMPORARY SHELTERS FOR THOUSANDS OF PEOPLE.>>THE WALMART FOUNDATION HAS COMMITTED $565,000 TO HELP ORGANIZATIONS PROVIDING IMMEDIATE RECOVERY AND RELIEF TO MEXICO.>>WALMART AND THE WALMART FOUNDATION WILL GIVE $5 MILLION IN CASH TO ASSIST IN RECOVERY EFFORTS THERE IN PUERTO RICO.>>THIS IS JOHN’S FIRST TIME TO PRESENT TO YOU ALL AS C.E.O. OF SAM’S CLUB. GIVE HIM GRIEF IF YOU WANT TO. I WANTED TO INTRODUCE HIM. HE STARTED WITH THE COMPANY IN 1993 AND BEEN WITH US FOR 24 YEARS. HE’S BEEN A BUYER, GENERAL MERCHANDISE MANAGER, STORE MANAGER, MARKET MANAGER, LED OPERATION. HE’S LED THE SOURCING AREAS IN SAM’S AND PRIVATE BRANDS. HE’S WORKED IN SAM’S PREVIOUSLY IN INTERNATIONAL AND IN WALMART. HE WAS OUR CHIEF MERCHANT IN WALMART CHINA UNTIL WE ASKED HIM TO COME OVER AND LEAD ALL THE MERCHANDISING FOR SAM’S AND THEN EARLIER THIS YEAR, WE PROMOTED HIM TO C.E.O. HE’S HAD A LOT OF JOBS AND TAKING AN OBJECTIVE LOOK AT SAM’S CLUB AND OFF TO A GREAT START, MAKING SOME CHANGES AND LOOKING FORWARD TO SEEING WHAT’S GOING TO HAPPEN AT SAM’S UNDER HIS LEADERSHIP.>>GOOD MORNING! DOUG, THANKS FOR THE INTRO. FIRST, IT’S A PRIVILEGE TO BE HERE TODAY TO REPRESENT THE TEAM AT SAM’S CLUB AND IT’S GREAT TO CONNECT WITH A LOT OF YOU. I SEE MAGGIE IN THE BACK AND I WAS THINKING ABOUT WALKING CLUBS EIGHT OR NINE YEARS AGO IN NEW YORK. WE GOT TO WALK STORES IN CHINA A COUPLE OF YEARS AGO AS WE WERE LAUNCHING MOBILE eCOMMERCE. I’M ALWAYS IMPRESSED WITH THE KNOWLEDGE THAT YOU HAVE OF OUR BUSINESS AND HOW CLOSE YOU ARE TO THE DETAILS OF OUR BUSINESS. WHICH MAKES IT EASY TO HAVE THESE CONVERSATIONS. SO LET ME START WITH A FEW NUMBERS. LIKE YOU SAW IN THE VIDEO, NET SALES ARE UP 2.6% FOR THE FIRST HALF. TRAFFIC INCREASED BY 1.6% AND WE MARKED THE SIXTH QUARTER OF POSITIVE GROWTH. SO THE SIXTH STRAIGHT QUARTER OF POSITIVE GROWTH. AND THE MEMBER’S MARK BRAND IS NEW AN $11 BILLION BRAND. WE THINK THESE ARE GOOD RESULTS. WE CAN DO BETTER AND MUST DO BETTER. AND AS YOU KNOW, OUR TRAJECTORY HAS BEEN RELATIVELY FLAT FOR SEVERAL YEARS. EVEN AS THE WAREHOUSE CLUB, THE CHANNEL HAS CONTINUED TO GROW. AND SO THAT’S WHY I’M GOING TO CALL THE QUESTION PROBABLY ON YOUR MIND. WILL THE NEW TEAM AT SAM’S CLUB MOVE THE NEEDLE IN A MEANINGFUL WAY? AND I WANT YOU TO KNOW THE ANSWER IS YES. WE WILL MOVE THE NEEDLE AND WE’RE GOING TO ACCELERATE GROWTH IN SAM’S CLUB IN A MEANINGFUL WAY. WE’VE GOT A CLEAR VISION FOR WHERE WE’RE GOING. AND WE’RE MAKING PROGRESS. TO START WITH, WE’VE GOT AN EXPERIENCED LEADERSHIP TEAM AND WE’RE MOVING WITH SPEED. OUR CHIEF OPERATING OFFICER IS A 25-YEAR ASSOCIATE. SHE’S LED OPERATIONS ALL OVER THE COUNTRY AND THE WORLD. AND SHE JOINS US FROM WALMART INTERNATIONAL. OUR CHIEF MERCHANT WAS LEADING A BIG PART OF THE U.S. FOOD BUSINESS BEFORE HE CAME OVER AND HE’S GOT A LONG CAREER IN RETAIL AND MERCHANDISING AND CONSULTING. AND THEN OUR C.E.O. OF SAMSCLUB.COM WHO IS THE HEAD OF MEMBERSHIP AND THE MARKETING TEAM HAS A WEALTH OF EXPERIENCE IN eCOMMERCE AND TECH. AND HE’S BUILT A TEAM WITH PEOPLE LIKE EDDIE GARCIA AND THEY’VE ALREADY MADE GREAT PROGRESS THIS YEAR SETTING UP AND LEADING PRODUCT ACCELERATION TEAMS THAT ARE HELPING MOVE US FORWARD. SO TOGETHER, WE’RE THINKING DIFFERENTLY. WE’RE WORKING IN NEW WAYS. WE’RE TAKING MORE RISKS. AND WE’RE BECOMING MORE AGILE. AND THE RESULT OF ALL THIS IS REALLY A GREAT REINVIGORATION OF . AND WHILE EVERYTHING WE’RE DOING IS INTENDED TO IMPROVE THE U.S. CLUB BUSINESS, THESE CHANGES ARE ALSO BENEFITTING SAM’S CLUB ALL AROUND THE WORLD. SO LET ME SHARE A FEW EXAMPLES OF THINGS THAT ARE GIVING US CONFIDENCE. IF YOU THINK BACK A COUPLE OF YEARS AGO, WE STARTED SIMPLIFYING AND THEN PRIORITIZING OUR PRIVATE BRAND MEMBER’S MARK. AND PAM AND HER TEAM, THEY’RE DOING JUST A TERRIFIC JOB. JUST TWO YEARS AGO, OUR PRIVATE BRAND PENETRATION WAS JUST 17%. AND TODAY, THE BRAND ACCOUNTS FOR NEARLY 23% OF OUR BUSINESS. SO THAT’S A SIGNIFICANT INCREASE IN JUST TWO YEARS. AND WE BELIEVE WE’VE GOT A LOT OF ROOM TO GROW. WE ALSO STARTED TO REFOCUS ON OUR FRESH FOOD BUSINESS. AND SO FAR, THE RESULTS, THEY’RE REALLY ENCOURAGING. ED WHO YOU MET LAST NIGHT, HE AND HIS TEAM HAVE RECHARGED OUR EFFORTS. JUST TWO YEARS AGO, WE HAD NEGATIVE GROWTH IN FRESH FOOD AND RECENTLY, WE HAVE BEEN RUNNING COMPS AS HIGH AS 5%. GOOD PROGRESS THERE. OUR SAMSCLUB.COM BUSINESS CONTINUES TO GROW, eCOMMERCE SALES ARE UP IN THE FIRST HALF BY 27%. BUT I THINK MOST EXCITING FOR THE BUSINESS IS YEAR TO DATE, WE’RE UP OVER SEVEN MILLION VISITS WHICH TELLS US WE’RE ON THE RIGHT TRACK. SO WE’RE SIMPLIFYING EVERYTHING WE DO. WE’VE INVESTED IN TECHNOLOGY AND FOUND NEW WAYS OF WORKING AND THAT ALLOWS US TO RUN A FLATTER MORE EFFICIENT OPERATION. WE’VE CHANGED OUR CHECKOUT PROCESS AND IN THE LAST FIVE MONTHS, OUR MEMBER SATISFACTION SCORES FOR SPEED OF CHECKOUTS HAVE IMPROVED BY NEARLY 7%. SO WE’RE MAKING SOME GREAT PROGRESS THERE. WE’VE ALSO LAUNCHED A NEW PROTOTYPE FOR THE FRONT END AND IT’S IN ABOUT 30 CLUBS AND THE PROTOTYPE IS CUTTING TRANSACTION TIMES AT THE FRONT BY HALF. WE’RE CUTTING TIMES IN HALF. OUR SCAN AND GO BUSINESS WHICH IS A COMPLETELY MOBILE TECHNOLOGY, AS YOU KNOW, OUR USAGE OF THE DEVICE HAS DOUBLED THIS YEAR AND IT’S A REALLY MEANINGFUL PART OF THE BUSINESS. WE’VE DONE OVER A BILLION DOLLARS OF SALES SINCE LAUNCH AND KEEP SEEING MORE AND MORE PEOPLE USE IT EVERY WEEK. ONE EXAMPLE OF SIMPLIFICATION I WANT TO TALK TO YOU ABOUT IS OUR NEW MEMBERSHIP SIGN-UP PROCESS AND THAT’S SOMETHING WE’LL LAUNCH LATER THIS YEAR. IF YOU GO INTO A CLUB TODAY, IT COULD TAKE ANYWHERE FROM EIGHT TO 28 MINUTES FOR YOU AS A NEW MEMBER TO GET A CARD AND MEMBERSHIP AND START SHOPPING THE CLUB. IT TAKES TWO DIFFERENT SYSTEMS, IT TAKES FIVE PIECES OF HARDWARE. AND SO OUR NEW PROCESS TAKES ABOUT 40 SECONDS AND IS ONE PIECE OF EQUIPMENT. LET’S TAKE A LOOK. SO WHAT YOU SEE ON THE RIGHT-HAND SIDE, OUR NEW PROCESS, WE HAVE AN ASSOCIATE WITH A NEW MEMBER. THE MEMBER WALKS UP. QUICK PHOTO WITH THE iPAD. WE NEED A DRIVER’S LICENSE, CREDIT CARD. SHE’LL SWIPE THE CARD. HAND IT OVER TO THE MEMBER. AND THEN HE’S OFF TO SHOP. AND YOU CAN SEE WE HAVE IT IN 43 SECONDS. ON THE LEFT-HAND SIDE, THE OLD PROCESS IS AN EXCHANGE BETWEEN THE MEMBER, THERE ARE A LOT OF QUESTIONS. THERE’S LOTS OF TYPING. AND THEN YOU’RE GOING TO SEE HERE IN A MINUTE HAVE TO MOVE OVER TO ANOTHER PIECE OF EQUIPMENT TO ACTUALLY USE THE P.O.S. SYSTEM. SO IT’S AN EXAMPLE OF HOW PRODUCT ACCELERATION CAN WORK. SO YOU THINK ABOUT IF WE HAVE AN EIGHT MINUTE PROCESS ONE APPROACH WOULD BE LET’S TRY TO REDUCE IT TO SEVEN BUT THE TEAM LOOKED AT WHAT’S THE BEST WAY IT CAN DO THIS AND MAKE THINGS EASIER FOR THE MEMBER. IT’S AN EXAMPLE OF SOME OF THE WAY THAT WE’RE TRYING TO MOVE FORWARD. SO NOW I WANT TO SHIFT TO WHERE WE’RE GOING. AND IF I CAN LEAVE YOU WITH ONE POINT TODAY. THE POINT THAT I WANT YOU TO TAKE AWAY FOR THIS BUSINESS IS A POINT OF FOCUS. AND WE’RE FOCUSING THE BUSINESS TO ACCELERATE GROWTH. AND MOST IMPORTANTLY, WE’RE NARROWING OUR TARGET MEMBER AND WE’RE TAKING MORE STEPS TO BECOME SPECIAL TO THAT MEMBER. OVER THE YEARS, WE’VE HAD AT SAM’S CLUB A NUMBER OF STRATEGIC SHIFTS. WE TRIED TO — WE TRIED TO SERVE A WIDE VARIETY OF INCOMES, SOME OF WHICH WAS DRIVEN BY OUR REAL ESTATE LOCATIONS. AND WE’VE ATTEMPTED TO SERVE TOO MANY TYPES OF SMALL BUSINESS MEMBERS. AT ONE POINT, WE HAD 16 DIFFERENT MEMBER SEGMENTS. AND THINK ABOUT THAT WITH A LIMITED SKU OFFERING, WE WEREN’T SERVING ANY OF THE SEGMENTS VERY WELL. I WANT TO GIVE YOU AN EXAMPLE. A COUPLE OF YEARS AGO, I ATTENDED A LINE REVIEW WITH ONE OF OUR BUYERS AND THIS BUYER WAS THE FROZEN POULTRY BUYER. AS WE STARTED WALKING HER A ASSORTMENT AND THE ITEMS SHE CHOSE, BIG ITEM I WANT TO TALK ABOUT, THIS IS FOR BUSINESS RESALERS AND THE NEXT ITEM IS FOR OUR FOOD SERVICE MEMBERS. NEXT ITEM IS FOR THE C.E.O. MOMS AND THIS ITEM IS FOR SOCIAL COUPLES AND THIS WENT ON AND ON. THINK ABOUT IT. THERE ARE NOT THAT MANY PARTS OF A CHICKEN. SO YOU GOT TO BACK UP AND SAY I THINK WE’VE COMPLICATED THIS AND WHAT WE WANT PEOPLE TO DO BY NARROWING THE FOCUS ON MEMBERS IS TAKE AN ASSIGNED CATEGORY AND BE THE VERY BEST CATEGORY BEARER THEY CAN BE AND BUY THE RIGHT ITEMS THAT WORK FOR THE MEMBER. SO MOVING FORWARD, WE’RE GOING TO BE VERY CLEAR ON THE MEMBER TARGET. SO AS YOU KNOW TODAY, AND YOU LOOK AT THE SLIDE, WE’VE GOT TWO TYPES OF MEMBERS. WE HAVE SAVINGS MEMBERS. WE HAVE BUSINESS MEMBERS. BUT WHEN WE DUG IN THE DATA, WHAT WE SEE IS THERE’S A LOT OF OVERLAP WITH HOW THEY SHOP. AND FOR NEW SIGNUPS, ABOUT 74% OF OUR MEMBERS WHEN THEY SIGN UP, THEY CHOOSE TO BE SAVINGS MEMBERS. BUT WHEN WE LOOK AT THE DATA, 95% OF WHAT MEMBERS BUY IS ACTUALLY FOR THE HOUSEHOLD. IT’S REALLY A SAVINGS MEMBER BASKET. NOW, WE DO HAVE STRONG RELATIONSHIPS WITH BUSINESSES LIKE RESTAURANTS, SMALL OFFICES, BUT AGAIN, WHEN YOU TAKE FUEL AND TOBACCO OUT OF OUR BUSINESS, 95% OF THE BASKETS LOOK LIKE THEY’RE PURCHASED FOR THE HOUSEHOLD. SO WE REALLY HAVE ONE MEMBER. AND I WANT YOU TO THINK OF THEM LIKE THIS. IT’S A BUSY FAMILY, TYPICALLY LIVING IN THE SUBURBS WITH ONE OR TWO INCOMES AND MAKE SOMEWHERE BETWEEN $75,000 AND $125,000 A YEAR. THEY MAY OWN A COUPLE OF CARS. THEY MAY BE EMPLOYED OR SELF-EMPLOYED. THEY MAY OWN A SMALL RESTAURANT OR RUN A SMALL OFFICE AND PURCHASE A FEW THINGS FOR THEIR BUSINESS. BUT THIS IS A BIG SEGMENT OF OUR BUSINESS CURRENTLY AND IT’S GROWING. THEY LIKE US. AND THE NUMBERS SHOW IT. YEAR TO DATE, THEY HAVE THE HIGHEST GROWTH IN CLUB TRAFFIC AND THEY ALSO HAVE THE HIGHEST ON-LINE SALES PENETRATION OF ANY MEMBER SEGMENT WE SERVE. AND WE BELIEVE IF WE CAN BECOME MORE SPECIAL TO THIS MEMBER GROUP, WE CAN EARN A GREATER SHARE OF THEIR WALLET. SO WE’RE MOVING FORWARD AND WE’RE MOVING QUICKLY TO ALIGN THE ENTIRE BUSINESS AROUND THIS MORE NARROW FOCUS. WE’RE EVALUATING EVERYTHING FROM OUR MEMBERSHIP OFFERING TO OUR MERCHANDISE CATEGORIES TO OUR LOCATIONS AND WE’VE GOT SOME IMPORTANT CHOICES TO MAKE IN THE FUTURE. SO WHAT’S NEXT? IT’S TO IMPROVE OUR VALUE PROPOSITION TO THAT MEMBER, TO PRESENT A UNIQUE OFFERING AND AN EXPERIENCE THAT WORKS WITH THEIR LIVES. AND I CONSTANTLY TALK TO OUR TEAM ABOUT THREE PRIORITIES. PEOPLE, PRODUCT AND DIGITAL. AND BY PEOPLE, WE MEAN MAKING SAM’S CLUB AN EVEN BETTER PLACE TO WORK AND EMPOWERING OUR ASSOCIATES TO SERVE MEMBERS, HOW ASSOCIATES ARE HIRED, DEVELOPED AND TRAINED TO ENGAGE OUR MEMBERS IS CREDIT CRITICAL TO THEIR SUCCESS AND OURS. AND WE’RE ENCOURAGING CURIOUSITY, OWNERSHIP AND NEW IDEAS. BY DIGITAL, WE MEAN USING TECHNOLOGY TO MAKE SAM’S CLUB A BETTER PLACE TO SHOP AND BETTER PLACE TO WORK. WHETHER IT’S AUTO RENEWING YOUR MEMBERSHIP, OR OFFERING EASY REORDER ON THE APP, WE’LL CONTINUE TO REDUCE FRICTION FOR MEMBERS. NOW, EARLIER, DOUG MENTIONED THE WORKPLACE APP. WE USE THE APP ALL OVER THE BUSINESS AND WE USE IT FOR COLLABORATION, WE USE IT FOR COMMUNICATION. AND EARLIER THIS YEAR, WE EXPANDED THE APP TO OUR ENTIRE FRESH FOOD TEAM IN THE FIELD INCLUDING THE ASSISTANT MANAGERS WHO RUN FRESH FOOD IN THE BUSINESS AND WHAT YOU’D SEE IS THEY’RE USING THE APP FOR MANAGING INVENTORY. THEY’RE SHARING IDEAS. THEY’RE DRIVING COMPETITION AROUND SALES. AND THE THING THAT I SAY EVERY WEEK IS I’M SO IMPRESSED BY THE PRIDE OUR ASSOCIATES SHOW IN THEIR WORK. THERE’S NOTHING BETTER THAN COMING IN ON A MONDAY AND SEE 20 OR 30 OR 40 PHOTOS OF THE GREAT THINGS THE ASSOCIATES ARE DOING IN THE FIELD AND HOW PROUD THEY ARE OF THE WORK. SO IT’S JUST AN EXAMPLE OF HOW DIGITAL CAN HELP US ACCELERATE. BUT WHAT I REALLY WANT TO FOCUS ON TODAY IS PRODUCT. WE’RE A WAREHOUSE CLUB. AND THINK ABOUT IT. PEOPLE DON’T COME INTO US FOR A FANCY ENVIRONMENT OR THE WHITE GLOVE SERVICE. THEY COME IN FOR ITEMS. AND HAVING BEEN A MERCHANT AT SAM’S CLUB FOR MANY YEARS, I CAN TELL YOU THE WAY YOU WIN IN THIS CHANNEL IS YOU HAVE THE BEST ITEMS. YOU’VE GOT TO HAVE THE BEST ITEMS AND WE’VE GOT TO GET THAT RIGHT AND THE KEY TO IT IS THE MERCHANT TEAM. WE’RE RAISING THE BAR ON TALENT AND EFFECT GETTING INTO THE DETAILS OF EVERY ITEM AND EVERY PALLET AND WE’RE PRESENTING AN ASSORTMENT THAT’S ON TREND. WE’RE BUILDING MOMENTUM IN FRESH. WE KNOW IT DRIVES TRAFFIC AND HAS A HIGH MARGIN. WE’VE PUT TEAM LEAD POSITIONS IN THE CLUBS WHERE WE’VE GOT NEW TRAINING PROGRAMS TO DEVELOP FRESH EXPERTS AND WORKING ON FRESH FOOD SOURCING AND THIS WORK HELPS US WITH A BROADER CORPORATE STRATEGY OF WINNING FRESH ALL AROUND THE WORLD. AS I MENTIONED EARLIER, WE’RE LEANING INTO MEMBER’S MARK AND THIS GIVES US AN OPPORTUNITY TO DIFFERENTIATE OURSELVES AND OFFER SUPERIOR QUALITY, GREAT PRODUCTS THAT CEMENT SHOPPER’S LOYALTY AND THE BRAND RESONATES WELL BEYOND THE U.S. SO WHETHER YOU’RE IN THE CLUBS IN MEXICO OR CHINA OR OUR PARTNERSHIP WITH JD.COM IT’S DRIVING GROWTH THROUGH THE ENTIRE COMPANY. LAST NIGHT AT DINNER, EVERYTHING YOU ATE FROM THE CLUB, EVERYTHING YOU ATE CAME FROM THE CLUB. FROM THE BEEF TENDERLOIN TO THE CRAB CAKES TO THE SHRIMP, IT ALL CAME FROM THE CLUB AND YOUR FEEDBACK LINES UP WITH WHAT WE’RE HEARING FROM OUR MEMBERS. THEY’RE DELIGHTED BY THE QUALITY AND THE SCOPE OF THE OFFERING. NOW, FOR THE HOLIDAYS, WE’RE FOCUSED ON GETTING — FOCUSED ON DELIVERING EXCITING ITEMS YOU CAN’T GET ANYWHERE ELSE. WE’VE GOT GREAT ITEMS LIKE WE’VE GOT MEMBER’S MARK CHRISTMAS DECOR. THE VIKING COOKWARE. COOKIES FROM EUROPE. OVER ON THE SIDE, YOU SEE THE COZY THROW. AND I’M TELLING YOU, IT’S A GREAT LINE-UP AND ONE OF THE BEST I’VE SEEN IN YEARS. THAT’S WHAT’S GOING TO MAKE THE DIFFERENCE FOR US. GREAT ITEMS IN A MEANINGFUL VALUE THAT APPEAL TO OUR TARGET MEMBER YOU CAN’T GET ANYWHERE ELSE. SO LET ME LEAVE YOU WITH THESE KEY TAKEAWAYS. FIRST, WE’VE GOT A FOCUS STRATEGY TO ACCELERATE GROWTH AND WE HAVE AN OPPORTUNITY TO GROW BY SERVING ONE MEMBER. WE’RE GOING TO LEAD WITH AGILE TECHNOLOGY AND WE ARE GOING TO WIN WITH MERCHANDISING. SO ALONG THE WAY, WE’LL SHOW YOU THE PROGRESS THROUGH RESULTS. WE’VE GOT A TERRIFIC TEAM. I KNOW THEY’RE UP FOR THE CHALLENGE. WE’RE LOOKING FORWARD TO WHAT’S NEXT. THANKS FOR THE TIME AND I’LL SEE YOU IN Q&A THIS AFTERNOON. THANKS.>>GOOD MORNING, EVERYBODY! IT IS GREAT TO BE HERE AND LIKE BRETT, I’M JUST ABOUT COMING UP TO MY 18TH ANNIVERSARY WITH WALMART. ALWAYS IN INTERNATIONAL. AND I HONESTLY DO NOT THINK THERE’S BEEN A BETTER TIME TO BE IN THIS BUSINESS. IF YOU ONLY REMEMBER THREE WORDS FROM THE NEXT 20 MINUTES OR SO, I’D LIKE YOU TO REMEMBER STRATEGY, MOMENTUM AND LEVERAGE. I THINK YOU’LL SEE WE HAVE A VERY CLEAR AND CONSISTENT STRATEGY IN INTERNATIONAL. IT HASN’T CHANGED THAT MUCH OVER THE LAST THREE YEARS. THAT’S DRIVING GREAT ALIGNMENT FOR OUR BUSINESS. BUT WHAT I’LL TALK A BIT MORE ABOUT, WE HAVE A CLEARER THAN EVER UNDERSTANDING OF OUR ROLE IN THE PORTFOLIO IN THE CORPORATE PORTFOLIO. BUT ALSO THE ROLE OF THE INDIVIDUAL COUNTRIES WITHIN OUR PORTFOLIO. IN TERMS OF MOMENTUM, WE’VE GOT REALLY GOOD MOMENTUM. WE’VE DELIVERED CONSISTENT RESULTS. YOU’LL SEE WE’LL TALK ABOUT IT IN A BIT MORE DETAIL LATER. WE’RE NOW ON 14 CONSECUTIVE QUARTERS OF SEEING COMP SALES IMPROVE. WE’VE DONE THAT PROFITABLY AND ALSO BROADBASED A LOT ACROSS MOST OF THE METRICS. MAYBE THE MOST EXCITING OF THE THREE IS LEVERAGE AND I’LL TOUCH ON THIS THROUGHOUT THE NEXT 20 MINUTES. BUT THERE’S MORE WORK GOING ON IN TRYING TO WORK OUT HOW INTERNATIONAL CAN LEVERAGE OFF THE CORE U.S. BUSINESSES AND HOW THE BUSINESSES CAN BENEFIT FROM HAVING AN INTERNATIONAL PORTFOLIO THAN EVER BEFORE AND I THINK THAT GIVES US A UNIQUE ADVANTAGE VS. A LOT OF THE COMPETITION THAT WE HAVE IN THE U.S. AND AROUND THE WORLD. SO THE STRATEGY, YOU’LL REMEMBER, IS PRETTY CONSISTENT. FOUR BIG PILLARS, SO FIRST OF ALL, WE ACTIVELY MANAGE OUR EXISTING PORTFOLIO AND DELIVER DISCIPLINE, GROWTH THROUGH DIFFERENTIATED CUSTOMER VALUE PROPOSITIONS AND WE WANT TO BE THE LOWEST COST OPERATOR WHEREVER WE ARE AND WE WANT TO MAKE SURE WE BUILD STRONG FOUNDATIONS. WE’VE WORKED VERY HARD TO UNDERSTAND OUR ROLE IN THE PORTFOLIO. WE THINK OF IT IN INTERNATIONAL AS DOING THREE THINGS. WE HAVE ACCESS TO A LOT OF HIGH GROWTH MARKETS AROUND THE WORLD. SO WE HAVE TO BE A GROWTH ENGINE. SO OUR FIRST AND FOREMOST ROLE IS TO GROW AHEAD OF THE BUSINESS AND DELIVER CASH GROWTH. BUT WE ALSO HAVE TWO OTHER REALLY IMPORTAN ROLES TO PLAY IN THIS CORPORATION. SECOND IS TO DELIVER TALENT. AND IT’S ONE OF THE THINGS I THINK WE UNDERESTIMATE. THERE’S A MILLION PEOPLE WORKING THE INTERNATIONAL BUSINESS. WE’VE PLACED OVER 25 OFFICES BACK INTO THE U.S. BUSINESS AND THEY MAY BE ASSOCIATED WHO HAVE GONE OUT AND GOTTEN EXPERIENCE AND COME BACK TO THE U.S. CORE BUSINESSES OR STARTED INTERNATIONAL AND GONE INTO THE U.S. BUSINESS. WHAT OTHER BUSINESS AROUND THE WORLD HAS THE OPPORTUNITY TO GIVE PEOPLE THAT SORT OF EXPERIENCE OR HAVE THAT BREADTH OF TALENT YOU CAN ACCESS FROM? THAT’S A HUGE COMPETITIVE EDGE. THIRD AREA IN I.P. AND IDEAS. WE RUN OVER 60 DIFFERENT BUSINESSES AROUND THE WORLD. AND AGAIN, IN TERMS OF OUR CORE BUSINESS, WHERE ELSE CAN YOU DIP INTO THAT DIVERSITY OF BUSINESS AND EXPERTISE? AND I ALWAYS JOKE WITH DOUG, QUITE OFTEN, IT’S VERY RARE ACTUALLY THERE’S A PROBLEM THAT WE FACE IN THE U.S. THAT SOMEONE HASN’T SOLVED SOMEWHERE OUT IN THE INTERNATIONAL BUSINESS THROUGH THE SMALL ENTREPRENEURAL MARKETS SO THREE DISTINCT CONTRIBUTIONS TO THE CORPORATION. IN TERMS OF OUR HALF YEAR PERFORMANCE, IT WAS A REALLY STRONG FIRST HALF. NET SALES WERE UP 3.2%. NOW, THAT EXCLUDES THE IMPACTS OF SOME OF THE DISPOSALS, SUBURBIA AND YIHAODIAN AND 1.6% INCLUDING THOSE. BUT WE SEE CONTINUED SALES MOMENTUM AND I’M PARTICULARLY ENCOURAGED THAT MOMENTUM IS COMING FROM BOTH WALMEX AND CANADA. WALMEX HAD A 5.5 COMP IN THE FIRST HALF. 10TH CONSECUTIVE QUARTER OF OUTPERFORMING THE INDUSTRY IN MEXICO. AND THAT BUSINESS REALLY DOES GO FROM STRENGTH TO STRENGTH. IF YOU SAW THE RELEASES THIS MONTH, OVER 10% COMP IN THE LAST RELEASES. SO VERY STRONG IN MEXICO. CANADA, 2% COMP. AND MUCH MORE MUTED MARKET BUT VERY STRONG. THING I’M MOST ENCOURAGED IN CANADA, IN THE LAST FEW MONTHS, THEIR TONNAGE GROWTH IS AHEAD OF THE VALUE GROWTH. VERY STRONG IN CANADA. U.K., AS YOU KNOW, HAS BEEN A TOUGH, TOUGH MARKET. WE’RE SEEING A REALLY NICE IMPROVEMENT THERE. FIRST HALF, COMPS WERE 1.8% POSITIVE. THAT’S RUNNING AGAINST MINUS SEVEN FROM LAST YEAR. IF YOU’VE LOOKED AT SOME OF THE MORE RECENT MARKET SHARES, YOU SEE A VERY NICE SHAPE TO IT. WE’VE SEEN REALLY GOOD INCREASES IN TRAFFIC. WE’RE NOW GENERATING THE MOST NEW CUSTOMERS OF ANY OF THE BIG PLAYERS IN THE U.K. WE’RE SEEING A UNIT GROWTH AHEAD OF OUR VALUE GROWTH AND FOR THE LAST TWO SETS OF FOUR-WEEK PERIODS THROUGH NILSEN, WE’RE TAKING VALUE SHARE IN THAT MARKET. REALLY ENCOURAGED BY THE PROGRESS IN THE U.K. ALTHOUGH LOTS TO DO. REALLY EXCITING THINGS HAPPENING IN CHINA. GROWTH IS STEADY THERE. WE’RE REALLY EXCITED ABOUT THE PARTNERSHIP WITH J.D. WE’VE LAUNCHED FLAGSHIP STORES FOR SAM’S CLUB. WE JUST OPENED UP OUR GLOBAL STORE WHICH ALLOWS US TO SHIP PRODUCTS IN FROM AROUND THE WORLD AND ACCESS THE HUGE CHINESE MARKET. BUT PROBABLY MOST EXCITINGLY IS THE PARTNERSHIP WITH NEW DADA, THAT’S THE RAPID DELIVERY MECHANISM. THERE WE HAVE 140 STORES ACROSS CHINA NOW WHERE FROM THE TIME YOU PRESS ORDER ON YOUR APP TO THAT BEING IN YOUR HOME IS LESS THAN AN HOUR. THAT REQUIRES US TO PICK IN 15 MINUTES. THE AMOUNT OF LEARNING WE’RE DOING FROM CHINA WHERE eCOMMERCE IS MOVING SO FAST THEY CAN APPLY TO OUR BUSINESSES IN AND AROUND THE WORLD AND THE U.S., I THINK IS GOING TO BE A SIGNIFICANT COMPETITIVE EDGE IN THE FUTURE. SO REALLY STRONG FIRST HALF. I TALKED A BIT ABOUT MOMENTUM AND THIS CHART SHOULD GIVE YOU AN INDICATION OF THIS. THIS LOOKS AT THE 12 MONTH ROLL-IN COMP NUMBERS SO TAKES OUT SOME OF THE VARIATIONS WITH TIMINGS. YOU CAN SEE FOR THE LAST 3 1/2, FOUR YEARS NOW, WE’VE NOT JUST SEEN POSITIVE COMP GROWTH IN INTERNATIONAL ON A PEG BUSINESS BUT SEEN THAT IMPROVE QUARTER AFTER QUARTER AFTER QUARTER. IF YOU LOOK AT THE RULES DOWN THE SIDE, THEY’RE THE KIND OF THINGS THAT BRETT WILL CHALLENGE US WHEN HE REVIEWS THE BUSINESS QUARTERLY. SO OUR GROWTH IS COMING, IT’S GOOD GROWTH. SO WE’RE GROWING OUR COMP SALES MORE THAN HALF OF OUR GROWTH AND THAT’S COMING A LOT FROM VERY STRONG CAPITAL DISCIPLINE. IF YOU LOOKED UNDER THE HOOD IN INTERNATIONAL, OUR OVERALL CAP X HAS BEEN COMING DOWN HIGH SINGLE DIGITS FOR THE LAST FOUR YEARS. WITHIN THAT, A NEW STORE CAP X HAS BEEN REDUCING ALMOST DOUBLE THAT RATE. WE’VE GOT MUCH MORE EFFICIENT AT HOW WE USE IT. AND THAT’S DRIVING OUR COMP SALES. SO COMP SALES MORE THAN 50% OF GROWTH. OUR SALES GROWTH IS AHEAD OF OUR EXPENSE GROWTH SO WE LEVERAGE NICELY IN THE FIRST HALF. WE’LL LEVERAGE AGAIN IN THE SECOND HALF AND SEE THAT AS A TREND THAT WE’RE GOING TO CONTINUE. OUR PROFIT GROWTH IS AHEAD OF SALES GROWTH AND ACTUALLY THROUGHOUT THIS FOUR YEAR PERIOD, WE’VE DELIVERED PROFIT GROWTH AHEAD OF SALES GROWTH. OUR SALES GROWTH IS AHEAD OF INVENTORY GROWTH AND OUR PAYABLES GROWTH IS AHEAD OF INVENTORY GROWTH. IT’S NOT JUST GOOD MOMENTUM BUT BROADBASED MOMENTUM ACROSS INTERNATIONAL WHICH WE’RE ENCOURAGED BY. LET’S START WITH THE PORTFOLIO. NOW, YOU’VE SEEN US GO THROUGH A NUMBER OF ITERATIONS ABOUT HOW WE THINK ABOUT THE PORTFOLIO. IT’S A DIVERSE PORTFOLIO. WE OPERATE IN 27 COUNTRIES AROUND THE WORLD WITH OVER 50 DIFFERENT FORMATS BUT KIND OF 12 OR 13 CORE FORMATS BUT VERY COMPLICATED. YOU REMEMBER WE DID SOME WORK THREE YEARS OR SO AGO THAT LOOKED AT WHERE IS GROWTH GOING TO COME FROM AROUND THE GLOBE? AND WE HAVE ACCESS IN THE MARKETS WE’RE INTO ABOUT 55% OF GLOBAL GROWTH. THE NEXT THREE MARKETS, RUSSIA, IRAN, VENEZUELA NOT PARTICULARLY ATTRACTIVE. IT GETS TO BE A LONG TAIL AFTER THAT. EARLY ON, WE SAY LOOK, WE’RE HAPPY WITH THE MARKETS WE’RE IN AND RATHER FOCUS ON WINNING IN THOSE MARKETS THAN GOING TO LOTS OF NEW MARKETS. YOU’VE SEEN US INCREASINGLY FOCUS ON WHERE IT MATTERS AND MAKE SOME TOUGH CHOICES. RATHER THAN BRIEFING ON EVERY SINGLE COUNTRY, WE’VE PUT RESOURCES INTO THE ONES THAT MATTERS. THREE YEARS AGO, MEXICO AND CANADA WERE HAVING TOUGH TIMES. THERE ARE BIG PROFITABLE BUSINESSES ADJACENT TO THE U.S. WE LENT IN HARD ON THOSE. AND MADE TOUGH CHOICES IN TERMS OF INVESTMENTS IN OTHER MARKETS AND GOT THOSE BUSINESSES BACK ON TRACK. WHAT WE’VE LOOKED AT OVER THE LAST YEAR OR SO IS ANOTHER WAY OF LOOKING AT THINGS AND REALLY TWO THINGS. WHAT IS THE ROLE THAT THE MARKETS PLAY IN THE PORTFOLIO? THEIR SIZE, THEIR STRATEGIC ADVANTAGE BUT ALSO LOOKING MARKET BY MARKET TO SAY WHAT IS THE UNDERLYING STRATEGIC ADVANTAGE FOR THAT MARKET? SO A GREAT MARKET MIGHT BE ONE LIKE CHILE. WE HAVE A DOMINANT MARKET SHARE. THERE’S A BIG INFORMAL MARKET SO THERE’S ENGINE ROOM FOR GROWTH THAT WILL KEEP GOING. HAS A GOOD BALANCED PORTFOLIO. IT’S VERY WELL POSITIONED AND THEY HAVE A DISTINCT COST ADVANTAGE. THERE’S A MARKET THAT SHOULD BE SUCCESSFUL FOR A PERIOD OF TIME. AND YOU CAN DO THAT EXERCISE ACROSS DIFFERENT MARKETS. WE’RE THINKING OF OUR MARKETS OF THREE BROAD BUCKETS AND TAKE A BIT OF TIME TO TALK ABOUT THOSE OVER THE NEXT FEW MINUTES. FIRST IS A STRONG NORTH AMERICAN CORE. AND IN THERE, WE CONSIDER THE MARKETS ADJACENT TO THE U.S. SO MEXICO, CANADA. OUR FOCUS THERE IS NUMBER ONE TO STRENGTHEN OUR ADVANTAGE. THEY’RE STRONG BUSINESSES. WE WANT TO MAKE SURE THEY REMAIN STRONG AND THERE’S NONE OF THOSE MARKETS WHERE WE CAN’T DO BETTER. SO, FOR EXAMPLE, MEXICO IS STRONG MARKET SHARE OVERALL. WE TEND TO BE A BIT WEAKER IN THE NORTHEAST. WHAT CAN WE DO TO ADDRESS THAT? MEXICO IS VERY GOOD COST LEVERAGE AND PRIMARILY DONE THAT BY GROWING VERY FAST. BUT SOME OF THE DISCIPLINES THAT WE’VE GOT TO CROSS OUR PORTFOLIO AND MARKETS WHERE GROWTH HAS BEEN MORE MUTED LIKE THE U.K., WE CAN HELP THEM BE EVEN BETTER AT MANAGING THE COSTS AND REINVESTING IN PRICE. SO YOU’LL SEE US LEAN INTO THOSE MARKETS TO NOT BE COMPLACENT BECAUSE WE’RE WELL POSITIONED BUT GET EVEN STRONGER IN THOSE MARKETS. SECOND THING WE’LL DO THERE IS FOCUS ON LEVERAGE. WHT YOU’LL HEAR AS YOU GO THROUGH THIS AND HOPEFULLY IN SOME OF THE OTHER SESSIONS WE’RE BUILDING STRUCTURAL LEVERAGE ADVANTAGES. SO WHETHER IT’S ON PRIVATE LABEL, THE FACT THAT JOHN, GREG, MYSELF, ONE DATA BASE OF SPECS, HOW POWERFUL THAT WILL BE TO LOOK ACROSS THE VENDOR BASE AND SEE WHERE THERE ARE OPPORTUNITIES IN TERMS OF WHERE WE SOURCE PRODUCT FROM. OUR GLOBAL SOURCING OPERATION, WE WORK TOGETHER NOW TO LOOK AT COMMODITY SOURCING. SO ITEMS THAT TYPICALLY COME FROM ONE PLACE, OLIVE OIL, TUNA, SHRIMP, THOSE SORTS OF THINGS. SO YOU’LL SEE US BUILD STRUCTURAL WAYS TO LEVERAGE BOTH INTO THE U.S. AND OUT OF THE U.S. ON COSTS. THAT’S THE ROLE OF THE STRONG NORTH AMERICAN CORE. IT’S A BIG CHUNK OF SALES. IT’S ABOVE AVERAGE PROFITABILITY. BUT OBVIOUSLY NOT THE HIGHEST GROWTH MARKETS. COME BACK TO THAT KEY GROWTH MARKETS IN A SECOND. THE REST OF THE PORTFOLIO IS DIVERSIFIED PORTFOLIO. IT’S PRETTY IMPORTANT. ALMOST 50% OF THE SALES. IT HAS ACCESS TO KIND OF MODERATE GLOBAL GROWTH. IT’S SLIGHTLY BELOW PROFIT. WHAT WE’VE LOOKED AT THERE ON THOSE MARKETS IS TWO THINGS. WHAT’S THE ROLE OF THOSE MARKETS? WHAT DO THEY PLAY IN THE BUSINESS? IF INTERNATIONAL IS ABOUT GROWTH, TALENT DEVELOPMENT AND I.P., WHAT SPECIFICALLY ARE THOSE MARKETS DOING TO BRING VALUE TO THE COMPANY? AND SO THAT’S BEEN VERY HELPFUL IN HELPING THE MARKETS FOCUS. SO U.K., FOR EXAMPLE, NOT THE MOST PROFITABLE MARKET BUT IT’S A BIG MARKET FOR US, IT CAN GENERATE CASH. THE WORK THAT THE TEAM HAVE DONE THERE IN IMPROVNG OUR CASH FLOW HAS BEEN PHENOMENAL, HASN’T IT? LAST YEAR WAS OUR BEST MARKET IN TERMS OF IMPROVEMENTS IN CASH FLOW. SO FIRST OF ALL, BE VERY CLEAR WITH THOSE MARKETS ABOUT WHAT THE CONTRIBUTION THAT MAKES THE BUSINESS AND HOLD THEM ACCOUNTABLE TO THAT. SECOND IS LOOK AT THE UNDERLYING STRATEGIC ADVANTAGE OR DISADVANTAGE AND SOLVE THE ISSUES WHERE THEY HAVE THEM. CHILE, VERY STRONG BUSINESS. YOU’LL KNOW AGAINST SOME OF THE OTHERS THERE ARE CHALLENGES AND LOOK FOR WAYS EITHER TO STRENGTHEN OR LOOK FOR PARTNERSHIPS AS WE HAVE DONE IN CHINA TO MAKE SURE THOSE BUSINESSES ARE STRONG AND VIABLE FOR THE FORESEEABLE FUTURE. AND IN TERMS OF THE GROWTH MARKETS I’M GOING TO FOCUS ON CHINA AND REALLY WHAT WE’VE TRIED TO DO IN CHINA AND INDIA, WHICH ARE ONLY 10% OF OUR SALES BUT ACCOUNT FOR THE VAST MAJORITY OF GROWTH THAT WILL OCCUR AROUND THE GLOBE IS MAKE SURE THAT WE, A, HAVE A VERY CLEAR STRATEGY TO WIN AND B, WE PUT THE RESOURCES BEHIND IT TO MAKE SURE THAT WE CAN EXECUTE THAT STRATEGY. SO THREE THINGS TO PICK OUT ON CHINA. FIRST OF ALL, WE’VE REBALANCED THE BUSINESS QUITE SIGNIFICANTLY OVER THE LAST THREE YEARS. WE USED TO HAVE A BUSINESS THAT TRIED TO BE EVERYWHERE IN CHINA. WE GOT A VERY STRONG BUSINESS IN THE CENTRAL SOUTH. WE HAVE MUCH BETTER MARKET SHARES AND NOT SURPRISINGLY, WE HAVE BETTER PROFITABILITY IN THERE. AND YOU’VE SEEN US OVER THE LAST TWO OR THREE YEARS FOCUS ALL NEW INVESTMENT INTO THAT AREA. 90% TO 99% OF THE NEW CAPX IS IN THAT AREA WHERE WE ARE STRONG. WE HAVE A REGULAR CADENCE OF LOOKING AT STORES THAT ARE NOT PERFORMING AND WOULDN’T SURPRISE YOU TO KNOW THAT THE STORES THAT WE’VE ADDRESSED IN THERE ARE PRIMARILY OUTSIDE OF THE AREA. SO YOU SEE THAT BUSINESS RETRENCHING INTO AN AREA WHERE I THINK WE HAVE MUCH GREATER CHANCE OF WINNING MUCH MORE PROFITABLE. SECOND THING THAT WE’VE LOOKED AT IS OUR PROPOSITION WITHIN THE MARKET. AND WE’VE MADE A LOT OF CHANGES TO OUR PORTFOLIO. SO SUPERCENTERS, JUST OPENED A COUPLE OF NEW CONCEPT STORES PROTO80’S. THEY’RE 80,000 SQUARE FOOT ON ONE FLOOR. WHAT WE’RE SEEING IN THOSE WE’RE TAKING SOMEWHERE IN THE REGION OF 40% OF THE SPACE OUT UP TO 50% OF SKUs BUT DELIVERING NOT FAR OFF THE SALES THAT THE OLD ONES DO. THEY ARE SIGNIFICANTLY MORE EFFICIENT THAN THE OLD BOXES. AND WE WILL LOOK AT DIFFERENT FORMATS. IN TERMS OF THE PROPOSITION, YOU’LL SEE A RELATIVELY STANDARD PLAYBOOK. WORKING VERY HARD ON STARTING TO DIFFERENTIATE ON PRICES AND I’M GOING TO TALK ABOUT HOW THAT’S FUNDED IN A MINUTE ACROSS THE WHOLE INTERNATIONAL BUSINESS. BUT IN PARTICULAR, FOCUSING HARD ON FRESH AND PRIVATE LABEL. SO IN FRESH, WE’VE NOW COMPLETED THE BUILD-OUT OF OUR DEDICATED FRESH SUPPLY CHAIN. THAT GIVES US AN ADVANTAGE VS. PRETTY MUCH ANYBODY ELSE IN CHINA THAT WE CAN SOURCE TOGETHER RATHER FROM LOCAL SUPPLIERS AND WE’VE SINCE THAT LANDED, FRESH SALES SEE — SEQUENTIALLY GROWING. THE GREAT THING ABOUT FRESH GROWTH, THAT BRINGS TRAFFIC TO YOUR STORES AND THEREFORE, DRIVES GROWTH ACROSS THE REST OF THE PROPOSITION. PRIVATE LABEL IS VERY UNDERPENETRATED IN CHINA. BUT YOU SEE BUSINESSES DOING WELL ON PRIVATE LABEL AND THERE, WE’VE LENT IN VERY HARD AND TAKEN A LOT OF THE BEST PRACTICE FROM AROUND THE GLOBE AND USE THE GREAT VALUE BRAND THERE AND WE’RE SEEING VERY STRONG DOUBLE DIGIT GROWTH ON PRIVATE LABEL IN CHINA. SO WE’RE FEELING PRETTY GOOD ABOUT THE PROPOSITION THAT WE’RE NOW PRESENTING IN FRONT OF THE CHINESE POPULATION. AND IN THE FINAL ONE IS OMNI CHANNEL. AND WE TOOK A DECISION, AS YOU KNOW, A BIT OVER A YEAR AGO TO SELL YIHAODIAN WHICH WAS PRETTY SMALL FOURTH PLACED AND BUY INTO J.D. AND THAT SO FAR HAS BEEN A GREAT, GREAT PARTNERSHIP. AS I SAY, WE’VE LAUNCHED FLAGSHIP SOURCE FOR SAM’S CLUB. SAM’S IS DOING 5% OF ITS VOLUME ON LINE NOW AND THAT’S GROWING PRETY DRAMATICALLY. WE HAVE A GLOBAL STORE THAT ALLOWS US TO CONNECT PRODUCT FROM AROUND THE WORLD INTO THE CHINESE MARKET AND WE HAVE A SITE ON THERE. WE HAVE A SITE FROM JAPAN. HIGH DEMAND FOR THINGS LIKE JAPANESE DIAPERS IN CHINA. LAST MONTH, WE>>A REAL GAME CHANGER IN TERMS OF SERVICE, SO I FEEL GOOD ABOUT STRAT. THE FINAL THING WITH CHINA IS TALENTS. ONE OF OUR MOST TALENTED LEADERS IS DICK VANDENBERG. HE RAN THE CANADIAN PROCESS, WE PUT DUI RD IN THERE, AND WE HAVE A STRONG TEAM OF TALENT IN CHINA. LET’S GO ONTO THE OTHER PILLAR, PILLAR TWO IS ABOUT DISCIPLINE GROWTH THROUGH THE VALUE PROPOSITION, AND WE LOOKED HARD TO LOOK AT THE FORMTSZ. SLIGHTLY DIFFERENT EXECUTIONS AS YOU GO FROM MARKET TO MARKET. GENERALLY WHAT YOU WILL SEE IS OUR PROTOTYPES ARE GETTING SIGNIFICANTLY SMALLER. WE ARE MAKING CLEAR CHOICES ABOUT WHERE WE THINK THAT THE CUSTOMER WILL SHOP IN THE FUTURE. WE ARE ALWAYS BUILDING ON THE CHANNEL OPERATIONS, AND IN MANY CASES THERE ARE ASSORTMENTS THAT USED TO BE IN STORES THAT WE BELIEVE THAT WE CAN FULFILL ONLINE AND MAKE THE STORES MORE EFFICIENT. TYPICALLY THAT WOULD LOOK LIKE 80,000 SQUARE FOOT PROTOTYPES ARE THE NORM RATHER THAN 120 OR 150. THEY TEND TO HAVE A MORE BIAS TOWARDS FOOD AND CONSUMER BUSINESS THAN THE PREVIOUS ONES. BUT GENERAL MERCHANDISE STILL IS CRITICALLY IMPORTANT TO THOSE BUSINESSES, SO AS THE FOOD DRIVES THE TRAFFIC, THEY WILL BUY MERCHANDISE WITH A HIGHER MARGIN AND THAT GETS THE POSITIVE MIX GOING. SO YOU WILL SEE LOTS OF INNOVATION AROUND THE WORLD IN TERMS OF THE FORMATS BUT BROADLY SMALLER AND MORE FOOD AND CONSUMEALES INTAKE WHICH GIVES US MORE BRIEFING AROUND WHERE THE CUSTOMERS ARE HEADED. THE REST IS THE, LARGELY THE BLOCKING AND TACKLING OF RETAIL. WE ARE SEEING GOOD PROGRESS IN TERMS OF PRICE LEADERSHIP. I AM GOING TO TALK ABOUT THE FUNDING OF THAT, BUT IN ALL THE MARKETS WE ARE SEEING OUR PRICE POSITION IMPROVE AGAINST KEY COMPETITION AND THAT’S STARTING TO DRIVE TRAFFIC. VERY FOCUSED ON FRESH. WE TOOK A DECISION A COUPLE OF YEARS AGO TO START MOVING BACK UP THE SUPPLY CHAIN TO TALK THEM. WE HAVE 58 FOOD UPSTREAMING FACILITIES, SO THOSE ARE PRIMARILY IN DELI, BAKERY, MEAT. THAT’S WHERE WE GO BACK UP THE CHAIN TO LOOK AT THAT. IN SOME CASES IT’S TAKING OUT MIDDLEMEN AND IN SOME CASES IT’S AN OPEN BOOK RELATIONSHIP AND IN SOME CASES WE OWN THE FACILITIES AND WE DO THE MEAT CUTTING OURSELVES BUT WE HAVE A BETTER CONTROL ON THE QUALITY. IT’S TAKING LABOR OUT OF STORES AND IT’S TAKING THE UNPREDICTABILITY OF MULTIPLE PRODUCTION FACILITIES IN AN ERA OF MORE SCRUTINY ON FOOD SAFETY. AND MOST IMPORTANTLY IT’S STARTING TO STRIP THE COST OUT OF OUR FRESH OPERATION. SO AROUND A THIRD OF THE VOLUME& ON THE CATEGORIES COMES THROUGH THE UPSTREAMED OPERATIONS IN PLACES LIKE THE U.K., MUCH HIGHER, AND THAT’S SOMETHING THAT WE WILL CONTINUE TO DRIVE. SEEING GREAT PROGRESS ON PRIVATE BRAND, AND AGAIN THE ADVANTAGE OF A PORTFOLIO, WE HAVE PENETRATION THAT IS RANGE FROM THE MID 40s IN THE U.K. OF PRIVATE LABEL DOWN TO LOW SINGLE DIGITS IN COUNTRIES LIKE CHINA, AND THEREFORE ARE ABLE TO TAKE THE BEST PRACTICE OF THE MARKETS THAT HAVE BEEN DOING THIS A LONG TIME. AND OUR PRIVATE LABEL BUSINESS NOW IS GROWING IN THE 20s. AGAIN, REALLY IMPORTANT BECAUSE IT’S HIGH MARGIN AS THAT GROWS AHEAD OF THE MIX, IT GENERATES FUNDS THAT YOU CAN RE-INVEST IN PRICE. AND FINALLY VERY FOCUSED ON ONLINE GROCERY IN ALL OUR MARKS. FOR ALL THE SAME REASONS THAT MARC SHARED WITH YOU. IT ALLOWS US TO USE OUR EXISTING ASSET BASE, WHICH IS A SIGNIFICANT EDGE VERSUS MOST COMPETITION. AGAIN WE’RE SEEING VERY STRONG GROWTH IN OUR ONLINE GROCERY BUSINESS ACROSS THE MARKETS. SO FEEL GOOD ABOUT THE VALUE PROPOSITION IN MARKETS AND FEEL LIKE WE ARE STARTING TO BUILD A BUSINESS THAT IS STARTING TO GET POSITION FOR WHERE THE CONSUMERS ARE MOVING TO RATHER THAN WHERE THEY HAVE BEEN. AND IN TERMS OF THE LOWEST COST OPERATIONS, A COUPLE OF THINGS TO SHARE. WE KICKED OFF A COUPLE OF YEARS AGO, THE COST OF GOODS REDUCTION PROGRAM, COST ANALYTICS, WHICH WAS ESSENTIALLY A MORE FACT-BASED APPROACH TO OUR NEGOTIATIONS WITH VENDORS, WHETHER THEY WERE BIG BRANDED OR PRIVATE LABEL VENDORS, AND WE HAVE SEEN GOOD SUCCESS IN TERMS OF IMPROVING THE COST OF THE GOODS THAT WE PROCURE. SO THAT PROGRAM IS NOW ROLLED OUT TO ALL THE MARKETS. WE ARE SEEING REALLY GOOD PROGRESS IN TERMS OF HOW THAT’S HELPING US REDUCE THE COST OF GOODS. SOURCING IS EXCITING. SO INTERNATIONAL RUN SOURCING FOR THE WHOLE CORPORATION. WE HAVE SPLIT THAT INTO A COUPLE OF BUCKETS. SO ON FOOD COMMODITIES YOU ARE SEEING A LOT MORE COLLABORATION BETWEEN SAM’S U.S., GREG’S BUSINESS AND INTERNATIONAL TO LOOK AT THINGS LIKE TUNA, OLIVE OIL, WHERE IT’S LARGELY SOURCED FROM ONE PART OF THE BUSINESS, TO START TO GET US TO BUY TOGETHER, AND WHERE WE BUY TOGETHER, WE ARE SEEING THE COST SAVINGS AND THE SPECKS ARE BROADLY THE SAME. THE SECOND IS PRIVATE BRAND. PARTICULARLY WE’RE THINKING ABOUT NORTH AMERICAN, ONE OF THE ADVANTAGES OF THAT FROM A SYNERGY PERSPECTIVE IS THE VAST MAJORITY OF PRODUCTION IS NORTH AMERICAN. THEREFORE OUR ABILITY TO LOOK AND COMPARE PRICES BETWEEN CANADA AND IN SOME CASES-MAKERS WITH THE U.S. AND OUR BUSINESSES IS STARTING TO SECURE LOTS OF OPPORTUNITIES WHERE WE CAN CONSOLIDATE THE PRIVATE BRAND, AND RE-INVEST IT IN PRICE. AND FINALLY ON GENERAL MERCHANDISE AND APPAREL WE HAVE SOURCING OFFICES AROUND THE GLOBE. AGAIN MUCH MORE COLLABORATION BETWEEN THOSE UNITS AND HARMONIZING RESPECTS. I TALKED ABOUT STRUCTURAL ADVANTAGES. TWO THINGS, ONE IS ALL THE PRIVATE BRAND ON A SYSTEM CALLED THE HIVE. SO ONE VIEW OF SPECKS, SO WE’RE ABLE TO LOOK AND SEE WHAT ARE THE MINOR DIFFERENCE, WHAT WOULD IT TAKE TO HARMONIZE THOSE AND THE BENEFIT OF DOING THAT. THE SECOND IS BIOCONNECT, WHICH IS A TECH-BASED TOOL THAT MAKES IT EASY FOR THE BUYERS, BOTH IN THAT CORE BUT IN OTHER MARK TO SEE WHAT EVERYBODY ELSE IS BUYING AND LOOK FOR DISCREPANCIES AND THEN START TO COLLABORATE. SO AGAIN NOT JUST OPPORTUNISTIC BUT STRUCTURAL ADVANTAGE IN OUR SOURCING. ON THE SDNA REDUCTION, WE LEVERAGED THE FIRST HALF AND WILL THE SECOND HALF AND I ANTICIPATE THAT CONTINUING. WE ARE SEEING GREAT LEVERAGE IN THE STORES. I THINK WE HAVE DONE A REALLY NICE JOB AS MAKING THE TRADE-OFFS, AND OFTEN YOU CAN SQUEEZE COSTS BUT IF YOU RE-ENGINEER IT OUT BY LOOKING AT THE INVENTORY AND THE ASSORTMENT AND MAKING DISTINCT CHOICES ABOUT CATEGORIES, WE ARE ABLE TO SEE SUSTAINABILITY CHANGES, BUT NOT ONLY, THAT NOT ONLY GIVE US FUNDS TO REINVEST IN PRICE BUT IMPROVE THE PROPOSITION FOR CUSTOMERS. WE HAVE DONE A LOT OF WORK WITH SUPPLY CHAIN. A GLOBAL CENTER OF EXCELLENCE WHICH SHARES THE BEST PRACTICE ACROSS THE MARKETS. OVER THE LAST THREE YEARS WE HAVE TAKEN 20 BASIS POINTS OUT OF THE DISTRIBUTION COST TO SELL. THAT’S BEEN KIND OF, FROM BOTH SIDES OF THE EQUATION, WE ARE MORE PRODUCTIVE IN THE DISTRIBUTION CENTERS, WE DO A LOT OF BENCHMARKING NOW, WITH INTERNATIONAL MARKETS BUT ALSO WITH GREG’S TEAM AND THE U.S., AND IT’S ALSO ON THE TRANSPORTATION SIDE WHERE WE HAVE GOT MORE EFFICIENT AGAIN BY SHARING THE BEST PRACTICE. AND YOU ARE STARTING TO SEE MORE SYNERGY ACROSS GOODS FOR RESALE BY THINKING ABOUT THE NORTH AMERICAN CORE, AND I THINK THAT THE BIG ADVANTAGE ABOUT THIS IS WE HAVE TALKED FOR YEARS, AS LONG AS I CAN REMEMBER IN WAL-MART ABOUT HOW WE LEVERAGE. WE TENDED TO FIND IT’S JUST TOO BIG OF A LEAP TO GO FROM THE U.S. TO INCORPORATE 27 DIFFERENT COUNTRIES THAT HAVE THEIR OWN WAY OF DOING THINGS, AND OFTEN THE PRODUCTION FACILITIES ARE DIFFERENT. BUT THE NORTH AMERICAN CORE IS THE BULK OF THE VOLUME, EASIER TO START GETTING MOMENTUM AND EASIER, AND I THINK YOU KNOW, WITH THE COLLABORATION THAT WE HAVE SEEN FROM BOTH GREG AND JOHN I THINK THAT THIS IS SOMETHING THAT YOU ARE GOING TO SEE GROW AND GROW AND GROW. FINALLY JUST TO TOUCH ON THAT, BUILDING STRONG FOUNDATIONS IS OUR FOURTH PILLAR. I AM REALLY ENCOURAGED BY THE TALENT IN INTERNATIONAL. THEY SPEAK 50 LANGUAGES, 75% OF THE CEOs HAVE WORKED IN DIFFERENT DISCIPLINES AND INDUSTRIES. 100% OF THEM HAVE WORKED IN DIFFERENT DISCIPLINES ACROSS THE RETAILING. 100% OF THEM WORKED AND LIVED IN MORE THAN ONE MARKET, AND THAT BRINGS A LOT OF EXPERIENCE AND OPEN MINDEDNESS TO THE DIVERSITY THAT I THINK IS A HUGE COMPETITIVE EDGE FOR US. AS I SAID AT THE START WE HAVE IMPORTED OR EXPORTED 25 OFFICES BACK INTO THE U.S. BUSINESS. SOME LIKE JOHN WHO GO AWAY AND GET THE EXPERIENCE OF LIVING AND WORKING A VERY DIFFERENT MARKET LIKE CHINA, AND SOME WHO GREW UP IN INTERNATIONAL AND CAME ACROSS TO THE U.S. BUSINESS, BUT IN EVERY CASE WHAT A UNIQUE COMPETITIVE EDGE TO HAVE ACCESS TO OVER A MILLION ASSOCIATES WORKING IN ALL CORNERS OF THE WORLD, OR THE OPPORTUNITY TO GET PEOPLE TO WORK AND GET A DIFFERENT PERSPECTIVE ON THE WAY THE WORLD IS CHANGING SO I FEEL REALLY GOOD ABOUT THE TALENT. GNOME ARE WERE WE EXPORTING THAT BUT THE PIPELINE IS FILLING SO WE SEE MORE TALENT TO COME. IN TERMS OF BUILDING TRUSTS, I SPENT A COUPLE MINUTES TALKING ABOUT COMPLIANCE. I KNOW JEFF, SOMETIMES PEOPLE TALKING YAWNING WHEN YOU TALK ABOUT COMPLIANCE, IT IS NOT JUST A PROTECTIVE BUT AN OFFENSIVE INITIATIE. THE PROGRESS THAT WE HAVE MADE COLLABORATION WITH JEFF’S TEAM TO BUILD PROCESSES AND TALENT THAT MAKES SURE WE GET THINGS RIGHT THE FIRST TIME IS A SIGNIFICANT COMPETITIVE EDGE FOR THIS BUSINESS. ONE OF OUR STREAMS IS HEALTH AND SAFETY, THAT’S STARTING TO PLAY OUT, AND MEXICO, FOR EXAMPLE, IS IN A 30% REDUCTION IN ONE YEAR AN ACCIDENTS, 30%. IMAGINE WHAT THAT DOES FOR THE MORALE AND WHAT IT DOES FOR COST AND WHAT IT DOES FOR PRODUCTIVITY, AND SO IT’S DELIVERING REAL BENEFIT FOR THE BUSINESS. ON FOOD SAFETY IS THE OTHER EXAMPLE, WHICH IS REALLY IMPORTANT, MUCH MORE HIGH PROFILE AROUND THE GLOBE. ON FOOD SAFETY NOW WE USE THE GFSI, GLOBAL FOOD SAFETY INITIATIVE, WHICH IS A HIGH BAR IN TERMS OF EFFICIENCY, AND WITH JEFF’S TEAM’S HELP WE HAVE 90% OF THE PRIVATE BRANDS ARE CERTIFIED, AND 85% ARE GFSI CERTIFIED. THAT MEANS THE CUSTOMERS HAVE MORE SURETY, BETTER QUALITY PRODUCT AND MORE EFFICIENTLY MADE. IT IS A COMPETITIVE ADVANTAGE. ON SUSTAINABILITY, WE CONTINUE TO SEE GREAT PROGRESS. NEARLY 80% OF ALL THE WASTE GENERATED IN OUR STORES IN THE GLOBE IS NOW RECYCLED, AND YOU THINK OF THE FACT THAT WE ARE IN A LOT OF EMERGING MARKETS, THAT’S A TREMENDOUS ACHIEVEMENT WITH AND WE ARE 20% MORE EFFICIENT FROM AN ENERGY PERSPECTIVE THAN FIVE YEARS AGO, AND LIKE THE U.S. WE DO A LOT OF GOOD WORK TO MAKE SURE IT CAN BE RECYCLED AND GO TO OUR PARTNERSHIPS WITH SOME OF THE FOOD RECYCLING AGENCIES, AND THE FINAL POINT IS WE’RE DOING A LOT ON AUTOMATION AND EFFICIENCY. I ALWAYS THINK THERE IS NO BETTER BUSINESS THAN RETAIL TO TAKE ADVANTAGE OF WHAT’S HAPPENING IN TECHNOLOGY BECAUSE IT’S AN OPEN-ENDED BUSINESS. MOST OF THE PROCESSES HAVE AN INFINITE AMOUNT OF WORK. FORECOSTING HAS AN INIF NOT AMOUNT OF WORK, AND ASSORTMENT. YOU COULD WORK 24 HOURS, 365 DAYS A YEAR AND NEVER GET IT DONE BUT WHEN YOU TAKE THE SWEET SPOT OF A BUSINESS WITH YEARS OF EXPERIENCE ABOUT HOW TO DO THINGS, AND YOU GET TECHNOLOGISTS TO CODE THAT AND ACROSS THE BUSINESS TO PEOPLE LESS EXPERIENCE AND HAD MAKE IT WORK FOR YOU 24 HOURS A DAY, 365 DAYS A YEAR, YOU GET SIGNIFICANT IMPROVEMENTS. SO KEY TAKE AWAYS FROM INTERNATIONAL, WE HAVE A VERY CONSISTENT STRATEGY, I THINK THAT WE HAVE A CLEAR VIEW OF OUR ROLE, AND THE ROLE OF OUR MARKETS WITHIN OUR PORTFOLIO, AND WE HAVE VERY STRONG MOMENTUM IN THE BUSINESS. IT IS BROAD-BASED, ALL OF THE METRICS ARE PERFORMING WELL, AND I THINK INCREASINGLY YOU ARE GOING TO SEE AS A BUSINESS IT IS POSITIONED TO WIN THROUGH THE TALENTED, THROUGH THE DIFFERENTIATED CUSTOMER PROPOSITIONS, AND I AM PROBABLY MORE OPTIMISTIC ABOUT INTERNATIONAL AT THIS POINT IN TIME THAN AT ANY STAGE OVER THE LAST FOUR YEARS. SO THANK YOU VERY MUCH AND ENJOY THE REST OF YOUR DAY. [APPLAUSE]>>I HOPE EVERYONE IS EXCITED ABOUT THIS AS WE ARE. ENJOY YOUR SUMMER. THIS IS NOT A PAID ENDORSEMENT IN ANY WAY. JUST A HAPPY MAMA.>>GOOD MORNING. THANK YOU ALL FOR BEING HERE TODAY. YOU KNOW THERE IS A LOT TO SHARE, SO LET ME GET RIGHT TO IT. I WANT TO BEGIN, THOUGH, BY RECOGNIZING MY LEADERSHIP TEAM. I ALSO WANT TO RECOGNIZE ALL OUR ASSOCIATES BECAUSE I CAN TELL YOU THAT NOTHING HAPPENS WITHOUT THEM. THE PROGRESS THAT YOU ARE GOING TO HEAR ME TALK ABOUT IS THE RESULT OF ALL OF THEIR HARD WORK. WE DEVELOPED THE SOUND STRATEGY, WHICH WE EXECUTED EXTREMELY WELL. OF COURSE THE CUSTOMER IS NUMBER ONE. SERVING CUSTOMERS IS WHAT WE DO. IT’S WHY WE GET UP EVERY MORNING. I THINK IF YOU ASK ANYONE AROUND HERE WHAT MY MANTRA IS, I AM PRETTY SURE THAT THEY WILL TELL YOU THAT IT’S THIS. YOU GET ONE POINT FOR TALKING, AND YOU GET NINE POINTS FOR DOING. I BELIEVE THAT SUMS UP THE STORY OF THE U.S. BUSINESS FOR THE LAST 2.5 YEARS. BACK IN 2015 WE TOOK A FEW MINUTES TO TELL YOU ABOUT WHAT WE WERE GOING TO DO, AND THEN WE HAVE SPENT THE REST OF THE TIME DOING IT. THAT’S WORKING. CUSTOMERS ARE RESPONDING. WE HAVE SOME GOOD MOMENTUM. THE CORE STRATEGY THAT WE OUTLINED IN 2015 WILL CONTINUE TO GUIDE OUR FUTURE WORK BECAUSE OUR SUCCESS TO THIS POINT HAS OPENED UP NEW OPPORTUNITIES, WE REFINE OUR STRATEGY ACCORDINGLY TO ENSURE THAT WE ARE POSITIONED TO TAKE FULL ADVANTAGE OF THEM. BEFORE TAKING YOU THROUGH THE FUTURE PLANS, LET ME GIVE YOU A QUICK LOOK AT THE PERFORMANCE FOR THE FIRST HALF OF THE YEAR AND THEN HOW WE PERFORMED OVER THE LAST 2.5 YEARS AGAINST OUR BROADER STRATEGIC GOALS. IN THE FIRST HALF WE SAW POSITIVE METRICS, POSITIVE RESULTS ACROSS KEY METRICS. WE INCREASED THE NET, COMP SALES AND TRAFFIC. OUR STORES, AS YOU HAVE HEARD, ARE CREATING EXPENSE LEVERAGE, WHICH IS ALLOWING FOR STRATEGIC INVESTMENTS AND E-COMMERCE TO CONTINUE TO GAIN TRACTION. WE HAVE MADE SIGNIFICANT PROGRESS ON INVENTORY, WHILE AT THE SAME TIME MAINTAINING HIGH INSTOCK LEVELS FOR CUSTOMERS. WE CONTINUE TO REMOVE FRICTION FROM THE CUSTOMER EXPERIENCE BY EXPANDING PICKUP AND DELIVERY FOR ONLINE GROCERY AND GENERAL MERCHANDISE. IF I HAD TO SUMMARIZE THESE ACCOMPLISHMENTS IN TERMS OF WHAT THEY MEAN FOR THE CUSTOMER, I WOULD SAY THIS. WE ARE MAKING EVERY DAY EASIER FOR BUSY FAMILIES. I AM FEMALE HAPPY WITH OUR REPORT CARD FOR THE PAST 2.5 YEARS. WE TOLD YOU THAT WE WOULD IMPROVE CUSTOMER EXPERIENCE. WE DID. SCHOOLS ERUPT. 1,100 BASIS POINTS FROM 2015. WE TOLD YOU THAT WE WOULD REDUCE INVENTORY AND IMPROVE IN STOCK. WE DID. KEY TWO, COMP STORE INVENTORY IS DOWN. APPROXIMATELY 10% ON THE BASIS FROM TWO YEARS AGO. SCHOOLS FOR UNSHELFED CUSTOMER AVAILABILITY, AND ON-TIME AND IN FULL FROM SUPPLIERS IS UP. WE SAID WE WOULD INCREASE THE QUALITY OF THE PRIVATE BRANDS. WE DID. WE INVESTED IN TALENT AND CAPABILITIES LIKE THE NEW CULINARY AND INNOVATION CENTER TO ELEVATE PRIVATE BRANDS. PRIVATE BRAND PENETRATION IS GROWING, BY FRESH AND GENERAL MERCHANDISE. WE SAID HE WOULD DRIVE EDLC BY NEGOTIATING BETTER MERCHANDISE COSTS. WE DID. WE SAID WE WOULD INVEST IN PRICE. WE DID. WE ARE ON TRACK FOR SEVERAL BILLIONS OF DOLLARS OF INVESTMENT. LET ME BE CLEAR, THOUGH, WE HAVE MADE A SOLID START IN THESE AREAS, AND WE HAVE GIVEN OURSELVES SOME MEMORANDUM, BUT WE’RE NOT FINISHED. THERE ARE A FEW YEARS WHERE WE CAN DO BETTER. EXPENSES. WE HAVE GOTTEN SOME LOW HANGING FRUIT. BUT THERE IS MORE, AND COMP SALES, WE ARE PLEASED WITH 12 CONSECUTIVE QUARTERS OF COMP SALES BUT I CAN TELL YOU THAT WE ARE NOT SATISFIED. MORE NEEDS TO BE DONE. SO AGAIN I THINK THE RESULTS ARE RESPECTABLE AND SHOWS OUR CORE STRATEGY IS WORKING. IT HAS GIVEN US SOME MOMENTUM. THAT STRATEGY WILL CONTINUE TO GUIDE OUR FUTURE. AS ADDS AT THE TOP THE PROGRESS HAS PUT US IN A POSITION TO TAKE THE NEXT STEP. SO NOW WE MUST BEGIN MOVING FROM A MINDSET OF FIXING TO A MINDSET OF LEADING. HERE’S WHAT I MEAN. FIRSTLY, TWO YEARS AGO WE COMMITTED TO RUNNING GREAT STORES. WE WILL CONTINUE TO DO SO WITH A MINDSET OF A LEADER THAT KNOWS FOR US THAT STORES ARE THE FOUNDATION UPON WHICH WE WILL SHAPE THE FUTURE OF RETAIL. SECONDLY WE WILL CONTINUE TO DELIVER VALUE, BUT WITH THE MINDSET OF A LEADER WHO UNDERSTANDS WHILE THE DEFINITION OF VALUE MIGHT CHANGE, THE UNDERLYING PRINCIPLE OF VALUE WILL NOT. IT’S THE ESSENCE OF WHO WE ARE. THIRDLY, WE WILL REMAIN TRUE TO OUR PURPOSE OF BEING GREAT MERCHANTS, BUT WE WILL DO THAT WITH THE INSIGHT THAT AS MERCHANTS WE’RE OPERATING IN A NEW MODEL OF RETAIL, AND IT’S CURRENCY IS TRUST. FOURTHLY, WE WILL CONTINUE TO PROVIDE CONVENIENCE BUT WITH THE MINDSET OF A LEADER WHO UNDERSTANDS THAT FOR TODAY’S CUSTOMER, THE EXPERIENCE WE CREATE HAS TO BE EASY, FAST, FRIENDLY, AND FUN. GETTING THERE WILL REQUIRE US TO REMOVE FRICTION FROM THE SHOPPING EXPERIENCE BY BLENDING ONLINE AND INSTORE TO CREATE A MODEL OF CONVERGED RETAIL. NOW LET’S TAKE A CLOSE LOOK AT OUR PLAN TO WIN. RUNNING GREAT STORES. YOU KNOW CENTRAL TO THE PROGRESS WE HAVE MADE HAS BEEN OUR FOCUS ON INVENTORY. BEFORE I GET INTO THE TECHNICAL SIDE OF WHAT WE DID IN THAT REGARD I WANT TO QUICKLY PAINT A PICTURE THAT UNDERSCORES THE IMPORTANCE OF GETTING INVENTORY RIGHT. BY IMPROVING INVENTORY WE GAVE ASSOCIATES A CHANCE TO SUCCEED. DOING SECTION WORK IS ALMOST IMPOSSIBLE IF YOU CANNOT WALK YOU HAVE NO MOTIVATION TO FIND AN ITEM FOR A CUSTOMER IF YOU THINK IT’S HIDDEN DEEP BEHIND THREE OR FOUR PALLETS. FIXING INVENTORY BREATHES LIFE BACK INTO THE STORE. FROM AN OPERATIONAL STANDPOINT WE ACCOMPLISH THIS BY WORKING ON FLOW FROM DISTRIBUTION CENTERS TO THE STORE. WE HAVE IMPROVED PROCESSES SUCH AS TOP STOCK CUSTOMER AVAILABILITY, FAST SIGNING, AND WE HAVE PROVIDED ASSOCIATES WITH NEW TECHNOLOGIES, SO FAR THIS YEAR WE HAVE RELEASED 12 NEW OR ENHANCE ONES, AND THROUGH THIS COMBINATION OF NEW PROCESSES, SUCH AS THOSE AROUND PRICE CHANGES AND LIKE THE INVENTORY MANAGEMENT TOOL WE HAVE IMPROVED THE PRODUCTIVITY IN STORES. THE VOLUME PRODUCING ITEMS,, INCENTIVIZE OUR ASSOCIATES TO DRIVE SALES HAS BEEN REALLY WELL RECEIVED. AND IN THE 52 DAYS SINCE IT WAS LAUNCHED. 150,000 ITEMS HAVE G-8 SUMMITED. THAT COMPARES TO A TOTAL OF 146,000 SUBMISSIONS FOR ALL OF LAST YEAR. EACH OF THESE AREAS ARE IMPORTANT AND WE’LL KEEP AFTER THEM. BUT THAT WORK WAS DONE WITH A FIXED MENTALITY. WHAT DOES REDUCING INVENTORY MEAN WHEN APPROACHED WITH A LEAD MINDSET? FOR ONE THING WHEN YOU IMPROVE INVENTORY YOU CHANGE THE CUSTOMER EXPERIENCE. FRIDGE IS AN AREA WHERE THIS MAKES THE MOST VISIBLE DIFFERENCE TO CUSTOMERS. ANOTHER EXAMPLE IS THE BACK ROOM. WHEN YOU HAVE EMPTY BACK ROOMS YOU HAVE GOT ADDITIONAL SPACE TO DO THINGS LIKE ROLL OUT ONLINE GROCERY FOR OTHER PICKUP OR DELIVERY. AND IT BECOMES MUCH EASIER TO ACCEPT AND HANDLE RETURNS. AND YOU CAN ALSO THINK ABOUT OFFERING MORE SERVICE THROUGH THE BOX, PERHAPS EXPANDING THINGS LIKE BUILDING OUT OFFERINGS. AS DOUG MENTIONED WE’RE ON TRACK TO BUILD 200 ALASKA THIS YEAR. SO FAR WE STOOD UP 197 OF THEM. 125 OF THEM WERE BUILD INSIDE THE STORE USING THE SPACE FREED UP FROM INVENTORY REDUCTIONS. NOW LET ME TALK ABOUT DELIVERING VALUE, WHILE EVERYTHING ELSE IN RETAIL IS CHANGING ONE THING THAT WILL NOT IS OUR COMMITMENT. PRICE INVESTMENTS ARE A KEY PART OF THE PLAN, AND AS WE SIT BACK IN 2015, WE ARE INVESTING SEVERAL BILLION DOLLARS IN PRICE WE ARE PLEASED WITH HOW IT IS PROGRESSING AND WE WILL MAINTAIN THAT APPROACH. OUR ABILITY STARTS WITH BUYING AND OPERATING, AND IN SHORT, EDLC EQUALS EDLP, AND THIS EQUAILS FUELS OUR PRODUCTIVITY. NOW IF IT’S TO FIX, HAVE GOTTEN THE WARMOUT WHEEL MOVING. WITH ACCELERATED OUR FRONT ENTRANCE INFORMATION INCLUDING MORE SELF CHECKOUTS AND PROGRESSING WITH SCAN & GO, AND WE ARE INCREASING AUTOMATION AND ROBOTICS IN OUR DISTRIBUTION CENTERS, TO USHER IN THE NEXT PHASE OF SUPPLY CHAIN EFFICIENCY. WE ARE UPSCHILLING OUR TALENT RIGHT ACROSS THE BUSINESS TO ENABLE ASSOCIATES TO SPEND MORE TIME SERVING CUSTOMERS IN NEW WAYS AND ENGAGING THEM IN MORE PERSONAL INTERACTIONS. A QUICK POINT ON HOW WE ARE APPROACHING THIS WITH THE LEADERSHIP MINDSET. 50 YEARS AGO WHEN YOU WENT SHOPPING, IT WAS A ONE TO ONE RELATIONSHIP. THE SHOP KEEPER KNEW YOU AND YOU KNEW THE SHOP KEEPER. WITH THE INCEPTION OF THE DEPARTMENT AND GROCERY STORE CAME A SHIFT, AND THE RELATIONSHIP BECAME ONE TO MANY. DIGITIZATION HOWEVER ALLOWS THESE RELATIONSHIPS TO BECOME ONE TO ONE AGAIN. BUT IT’S SCALE. SO WHAT DOES LEADING LOOK LIKE? TWO GREAT EXAMPLES. SELF CHECKOUT HOSTS AND PERSONAL SHOPPERS AND ONLINE GROCERY. TWO YEARS AGO WE DIDN’T HAVE ANY DEDICATED SELF CHECKOUT HOSTS. WE NOW HAVE OVER 17,000 OF THEM. 4,192 STORES. TWO YEARS AGO WE DID NOT HAVE ANY PERSONAL SHOPPERS. WE NOW HAVE MORE THAN 18,000. THESE ROLES FOSTER A ONE TO ONE RELATIONSHIP THROUGH TECHNOLOGY. NEXT BEING GREAT MERCHANTS IN THE CURRENCY OF TRUST. TODAY THROUGH CROWD SOURCING, WE DON’T GIVE A SECOND THOUGHT TO HOPPING INTO A STRANGER’S CAR AND EXPECTING WE’LL END UP WHERE WE WANT TO BE. UBER. WE THINK NOTHING OF MAKING A RESERVATION AND SLEEPING IN A STRANGER’S HOUSE. AIRBNB. BASED ON THE DIGITAL IMAGE OF A PRODUCT WE TRANSFER LARGE SUMS OF MONEY TO AN ACCOUNT AND EXPECT THE PRODUCT WILL SHOW UP AT OUR HOUSE. E-COMMERCE. AND TWO WEEKS AGO WE ANNOUNCED A PARTNERSHIP TO TEST A SERVICE IN WHICH A CUSTOMER ALLOWS A DELIVERY PERSON TO ENTER THE HOMES WHEN THEY ARE NOT THERE IN ORDER TO STOCK THEIR PANTRIES AND FRIGERATORS. THAT’S TRUST. IT’S MERCHANTS TODAY, WE’RE OPERATING IN A MARKETPLACE WHERE TRUST IS A CURRENCY NEARLY AS VALUABLE AS MONEY. NOW OVER THE YEARS WITHIN THE TRUST OF CUSTOMERS BY CONSISTENTLY DELIVERING A GREAT ASSORTMENT OF QUALITY MERCHANDISE AT A GREAT PRICE. AS LEADERS HOWEVER WE NEED TO PUSH OURSELVES FURTHER ON QUALITY. THIS IS ESPECIALLY SO AND FRESH AND WE HAVE A ROBUST PROGRAM OF WORK IN THE PIPELINE. THROUGH OUR FRESH NETWORK SPEED PILOT WE ARE DEEPENING OUR RELATIONSHIP. OUR PARTNERSHIP WITH SUPPLIES TO MOVE THE PRODUCT THROUGH THE SUPPLY CHAIN FASTER. THE RESULT OF THIS PILOT IS AN AVERAGE OF TWO TO THREE ADDITIONAL DAYS OF FRESHNESS TO THE CUSTOMER WITH UP TO FOUR DAYS OF ADDITIONAL FRESHNESS IN STRAWBERRIES. THERE IS ALSO PRIOR TO BRAND QUALITY IMPROVEMENT THROUGH THE CULINARY AND INNOVATION CENTER WHERE RIGOROUSLY TESTING EACH OF OUR PRIVATE BRANDS AGAINST ALL COMPETITORS, AND CONTINUALLY BRINGING INNOVATION TO OUR OFFERINGS. IN APPAREL, WE WILL HAVE NEW NEWS IN THE COMING MONTHS ABOUT NEW BRANDS. SIMPLER ASSORTMENTS, AND SIGNING ELEMENTS. AND THE OTHER BIG PIECE OF THE EQUATION IS CONVENIENCE. IT’S TIME INCREASINGLY BECOMES AS VALUABLE AS MONEY, WE HAVE TO BUILD TRUST WITH CUSTOMERS BY LETTING THEM KNOW THAT WE ARE FOCUSED ON SAVING THEM BOTH. WE HAVE TO LET THEM KNOW THAT WE ARE MAKING EVERY DAY EASIER FOR BUSY FAMILIES. THAT MEANS PROVIDING CONVENIENCE, AND I WILL TALK MORE ABOUT THAT IN A MOMENT. BUILDING TRUST FOR THE ASSOCIATES. THE TRUST ASSOCIATES HAVE IN US SITS THE TONE FOR THE RELATIONSHIPS THEY ESTABLISH WITH OUR CUSTOMERS. WE HAVE REINFORCE THIS HAD BY TAKING A NUMBER OF THINGS WHICH WE BELIEVE HELP TO EMPOWER THEM. WE STARTED WITH WAGE INVESTMENTS. WE IMPLEMENTED STRUCTURAL CHANGES LIKE BRINGING BACK DEPARTMENT MANAGER ROLES. ACADEMIES ARE ALMOST FULLY IMPLEMENTED. WE’RE DRIVING ON-TIME AND IN FULL TO SUPPORT OUR CUSTOMER AVAILABILITY PROGRAM. WE ARE IMPROVING THE DISTRIBUTION OF MERCHANDISE TO ENSURE BETTER STORE RESPONSE TIMES. AND FINALLY AS A LEADER WE ARE BUILDING TRUST IN THE COMMUNITIES IN WHICH WE LIVE AND WHERE WE OPERATE. SO WE HAVE MADE IT A PRIORITY TO BE THERE IN TIMES OF CRISIS WHEN THEY NEED US AND WHERE THEY NEED US ANYWHERE AROUND THE GLOBE. FINALLY, PROVIDING CONVENIENCE. EASY, FAST, FRIENDLY AND FUN. THE THREE AREAS THAT I HAVE SPOKEN ABOUT TO THIS POINT STORES, VALUE, AND MERCHANTS, THEY COMBINE TO FORM A NEW KIND OF CUSTOMER EXPERIENCE. BUT IN ORDER TO ASSERT OUR POSITION AS LEADERS WE NEED TO BE, TO BUILD A MODEL OF CONVERGED RETAIL IN WHICH THE ONLINE AND THE INSTORE EXPERIENCE FORM A FRICTIONLESS INTERACTION WITH OUR CUSTOMERS. THE GOAL IS TO PROVIDE CUSTOMERS WITH THE RETAIL EXPERIENCE THAT IS EASY, FAST, FRIENDLY AND FUN. WE NEED TO DO THIS AT SCALE. WE HAVE BEGUN. OVER THE COURSE OF THE PAST YEAR WE HAVE LAUNCHED A NUMBER OF E-COMMERCE INITIATIVES SUCH AS THE ONES THAT MAX SPOKE ABOUT PREVIOUSLY AND THEY ARE DESIGNED TO DELIVER CONVENIENCE, FREE TWO-DAY SHIPPING. PICKUP DISCOUNTS. DELIVERY WITH UBER. WE’RE ALSO GOING TO DELIVER MORE TO EXPAND OUT OMNICHANNEL OFFERING, ONLINE GROCERY WILL BE IN 1,100 STORES BY YEAR’S END. AND WE’LL ADD ANOTHER 1,000 LOCATIONS NEXT YEAR. WE’RE ALSO TESTING OTHER WAYS FOR CUSTOMERS TO USE OUR PICKUP OFFERING, INCLUDING TOWELS AND LOCKERS. WE HAVE NEARLY GOT 50 UP AND RUNNING NOW, AND WE ARE ON TRACK TO HAVE 100 INSTALLED BY THE HOLIDAY. LET ME TAKE JUST A MOMENT TO DRAWDOWN THE ONLINE GROCERY. IT’S TAKING HOLD. CUSTOMERS THAT USE IT HAVE A BIGGER BASKET AS CUSTOMERS WHO ONLY SHOP IN THE STORE. AT THE SAME TIME IT HAS A HALO EFFECT ON THE STORES. YOU KNOW, STORES WITH ONLINE GROCERY HAVE A HIGHER PRODUCT AVAILABILITY THAN IN SALES WITH STORES WITHOUT THEM, AND IT’S ALSO ATTRACTING NEW CUSTOMERS, WHICH GIVES US AN OPPORTUNITY TO EARN GREATER SHARE. WE’RE ALSO BEGINNING TO HAVE SUCCESS MAKING THE INSTORE EXPERIENCE EASIER AND FASTER BY PROVIDING MORE SERVICES. WAL-MART PAY IS THE THICKEST AND LARGEST PAYMENT SERVICE BY USAGE, AND WE WILL CONTINUE TO FOCUS ON IT AS A WAY OF HELPING TO STRIVE OUR DIGITAL RELATIONSHIPS WITH CUSTOMERS. FINALLY OUR MOBILE EXPRESS MONEY SERVICES ARE IN ALL STORES, AND MOBILE EXPRESS PHARMACY WILL BE CHAIN WIDE BY THE YEAR END. MOBILE EXPRESS SCAN & GO IN 25 YEARS, AND AS YOU KNOW, MOBILE EXPRESS RETURNS WERE LAUNCHED YESTERDAY. WE WILL CONTINUE TO PROVIDE CONVENIENCE BY BUILDING A MODEL OF CONVERGED RETAIL THROUGH INNOVATION, THROUGH OUR 4,741 STORES AND GROWING STATE OF ONLINE ASSETS WE ARE IN A UNIQUE POSITION TO DO THIS. THE DATA POINT THAT DOUG REFERENCED BEARS REPEATING. CUSTOMERS WHO SHOP WITH US BOTH ONLINE AND IN STORES SPEND AROUND TWICE AS MUCH AS A CUSTOMER WHO ONLY SHOPS WITH US IN THE STORE. AS WE FIND OTHER WAYS FOR CONVERGED SYSTEMS FOR OUR CUSTOMERS WE HAVE GOT TO ACCELERATE OUR EFFORTS. THAT BRINGS ME TO OUR FINANCIALS AND EXPECTATIONS FOR 2019. DRIVING GROWTH EFFICIENTLY. WE WANT TO SERVE CUSTOMERS, HOW, WHEN, AND WHERE THEY WANT. WE BELIEVE THAT WITH OUR CURRENT FLEET OF THE NEIGHBORHOOD MARKETS, COMBINED WITH THE EXPANDING SET OF ONLINE ASSETS, WE ARE IN A STRONG POSITION TO DO JUST THAT. LAST YEAR WE SAID THAT WE WOULD OPEN FEWER NEW STORES IN THE U.S. AS WE CONTINUE TO EXAMINE THE LANDSCAPE AND OUR OVERALL STRONG POSITION WE NOW ANTICIPATE OPENING FEWER THAN 15 SUPERCENTERS AND FEWER THAN 10 NEIGHBORHOOD MARKETS IN FISCAL 2019. THIS IS CONSISTENT WITH STRONG, EFFICIENT GROWTH, AND YOU KNOW IT ALLOWS US TO ALLOCATE CAPITAL REMODELS, SUPPLY CHAIN, AND TECHNOLOGY. AND IN TERMS OF REMODELS WE WILL CONTINUE OUR FOCUS HERE BY INVESTING IN 500 OF THESE PROJECTS NEXT YEAR. THEY ENABLE US TO LEVERAGE OUR STORE ASSETS MORE EFFECTIVELY TO MEET CUSTOMER’S NEEDS, AND FINALLY AS MENTIONED WE WILL ACCELERATE THE EXPANSION OF ONLINE GROCERY TO 1,000 ADDITIONAL LOCATIONS. SO HERE’S WHAT WE ARE GOING TO DO THIS COMING YEAR. WE ARE GOING TO CONTINUE OUR JOURNEY BY BUILDING ON THE SUCCESSES OF THE PAST THREE YEARS, RUNNING THE PLAY, INVESTING GROWTH, AND LEANING INTO INNOVATION. DOING THESE THINGS WILL ENABLE US TO DELIVER THE FOUR ELEMENTS OF OUR PLAN TO WIN. RUNNING GREAT STORES. BEING GREAT MERCHANTS. DELIVERING VALUE. PROVIDING CONVENIENCE. YOU KNOW IT’S AN EXCITING TIME IN RETAIL. WHAT I FEEL FROM THE HOME OFFICE TO THE STORE FLOORS RIGHT ACROSS THE COUNTRY IS AN EAGERNESS TO HARNESS THAT EXCITEMENT AND PLAY TO WIN. THANK YOU AGAIN FOR BEING HERE. AND I REALLY APPRECIATE THE CHANCE TO TALK TO YOU ABOUT OUR U.S. BUSINESS, AND I LOOK FORWARD TO TAKING YOUR QUESTIONS DURING THE Q&A. THANK YOU. [APPLAUSE]>>WHY DON’T WE TAKE 125 MINUTES, GET BACK AROUND 10:50 AND OPEN IT UP FOR A Q&A WITH DOUG AND HIS TEAM. THANKS. WE ARE GOING TO GET READY FOR OUR Q&A SESSION IN A MINUTE IF PEOPLE CAN FIND THEIR SEATS, PLEASE.>>ARE YOU GUYS READY?>>YOU WANTED US, HUH?>>I DID.>>ALL RIGHT, SO WE WILL HAVE ABOUT 45 MINUTES OR SO OF Q&A. SO WHEN YOU HAVE A QUESTION JUST LET ONE OF THESE GUYS KNOW IN THE AUDIENCE AND WELL START RIGHT HERE. PETE BENEDICT.>>THANKS, STEVE. PETER BENEDICT, ROBERT BAIRD. DOUG WANT TO GET YOUR VIEW ON, SORRY, ON THE U.S. WAGE ENVIRONMENT. YOU GUYS MOVED A FEW YEARS AGO, TO GET IN FRONT OF THINGS, THERE’S BEEN SOME MOVING HERE IN THE PAST SEVERAL MONTHS SO HOW DO YOU JEW — VIEW THE TRAJECTORY OF THE FINANCIAL LOGARITHM THAT YOU HAVE.>>SURE, I AM SURE THAT GREG AND JUDITH WOULD WANT TO COMPLIMENT WHATEVER IT IS THAT I HAVE TO SAY, BUT I FEEL GREAT ABOUT THE FACT THAT WE MOVED, WHEN WE DID, AND THE BOLDNESS WITH WHICH WE TOOK THAT ACTION. I THINK THE CONVEY A WAY THAT ASSOCIATES FEEL ABOUT OUR LEVEL OF SUPPORT FOR THEM IS DIFFERENT THAN IT WAS BEFORE THAT ACTION, AND AS WE MOVED ON TO TRAINING AND BETTER TOOLS AND THINGS LIKE THAT, THE GROUND WAS PREPARED FOR THAT KIND OF ACTIVITY. AS WE LOOK FORWARD I THINK THAT WAGES ARE GOING TO CONTINUE TO MOVE, AND I SEE THAT AS A GOOD THING. I THINK THAT SOME OF THE WORK THAT WE HAVE UNDERWAY AS IT RELATES TO PRODUCTIVITY POSITIONS AS WELL TO BE ABLE TO THRIVE IN THAT KIND OF ENVIRONMENT. I THINK A LOT OF INFORMATION HAS BEEN SHARED TODAY ABOUT SOME IDEAS THAT WE HAVE ON HOW TECHNOLOGY AND TRAINING CAN PLAY A ROLE GOING FORWARD. GREG ANYTHING YOU WANT TO ADD TO THAT?>>YOU KNOW IT’S A COMPETITIVE MARKET OUT THERE. AT ANY GIVEN POINT IN TIME WE ARE ADJUSTING WAGE RATES IN ORDER TO ATTRACT THE RIGHT TALENT AND WE KNOW THAT GETTING THE RIGHT TALENT IN OUR STORES IS CRITICAL TO ALLOWING US TO WIN, AND JUDITH DO YOU WANT TO MAKE A FEW COMMENTS?>>YEAH, THAT IS EXACTLY RIGHT. THERE IS NOT FROM THE WAGE ENVIRONMENT PERSPECTIVE. THE OTHER THING THAT WE ARE WORKING HARD TO DO IS YOU HAVE SEEN THROUGH THE ALASKA IS THE — ACADEMIES IS THE TRAINING PART, WHICH IS A DIFFERENTIATOR FOR US BUT ALSO TO PROMOTE THROUGH AND THAT’S ANOTHER WAY THAT WE CAN HELP PEOPLE EARN MORE BY WORKING FOR US AS WELL.>>YOU DON’T KNOW, JUDITH IS OUR CHIEF OPERATING OFFICER FOR THE U.S. BUSINESS.>>WE SEE THE TREND AROUND THE GLOBE, AS YOU SEE GROWTH RATES, MOBILITY, SOCIAL MOBILITY TENDS TO GO DOWN, SO THE WAGES ARE REALLY IMPORTANT BUT I THINK AS WELL THE OPPORTUNITY THAT WE GIVE PEOPLE FROM WHATEVER BACKGROUND THEY COME TO, TO PROGRESS THEIR LIVES AND THEIR CAREERS IS A HUGE MOTIVATOR AT THE MOMENT.>>SO I THINK THAT PETER IN SUMMARY WAGES AFTER WE MADE THE CHANGE KEPT MOVING IN A MORE INCREMENTAL FASHION AND WE’VE BEEN ADJUSTING THAT MARKET BY MARKET AND WILL CONTINUE TO DO THAT.>>DOUG, THINKING THREE TO FIVE YEARS, WANTED TO ASK, WHAT DOES SUCCESS LOOK LIKE FOR WAL-MART, IS THE FINANCIAL PICTURE THAT YOU ARE PROJECTING FOR 2019 ABOUT RIGHT? THINKING THROUGH MARGINS AND SALES, AND WOULD YOU BE SATISFIED WITH GROWING SHARE OVER TIME BUT HOLDING MARGINS FLAT?>>YOU CAN CHIME IN, TOO, IF YOU WANT TO. I THINK THE FIRST THING THAT I WOULD SAY IS THAT THIS IS A REALLY FLUID ENVIRONMENT, AND WE DON’T WANT TO PAINT OURSELVES INTO A CORNER AS IT RELATES TO FLEXIBILITY. I THINK THAT WE HAVE SHARED WITH YOU HOW WE FEEL ABOUT NEXT YEAR, AS WE LOOK BEYOND THAT, I THINK THAT THE WAY THAT WE THINK ABOUT IT IS WE MUST MAKE SURE THAT WE ARE DOING WHAT’S NECESSARY TO EARN CUSTOMER’S BUSINESS. GROWTH AND COMP STORES IS A PRIORITY FOR THIS COMPANY. IF AND AS WE DO THAT, WE CAN LEARN HOW TO MANAGE EXPENSES AND WE CAN DELIVER PROFITABILITY AT AN APPROPRIATE RATE, SO WE’LL STAY FLUID, AND WE’LL STAY OPEN AND COMMUNICATE WITH YOU AS BEST THAT WE CAN, AND WE ARE CONFIDENT AS IT RELATES TO NEXT YEAR’S PLAN.>>AS AN EXECUTIVE COMMITTEE TEAM WE SPEND A LOT OF TIME TALKING ABOUT HOW DO WE BALANCE OUT WHAT WE ARE TRYING TO DO LONG-TERM, WHICH IS MAKE THIS BUSINESS INCREDIBLY SUCCESSFUL, PAST OUR CAREERS BUT HOW WE GROW THE VALUE OF THE COMPANY WHICH I TALKED ABOUT THIS MORNING. OVER THE SAME PERIOD OF TIME, THE GOOD THING IS WE HAVE A LOT OF DIFFERENT LEVERS THAT WE CAN USE TO GET TO THAT ANSWER, SO WHEN WE — THIS MORNING WHEN I WAS TRYING TO GIVE YOU SOME FRAMEWORK AROUND OPERATING INCOME MARGINS TO GIVE YOU SOMETHING TO KIND OF PUT A FRAMEWORK AROUND IT, THERE IS A LOT OF PIECES WITHIN THAT, AND I THINK THAT AS DOUG SAID WE JUST NEED THAT FLEXIBLE, WE WANT THAT FLEXIBILITY. IT COULD BE DIFFERENT MARGINS OR SGNA. THERE IS A LOT OF WAYS TO GET THE SAME PLACE. BUT WE WOULD LIKE THE DIRECTION WE’RE HEAD HEADING.>>OK. GO AHEAD.>>WE’RE GOING TO STAY ON THIS SIDE OF THE ROOM AND WORK OUR WAY OVER.>>I THINK THAT. SO FOLLOWING UP ON THE MARGIN QUESTION. YOU ARE IMPLYING GROSS MARGIN DOWN A BIT NEXT YEAR, IT SOUNDS LIKE IT DOES NOT NECESSARILY HAVE TO BE THAT WAY. YOU ARE GOING TO MANAGE IT, BUT CAN YOU TALK SPECIFICALLY ABOUT THE TAKES IN GROSS MARGIN, MIXED NEGATIVE, IS PRICE INVESTMENT NEGATIVE, IS SUPPLY CHAIN POSITIVE, LIKE HOW ARE YOU THINKING ABOUT THE DIFFERENT VARIABLES?>>DO YOU WANT TO START IT?>>I WILL GO LAST.>>OK.>>I WILL START AND GREG YOU MIGHT WANT TO TALK A BIT ABOUT IT. SO WHEN WE GAVE YOU KIND OF A RANGE OF HOW WE THINK ABOUT OPERATING INCOME MARGIN, AS WE TALKED ABOUT THERE IS THE ANSWER I JUST GAVE, A LOT OF VARIABLES THAT GO INTO HOW WE GET THERE. IN ALMOST ANY CIRCUMSTANCE IN WHICH WE WOULD DISCUSS HAVING EXPENSES BE IN A BETTER PLACE, CAN PROVIDE FUEL, JUST GIVES US OPTIONS TO DO DIFFERENT THINGS WITHIN THE PNL SO DO I THINK THAT GROSS MARGINS HAVE TO GO DOWN NEXT YEAR? NO AND I DON’T THINK THAT WE IMPLIED THAT. COULD THEY GO DOWN, YES, AND WE WANT THAT FLEXIBILITY TO BE ABLE TO DO THAT. OVER TIME THE CUSTOMER AND THE COMPETITORS ARE GOING TO DETERMINE WHERE GROSS MARGINS TO SOME DEGREE NEED TO BE FOR THE COMPANY. AND WE NEED TO BE READY FOR WHAT THAT NEEDS TO BE AND WHAT WE WANT IT TO BE, AND EXPENSES PLAY A BIG PART IN THAT, SO WE ARE TRYING TO GIVE YOU ENOUGH FRAMEWORK BUT AS DOUG SAID NOT GET OURSELVES TIED INTO HOW WE GET THERE AS MUCH, AND GREG CAN TALK. THERE IS A LOT OF THINGS THAT GO INTO THE GROSS MARGIN AND GREG CAN TALK ABOUT THAT.>>IT WAS INTERESTING, MICHAEL AND I WERE GOING THROUGH BECAUSE WE HAD A BUDGET MEETING TOMORROW WE WERE LOOKING AT THE PLAN WE PUT FORWARD THREE YEARS AGO. THE INTERESTING THING, THE BOTTOM LINE IS ALMOST EXACTLY WHERE WE SAID THAT WE WERE GOING TO BE, BUT THE SHAPE OF IT IS A BIT DIFFERENT, SO WE THOUGHT THAT WE WOULD DO BETTER WITH COMP SALES, AND WE DIDN’T. WE WERE ABLE TO DO A BIT BETTER WITH SOME EXPENSES THAN WHAT WE THOUGHT THAT WE COULD DO, AND THE MARGIN WAS A BIT DIFFERENT. SO THE POINT IS, YOU KNOW, WE BUILD A PLAN AND WE SAY THIS IS WHAT WE ARE GOING TO DO WITH FRESH THROWS, AND THIS IS WHAT WE ARE GOING TO ACHIEVE IN TERMS OF LEVERAGE WITH SUPPLIERS, AND THIS IS WHAT WE THINK JUDITH WOULD ACHIEVE IN TERMS OF UNKNOWN SHRINKAGE WHEN WE TAKE OUR STOCK, AND STEVE THIS IS HOW MUCH WE HAVE GOT TO INVEST IN THE PRICE, AND THEN WE WORK OUT HOW WE ARE GOING TO DO THAT. SO WE ARE DILIGENT ABOUT HOW WE PUT THAT TOGETHER, AND OF COURSE YOU HAVE TO DEAL WITH THE DYNAMICS OF THE MARKET. AS YOU SAY THERE ARE ALWAYS PUTS AND TAKES. THOSE ARE THE COMPONENT PIECE, AND THERE IS MANY OTHERS THAT GO INTO IT. BUT WE WOULD SIT DOWN AS A LEADERSHIP GROUP, WE DO IT EVERY MONDAY, ACTUALLY, MONDAY AFTERNOON, AND WE LOOK AT IT, AND MICHAEL AND HIS TEAM HELPED TO PULL THE NUMBERS TOGETHER WITH STEVE AND JUDITH AND JULIE AND GREG. WE WILL MAKE DECISIONS. NOT ON THE FLY. REALLY THOUGHTFUL, SENSIBLE DECISIONS THAT TAKE INTO ACCOUNT THE LONGER TERM REQUIREMENTS AND SHORTER TERM NEEDS. AND THAT’S HOW WE DO IT.>>IT’S NOT A PERFECT ANALOGY BUT BRETT AND I WERE TALKING A BIT ABOUT WHAT IT’S LIKE TO FLY AN AIRPLANE, AND WE’RE GOING TO LAND OVER THERE, AND THAT’S ABOUT 5% OF THE EPS GROWTH. HOW WE GET FROM THERE WE KNOW, AND THE WINDS MAY CHANGE A BIT ON US, AND WE HAVE GOT THERE DASHBOARD WITH THE VARIABLES ON IT, AND I WAS JUST THINKING ABOUT THAT, ACTUALLY, THERE IS A BIG PLANE THAT’S A TOTALLY COMPANY, BUT EVERYBODY ELSE IS FLYING PLANES IN FORMATION AND WE ARE LIKE HEY, HOW ARE YOU DOING ON FUEL, AND WE ARE ADJUSTING BASICALLY MONTHLY AS WE THINK ABOUT THE MARGINS AND PRICE INVESTMENTS AND THINGS LIKE THAT. AS WE HAVE SAID MANY TIMES NOW, WE JUST WANT ENOUGH FLEXIBILITY IN THIS ENVIRONMENT THAT’S CHANGING SO MUCH TO BE ABLE TO GET THERE IN A HIGH QUALITY WAY.>>LET’S GO HERE. LET’S STAY IN THIS SECTION AND MOVE AROUND. I THINK IT’S EASIER. ROBBIE?>>THANKS. BANK OF AMERICA, MERRILL LYNCH. QUESTION FOR MARK AND GREG. YOU ARE SITTING AT OPPOSITE SIDES BUT AS I LISTENED TO ALL TO ME WHEN YOU GIVE US THAT TWO TIMES FOR YOU KNOW, THE PERSON THAT’S OMNICHANNEL, THE KEY SEEMS TO BE HOW QUICKLY YOU CAN CONVERT STORE CUSTOMERS TO STORE PLUS ONLINE CUSTOMERS. SO MY QUESTIONS WOULD BE YOU KNOW, NUMBER ONE, ANY METRICS ON THAT? HOW QUICKLY ARE YOU GETTING STORE-ONLY SHOPPERS TO BECOME STORE ONLINE, AND NUMBER TWO, ARE THERE SOME INITIATIVES THAT YOU BOTH ARE INDEPENDENTLY AND ALSO TOGETHER WORKING ON TO ACCELERATE GETTING THOSE STORE SHOPPERS TO CONVERT ONLINE, AND IS THERE ANY REASON THAT YOU MAYBE HAVE BEEN HOLDING OFF? ARE YOU WAITING TO GET INFRASTRUCTURE TO A CERTAIN PLACE BEFORE YOU REALLY MAKE A BIGGER PUSH TO DO THAT? JUST ANY MORE COLOR, YOU CAN GIVE US WOULD BE TERRIFIC.>>DO YOU WANT TO START?>>YEAH. I THINK, YOU KNOW, IF YOU LOOK AT THE TOP LINE THAT WE HAVE SEEN IN THE FIRST HALF AND WHAT WE ARE PROJECTING NEXT YEAR, THAT’S REALLY JUST A FUNCTION OF TWO THINGS. IT’S GETTING MORE PEOPLE TO SHOP FOR THE FIRST TYPE ON THE WEBSITE, AND THEN IMPROVING COHORT BEHAVIOR. WE ARE SEEING ON BOTH POSITIVE RESULTS, SO I THINK THAT THE STRATEGY THAT WE HAVE SET OUT IS WORKING. THERE IS MORE THAT WE CAN BE DOING TO MARKET SPECIFICALLY TO THE STORE SHOPPER. BUT I FEEL GOOD ABOUT OUR APPROACH RIGHT NOW.>>WE HAVE GOT A CORE CUSTOMER NOW, IN OUR BUSINESS. AND I AM TALKING JUST STORES HERE. A LOT OF THAT IS LOCATION DRIVEN, YOU KNOW, THAT WE ARE STRONG IN TERMS OF OUR STORES. A LOT OF OUR FOCUS, JUDITH AND STEVE AND THEIR TEAMS HAVE BEEN WORKING ON IS LET’S MAKE SURE THAT WE DO A GOOD JOB OF SERVING THEM. WE ALSO KNOW THAT THERE IS AN OPPORTUNITY TO ATTRACT NEW CUSTOMERS INTO OUR BUSINESS. WE QUITE OFTEN SEE THESE PEOPLE SHOPPING WITH US WHEN THERE IS EVENTS LIKE HALLOWEEN OR CHRISTMAS, OR THEY MAY COME IN AND BUY GROCERY BECAUSE THE PRICE IS REALLY GOOD BUT THEY DON’T TRUST US ON THE FRESH FOODS, OR THEY MAY COME IN AND BUY GARDENING BUT NOT OUR APPAREL BECAUSE THEY DON’T LIKE THE TASTE OR THE YOU KNOW, THE STYLE THAT WE HAVE GOT. SO AS WE LOOK AT THAT CUSTOMER BASE, WE ARE SAYING TO OURSELVES, WE CAN DO A MUCH BETTER JOB AFFECTING THOSE, AND ONE OF THE THINGS THAT WE THINK IS ALSO PRETTY POWERFUL WITH THAT GROUP IS GENERALLY THEY HAVE GOT A BIT MORE MONEY. THEY ARE QUITE STRONG OMNI SHOPPERS. THEY SHOP IN THE STORE AND ONLINE. AND IN SOME CASES, THEY ARE SHOPPING ONLINE WITH WAL-MART AND IN OTHERS SHOPPING WITH OUR COMPETITORS. WE NEED TO GET THEM TO BECOME ADVOCATES FOR OUR BUSINESS, AND WE THINK THAT THAT IS A POWERFUL IDEA. SO WE ARE WORKING REALLY CLOSELY TOGETHER, AND DOUG IS INVOLVED WITH US, AND SO, AND SO MANY OF DOUG’S TEAM, SO DOWN THE BACK THERE, THEY ARE HELPING US TO PULL SOMETHING TOGETHER, SLOAN WHO IS PART OF MARC’S TEAM, AND WE ARE MEETING REGULARLY ON CAMERA THIS. NOW WE’LL GET ONE POINT FOR TALKING ABOUT IT AND NINE POINTS FOR DOING IT. IS IT A BIG IDEA? YEP. WE NOW HAVE TO BREAK THAT DOWN INTO PIECES THAT ARE DIGESTIBLE AND MANAGEABLE. IT DOES NOT MEAN THAT WE HAVE NOT BEEN DOING THAT. BUT WE ARE NOW GOING TO SHARPEN OUR FOCUS ON THOSE AND GO AFTER IT. AND I THINK THAT IT COULD BE QUITE POWERFUL IF WE CAN PULL IT OFF. IT WILL BE A NUMBER OF THINGS. BUT WITHIN THE BIGGER IDEA, THEY WILL, THERE WILL BE SOMETHING THAT WE CALL MICRO-BATTLES, THAT WE WILL ATTACK WITH BIGGER. SO IMAGINE THAT VIN DIAGRAM THAT OVERLAPS BETWEEN E-COMMERCE AND THE INITIATIVES THAT YOU ARE SEEING SO FAR THAT FALL INTO THE OVERLAP, ONLINE GROCERY USE THE APP, THE SITE, APPROXIMATE I CAN IT UP IN THE STORE, AND WAL-MART PAY, DIGITIZATION OF THE PHARMACY RELATIONSHIP WHICH CAUSES YOU TO DOWNLOAD THE APP. YOU CAN DO A LOT WITH YOUR PRESCRIPTIONS. THE EXPRESS AREA BEING MORE AUTOMATED. SOME DAY YOU WILL BE ABLE TO DIGITIZER THE EXPERIENCE AT THE BAKERY AS YOU ARE DOING A CAKE. THERE IS JUST GOING TO BE THIS FOCUS AND SO AS YOU HEAR ANNOUNCEMENTS ABOUT INITIATIVES YOU CAN IMAGINE THAT VIN DIAGRAM AND LOOK AT WAS THEY ARE AND INCREASINGLY THEY WILL BE IN THE MIDDLE OF THAT SPOT.>>BOB [INAUDIBLE] I WAS WONDERING IF YOU COULD TALK ABOUT FULFILLMENT COSTS GENERALLY. THE EXPECTATION ON THE SGNA LINE AND WHERE THE OPPORTUNITIES EXIST AS YOU THINK ABOUT THE LAST MILE WITH THE PARCEL, ACQUISITION, AND ASSOCIATE DELIVERY, THE EFFICIENCIES THAT YOU SEE, BUT MORE OF THE LONGER TERM EXPENSE PRESSURE THAT COMES ALONG WITH, YOU KNOW, THE LAST MILE THINGS.>>MARC DO YOU WANT TO GO FIRST?>>YEAH. THE MAJORITY, THE VAST MAJORITY, COMING OUT OF THE WAREHOUSES, A LOT WE CAN DO TO IMPROVE THE PROCESS, AND WE HAVE PLANS TO DO THAT. I SUSPECT IT WILL ONLY GET BETTER OVER TIME. WEREN’T THE LAST MILE AND, YOU KNOW, LEVERAGING UBER AND DELIV AND OUR ASSOCIATES, CURRENTLY WITH THE ONLINE GROCERY APP, WE’RE PASSING THOSE COSTS ON IN THE FORM OF A FEE TO DELIVER. SO WE DON’T NECESSARILY SEE THAT BEING A BIG INCREASING COST GOING FORWARD.>>HI. KAREN, BARCLAYS. LAST YEAR ROIC WAS MENTIONED IN THE SLIDES, AND IT WAS MENTIONED THAT, YOU KNOW, YOU OBVIOUSLY HAVE THAT A GOAL OF TRYING TO IMPROVE ROIC, AND IT WAS MENTIONEDLY HOLISTICALLY, NOT NECESSARILY EXCLUDING E-COMMERCE, SO I AM WONDERIN IF YOU COULD GIVE AN UPDATE ON ROIC, HOLISTICALLY, IDEALLY.>>YES, AS I TALK ABOUT THE DISCUSSIONS, IT’S A BIG PART OF WHAT WE DISCUSS AND UNDERSTAND CERTAINLY FROM AN INVESTOR STANDPOINT THAT YOU WANT TO SEE OUR RETURNS GROW OVER TIME, AND IT’S WHY IS REALLY THE GENESIS OF WHAT WE TALK ABOUT WITH THE FINANCIAL FRAMEWORK, AND IT STARTS WITH HOW WE GROW, HOW WE GROW MAKES A DIFFERENCE. 3% SALES GROWTH, AND WE CAN GET THAT THROUGH E-COMMERCE OR COMPS. THERE IS A DIFFERENT THING THAN GETTING IT THROUGH STORES. THAT’S A DIFFERENCE FROM A RETURN STANDPOINT. WE ARE GOING TO CONTINUE, AND YOU SAW THIS IN THE SLIDES, WE’RE GOING TO CONTINUE TO INVEST WHERE IT MAKES SENSE. WE ARE GOING TO LEAN IN, INTO PLACES LIKE TECHNOLOGY, WE’RE GOING TO LEAN INTO SUPPLY CHAIN. WE’RE GOING TO LEAN INTO THE E-COMMERCE AND INVEST MONEY IN INTERNATIONAL STORES. AS WE MAKE THOSE, AS WE HAVE THOSE DISCUSSIONS AND WE DEBATE THAT AMONGST THE TEAM, RETURN ON CAPITAL IS A BIG PART OF THOSE DISCUSSIONS. WE DO FEEL LIKE THE DIRECTION WE’RE TAKING, GETS US TO WHERE WE WANT TO BE AND YOU WOULD LIKE US TO BE IN THE MID TO LONG-TERM. WE ARE NOT GOING TO SIT HERE AND SAY WHAT ROI WILL BE NEXT YEAR BUT WE FEEL LIKE WE ARE GOING IN THE RIGHT DIRECTION WITH THAT, AND HOPEFULLY YOU ARE GETTING A SENSE OF WHAT YOU HAVE SEEN OVER THE LAST COUPLE OF YEARS THAT WE ARE STARTING TO HEAD TOWARDS THAT PATH.>>THERE YOU GO, MATT, AND OVER HERE.>>HI, IT’S MATT FROM GOLDMAN SACHS. YOU HAVE HAD A TERRIFIC WORKING CAPITAL STORY OVER THE PAST COUPLE OF YEARS. GIVEN THAT INVENTORY TRACKED FLAT YOU ARE IN THE SECOND QUARTER AFTER A SEQUENCE OF DECLINES, WHERE ARE YOU NOW ON THAT INVENTORY JOURNEY, AND THEN ALSO AS YOU THINK ABOUT THE FINANCIAL PLAN THAT YOU PRESENTED, WHAT’S YOUR EXPECTATION FOR THE WORKING CAPITAL CONTRIBUTION TO FREE CASH FLOW?>>DO YOU WANT TO GO TO INVENTORY FIRST.>>I WOULDN’T MIND GETTING TO STEVE’S COMMENT BECAUSE HE’S CLOSE TO WHAT WE ARE DOING THERE.>>STEVE IS OUR CHIEF MERCHANT ASK THE TEAM HAS DONE AN OUTSTANDING JOB ON MANAGING BOTH INVENTORY AND PAYABLES. A LOT OF PROGRESS.>>THANKS DOUG. YEAH. INVENTORY, IT’S A JOURNEY. I WOULD NOT LOOK AT ONE QUARTER IT’S FLAT, TO THINK THAT WE STOPPED. I PROMISE YOU FOR THE GENTLEMEN I WORK FORK MR. FORAN HE PRESSES ON INVENTORY ALL THE TIME. IT’S A BIG ENABLER FOR OUR BUSINESS, AND I THINK HE PAINTED THE PICTURE PRETTY WELL EARLIER ON THE LEVERAGE THAT WE CREATE AND THE ENABLEMENT IN THE STORES. SO JUDEth’S TEAM CAN OPERATE BETTER, SO IT’S A FOCUS FOR US AND WE ARE GOING TO PUSH AND WE THINK THAT WE HAVE MORE OPPORTUNITY TO CONTINUE DURING THIS INVENTORY THROUGHOUT THE SUPPLY CHAIN. WHAT WE BUY IN OUR D.C. THROUGH TO THE STORES TO MAKE IT EASIER FOR OUR ASSOCIATES, SO THAT’S GOING TO CONTINUE TO BE A BIG FOCUS FOR US. IN TERMS OF WORKING CAPITAL IN GENERAL WE CONTINUE TO WORK ON IT. WE HAD A BIG PUSH ON THE ALLOWANCES WITH OUR SUPPLIERS. IT MADE A DIFFERENCE FRANKLY IN WORKING CAPITAL. AND THERE IS MORE TO DO THERE. WE ARE CONTINUING TO PUSH ON THAT AND CONTINUING TO WORK ON THAT BUT WE THINK THAT WE CAN CONTINUE TO FOCUS ON IMPROVEMENT. BUT INVENTORY REMAINS AS BIG OF A FOCUS TODAY AND TOMORROW AS IN THE PAST.>>FROM AN INTERNATIONAL PERSPECTIVE WE ARE SEEING REALLY GOOD PROGRESS SO OUR INVENTORY IN THE FIRST HALF WAS GROWING LESS THAN A HALF THE RATE OF SALES. WE ARE SEEING GOOD WORK IN CAPITAL MANAGEMENT, AND HE’S BEEN DOING GOOD WORK ON CASH MANAGEMENT.>>RICHARD IS OUR INTERNATIONAL CFO.>>THANKS, STEVE. THANKS DAVE. YEAH, WE PUT A BIG FOCUS ONTO WORKING CAPITAL, STARTING IN THE MIDDLE OF LAST YEAR. WE SET A TOUGH TARGET THIS YEAR AND ALMOST EXCEEDED IT BY THE MID YEAR, PROBABLY TWO-THIRDS OF THAT IMPROVEMENT IS IN PAYABLES RATHER THAN INVENTORY. WE’VE BEEN IMPROVING ON BOTH. THEY TALKED ABOUT THE KEY TWO RESULTS, SO WE SAW INVENTORY WELL BELOW HALF THE SALES, SALES GROWTH RATE AND PAYABLES GROWING FASTER THAN SALES. AND WHILE WE FOCUS ON PAYABLES IT’S WORTH SAYING THAT WE HAVE GOT SOME MARKETS DOING A GREAT JOB ON INVENTORY SO CANADA WOULD BE ONE EXAMPLE THAT WITH GROWTH WE ARE SEEING DOLLAR INVENTORY DOWN. WHAT I WOULD ADD IS WE WOULD SEE A SIGNIFICANT AMOUNT OF OPPORTUNITY IN THE YEAR AHEAD. SO I THINK YOU WILL SEE THE FOCUS SHIFT MORE FROM PAYABILITIES — PAYABLES BUT WE HAVE PLENTY OF RUNWAY TO GO.>>AND I THINK THE BIG THING YOU LEARNED, RICH, IS THE IMPORTANCE OF MAKING CLEAR CHOICES. RATHER THAN JUST SQUEEZING, SO SOME OF THE WORK THAT WE HAVE DONE ON ASSORTMENT CHOICES AND BEING REALLY, REALLY FOCUSED USING TECHNOLOGY TO GET MUCH CLEARER ABOUT WHAT THE CUSTOMER REALLY WANTS AND WHERE THEY WOULD SUBSTITUTE ARE ALLOWING US TO MAKE GOOD, SENSIBLE CHANGES WITHOUT SQUEEZING THIS IN. THE GENUINE COST SAVINGS THAT ARE SUSTAINABILITY.>>JUST ON THE OVERALL QUESTION SO GO BACK LAST YEAR WE HAD A CASH FLOW OF 31.5 BILLION. THERE WAS SIGNIFICANT IMPROVEMENT WORKING CAPITAL LAST YEAR. YOU HAVE SEEN CASH FLOW LOWER THAN THAT. AND THAT’S PRIMARILY DIFFERENT. WE HAD AN INCREDIBLE PERFORMANCE LAST YEAR, STILL GOOD PERFORMANCE THIS YEAR, AND THERE IS STILL SOME ASSUMED IMPROVEMENT GOING FORWARD, NOT THE LEVELS LAST YEAR BUT WE’RE GOING TO KEEP A GOOD FOCUS ON THAT.>>MICHAEL [INAUDIBLE] FROM UBS. FIRST FOR MARC OVER THE LAST FEW QUARTERS DO YOU THINK MORE OF YOUR E COMMERCE GROWTH HAS COME FROM CUSTOMERS WHO WOULD HAVE OTHERWISE SHOPPED IN A WAL-MART STORE OR WHO WOULD HAVE OTHERWISE SHOPPED ON AMAZON, AND HOW DO YOU SEE THAT MIX PLAYING OUT OVER THE NEXT FEW? MY SECOND QUESTION IS FOR DOUG IF YOU HAD TO RATE THE ORGANIZATION ON HOW WELL IT IS LEVERAGING THE POWER OF ITS DATA, HOW WOULD YOU DO THAT? THANK YOU.>>SURE. MOST OF THE MARKETING HAS BEEN DONE ONLINE IN DIGITAL PLACES, ESPECIALLY WITH GOOGLE. I SUSPECT THAT WE DON’T KNOW FOR SURE THAT A MAJORITY OF THE VOLUME IS COMING FROM PEOPLE WHO ALREADY SHOPPED ON THE INTERNET WHO NOW ARE CHANGING AND MOVING THE SHOP ON WAL-MART.COM. I AM SURE AS WELL THAT GOES FOR STORE SHOPPERS, BUT MOST OF THE MARKETING IS GEARED TO EXISTING E-COMMERCE SHOPPERS.>>1-10, IN OUR USE OF DATA I WOULD SAY THAT WE’RE PROBABLY A TWO. WE USE DATA TO IMPROVE INSTOCK AND REPLENISHMENT. WE DON’T USE DATA TO PERSONALIZE, AND WITH OUR EDLP ROOTS WE MADE A DECISION NOT TO DO A LOT OF COUPONING, EITHER, IN THE PHYSICAL WORLD OR DIGITALLY. I DON’T PERSONALLY BELIEVE THAT BUILDS LOYALTY, AND WE WANT TO BUILD TRUST AND WE WANT TO BUILD LOYALTY. HAVING SAID THAT I THINK IN THIS WORLD WE NEED TO KIND OF PUSH REFRESH ON YOUR MINDSET AS IT RELATES TO THAT, NOT THAT WE SHOULD DO COUPONING BUT WE SHOULD BE OPEN TO PERSONALIZATION. GREG I THOUGHT DID A NICE JOB DESCRIBING ONE TO MANY AND ONE TO ONE AT SCALE, AND SO WE HAVE GOT A LOT OF WORK TO DO, AND IT’S GOING TO BE A MULTI-YEAR JOURNEY TO GET OUR DATA INTO SHAPE, ORGANIZE, COLLECTED, CLEANED, SO THAT WE CAN ACTUALLY USE IT. AND THERE’S BEEN MORE DISCUSSION AS OF LATE ABOUT OUR DATA STRATEGY AND THE WAY IT FEELS TO ME IS THAT WE’VE BEEN TAKING CARE OF SOME BANKS TO GET THE BUSINESS MOVING IN A DIFFERENT WAY. NOW WE’RE STARTING TO HAVE MORE ADVANCED CONVERSATIONS ABOUT THE OMNI OPPORTUNITY AND THE USE OF DATA AND EVENTUALLY PERSONALIZATION. SO YOU CAN IMAGINE USE CASES THAT WILL SAVE CUSTOMERS TIME AND HAVE THEM ACTUALLY UNDERSTAND THAT WE DO UNDERSTAND THEM TO AN EXTENT. ALL THOSE THINGS DONE IN A WAY THAT BUILDS TRUST WITH THEM WHICH IS OUR ULTIMATE ASSET, BUT START TO UNLOCK THE DATA IN THE COMPANY IN FUTURE YEARS. IT’S NOT SOMETHING THAT I WANT US TO RUN OUT AND DO SOMETHING, AND YOU KNOW, 90 DAYS TO SHOW THAT WE DID IT, IT’S NOT THAT EASY. THINK THAT THIS IS GOING TO BE MORE OF A SLOW BURN MYSELF.>>BRIAN NEAGLE FROM [INAUDIBLE]. SO A COUPLE OF QUESTIONS. FIRST ONLINE, AND MAYBE A BIT OF A FOLLOW-UP TO MICHAEL’S QUESTION, BUT AS YOU CLEARLY AND UNDERSTANDING THE ENVIRONMENT IS VERY FLUID OUT THERE, YOU ARE PUSHING THIS OMNICHANNEL MODEL AGGRESSIVELY, BUT AS YOU LOOK AT YOUR CUSTOMERS THROUGH SURVEYING OR INTUITION, THE CUSTOMER THAT CHOOSES, YOUR CUSTOMER, WHO WOULD NORMALLY BE YOUR CUSTOMER CHOOSES TO SHOP ONLINE ONLY. WHY IS THAT? IS THERE SOME ASPECT OF THAT, THAT MODEL VERSUS THE WAL-MART OMNICHANNEL MODEL THAT’S GOING TO TAKE THAT CUSTOMER AWAY AND COULD YOU TACKLE THAT OVER TIME? AND THE SECOND QUESTION RELATED TO ONLINE AS WELL BUT AS YOU ARE THINKING ABOUT THE SUPERCENTERS AND SOME OF THE NEW FUNCTIONALITY IN THE STORES AS IT RELATES TO ONLINE, HOW DOES THAT LABOR MODEL SWITCH OVER TIME? THANKS.>>OK. ARE YOU GOING TO TAKE THE FIRST ONE?>>YEAH. I WILL TAKE THE FIRST ONE. SO I THINK HOW WE WIN IS WITH THE HEAD OF THE ASSORTMENT. AS I WAS SAYING BEFORE IT STARTS WITH FRESH, IT STARTS WITH CONSUMEABLES. IT’S BUILDING THAT FOUNDATION OF RELATIONSHIP WITH THE CUSTOMER. IF YOU CAN OFFER FRESH PRODUCE CONSUMEABLES AT THE BEST PRICES WITH A GOOD EXPERIENCE WHETHER IT BE PICKUP OR DELIVERY, THEN YOU HAVE A GOOD CHANCE TO BUILD A LONG STANDING RELATIONSHIP THAT YOU COULD LEVERAGE TO SELL THE REST OF GENERAL MERCHANDISE. AND I THINK THAT WE HAVE AN ADVANTAGE. WE HAVE ASSETS TO LEVER IN THAT AREA SO WE’RE GOING TO LEAN IN PRETTY HARD, WHICH I THINK WE’RE DOING WITH ONLINE GROCERY PICKUP AND ALL THE DELIVERY TESTS WE’RE DOING.>>AND ON THE LABOR QUESTION, COULD YOU ELABORATE A BIT MORE, SWITCH FROM WHAT TO WHAT?>>SO CLEARLY NOW WITH WHAT’S GOING ON IN YOUR STORES AND MORE, WE ARE MORE FOCUSED ON ONLINE SALES WITHIN THE STORES. THERE MUST BE SOME FUNCTIONALITY SWITCH OR THE PEOPLE WORKING THERE. HOW DOES THAT CONTINUE TO EVOLVE OVER TIME? IS THERE MORE LABOR PUT IN THE STORES, TAKE SOME LABOR OUT?>>YEAH. IT’S CHANGING RAPIDLY. IT WOULD NOT BE A WEEK THAT GOES BY THAT JUDITH AND I ARE NOT SITTING DOWN ALONG WITH MANY OF THE OTHER TEAM HAVING THAT DISCUSSION. IF I THINK BACK ON THE THINGS THAT I USED TO DO WHEN I STARTED IN THE STORE 40 YEARS AGO WORKING IN THE HABIDASHARY DEPARTMENT.>>THE WHAT?>>DO YOU KNOW WHAT THAT IS?>>HE KNOWS WHAT IT IS. [LAUGHTER]>>IT’S NEXT TO MANCHESTER.>>YEAH.>>ABOVE THEIR HEADS.>>I WILL GOOGLE THAT ONE.>>ANYWAY. [LAUGHTER]>>GOT NOTHING.>>WHAT WAS IT CALLED AGAIN?>>ENGLISH.>>IN ENGLISH. [LAUGHTER]>>THINGS CHANGE A LOT, AND YOU KNOW I MENTIONED IT DURING MY PRESENTATION. THIS CONCEPT OF SOMEONE PERSONALLY GOING AROUND THE STORE AND PICKING YOUR ORDER. WE HAVE TO PAY FOR THAT, AND FUNDAMENTALLY IF I GET TO THE HEART OF IT, WHAT HAS TO HAPPEN IS THAT WE NEED TO GET TO A SITUATION WHERE YOU ONLY TOUCH THE PRODUCT ONCE IN A STORE. SO IF YOU THINK ABOUT THAT AS A PRINCIPLE, THAT’S EVERYTHING WE ARE WORKING TOWARDS, SO GREG SMITH WHO RUNS OUR LOGISTICS AND IS SITTING BEHIND YOU, HE’S GOING TO MAKE SURE THAT HE DELIVERS PRODUCTS IN SUCH A FLOW AND IN SUCH A MANNER THAT WHEN THEY COME IN THE BACK DOOR, WE CAN BASICALLY PICK IT UP AND PUT IT ON THE SHELF. THAT MEANS STEVE HAS TO BUILD A PLAN-O-GRAM, TO ORDER MULTIPLES TO FIT ON THE SHELF. AND IF IT’S APPAREL, YOU KNOW, TO WHATEVER THAT PARTICULAR ORDER MODEL IS. JUDITH HAS GOT TO MAKE SURE THAT SHE HAVE THE LABOR TO BE IN THE STORE, THE TRUCK ARRIVES, SO IT’S THERE, IT’S TOUCHED ONCE, IT DOES NOT GET IN THE WAY OF THE CUSTOMER WE LOOK AT SCAN & GO, WE LOOK AT FRESH AREAS IN TERMS OF HOW MUCH LABOR IS INVESTED IN THERE, LOOSE VERSUS PREPACKED. ALL THOSE THINGS ARE GOING TO GO INTO EEQUATION THAT ARE GOING TO MAKE US MORE EFFICIENT, AND WE WILL SHARE THAT WITH THE CUSTOMER THROUGH REDUCED PRICES AND SOME OF THAT WITH OUR SHAREHOLDERS WITH HOPEFULLY BETTER RETURNS. THERE IS NO DOUBT WHAT YOU ARE GOING TO SEE OVER THE NEXT DECADE OR TWO IS MORE AND MORE PEOPLE DOING BOTH. AGAIN, STAND IN THE STORE AND ORDER ONLINE OR GOING TO SIT AT HOME AND THEY ARE GOING TO ORDER AND IT’S GOING TO GO DELIVERED TO HOME. AND WE HAVE TO DEAL WITH THAT. SO THE WORD FLEXIBILITY COMES TO MIND, BUT THE PRINCIPLE OF TOUCHING A PRODUCT ONLY ONCE, I THINK, IS A REALLY IMPORTANT PRINCIPLE FOR US IN OUR ENTIRE SUPPLY CHAIN TO GRASP AND TO DELIVER.>>I LOVE THE SAM’S CLUB EXAMPLE THAT JOHN SHARED ABOUT THE MEMBERSHIP DESK. THINK ABOUT HOW MANY PEOPLE DOES IT TAKE TO DO THE OLD PROCESS VERSUS THE NEW PROCESS AND IMAGINE THAT REPLICATED ACROSS OUR STORES AND CLUBS. THERE IS A LOT OF OPPORTUNITY TO HAVE THE EXPERIENCE FOR EVERYBODY, THE ASSOCIATES WORKING THERE AS WELL AS THE CUSTOMERS BE BETTER AND TAKE COSTS OUT BECAUSE THE WORK JUST GOES AWAY.>>LET’S GO HERE AND THEN ALL THE WAY OVER TO THIS SIDE.>>FOLLOWING UP ON PERSONALIZATION, TAKING JUST A STEP BACK, PERSONALIZATION IS NICE. BUT EASE OF SEARCH, YOU KNOW HOW RELEVANT THE SEARCH RESULTS ARE, MOVING AROUND THE APP, THAT’S THE SECRET SAUCE OF WHY SOME COMPANIES DO WELL AND OTHERS DON’T. HOW HAPPY ARE YOU WITH THE EXPERIENCE YOUR CUSTOMERS ARE GETTING NOW SHOPPING EITHER ONLINE OR WITHIN THE APP, AND WHAT’S THE RISK THAT IF THAT STILL IS NOT AS GOOD AS YOU WANT IT TO BE, THAT I TRY IT, AND I GO OH, I DON’T LIKE IT. IT’S TOO DIFFICULT. AND I NEVER COME BACK. SO, AND I AM MARIA FROM [INAUDIBLE]>>YEAH, THAT’S SOMETHING THAT IS WHAT I SAID IN MY PRESENTATION IS THE NUMBER ONE FOCUS RIHT NOW IS TO GET THE FUNDAMENTALS RIGHT. WE KNOW THE FUNDAMENTALS ARE NOT WHERE THEY NEED TO BE. TO DATE, YOU KNOW, LARGELY TRYING TO BE SOLVED WITH TECHNOLOGY, AND TECHNOLOGY ALONE, AND THAT’S WHY WE ARE MOVING TO BE MORE HUMAN POWERED AND COMBINING BOTH THE HUMANS AND TECHNOLOGY TO PERFECT THE EXPERIENCE. I THINK WE CAN, AND I THINK THAT WE WILL. IT’S GOING TO TAKE A BIT OF TIME, BUT THE TOP 100,000 SEARCH TERMS REPRESENT TWO-THIRDS OF THE TOP MILLION REPRESENT MORE THAN 80%, SO ACTUALLY, WITH HUMANS, AND IF YOU HAD 2000 CATEGORY SPECIALISTS, YOU DO QUITE A BIT OF DAMAGE IN PERFECTING THE SEARCH RESULTS VERY PRECISELY FOR EVERY KEY WORD SEARCH TERM THAT PEOPLE CARE ABOUT, AND LEAVE THE LONG PAL ALL THE SEARCHES BEYOND THE MILLION TO TECHNOLOGY AND MACHINE LEARNING. AND IT’S BRINGING THOSE TWO TOGETHER IS WHAT IS WE ARE IN THE PROCESS OF DOING RIGHT NOW.>>WE GO OVER HERE, WE ARE DOING IT IN SECTIONS, IT’S EASIER FOR THE CAMERAS TO FOLLOW SO WE’LL GET TO EVERYBODY.>>HEY, SCOTT FROM WOLF RESEARCH. THANKS FOR TAKING MY QUESTIONS. I HAD ONE CLARIFICATION ON THE GUIDANCE THAN A QUESTION. IN THE GUIDANCE IT SEEMS LIKE YOU ARE REFERENCED M&A AS PART OF THE PLAN, AND IT SEEMS LIKE THAT’S NOT PART OF THE GUYEDANCE SO I WANT I WAS WANT TO KNOW IF MOST OF THE ACQUISITIONS HAVE BEEN E-COMMERCE, WHICH ARE SLIGHTLY DILUTIVE AND SHOULD THAT BE OUR EXPECTATION GOING FORWARD. AND MY QUESTION REALLY GOING TO THE PRICING ENVIRONMENT IN THE U.S. BOTH FOR SAMES AND WAL-MART USA, IT SEEMS LIKE COSTCO ON THEIR CALL EARLIER THIS WEEK, I THINK IT WAS, LAST WEEK SAID THAT THEY WERE GOING TO BE INVESTING IN PRICE, AND I THINK THAT THEY HAVE A PRICE GAP TO SAMES. WE HAVE ALSO SEEN KROGER CUTTING THEIR PRICES AND [INAUDIBLE] GOING DOWN EVEN FURTHER, SO AS THE U.S. LOOKS AT THE BUSINESS AND GREG YOU KIND OF SAID TWO YEARS AGO THAT YOU WERE GOING TO REALLY DRIVE YOUR PRICE INTO THE MARKET. HOW SHOULD WE THINK ABOUT THAT ON WAL-MART?>>WHY DON’T I TAKE THE FIRST QUESTION FIRST. AS YOU LOOK AT THE GUIDANCE THIS YEAR, SHARES AND SALES GROWTH THAT, INCLUDES THINGS THAT WE HAVE DONE, EVERYTHING IS ON THE WALL, THAT’S INCLUDED, AND THAT’S INCLUDED IN NEXT YEAR. ANY FURTHER ACQUISITIONS THAT WE WOULD MAKE WOULD NOT HAVE BEEN IN THAT GUIDANCE.>>I WILL TAKE IT.>>LET ME TAKE THE FIRST QUESTION ON PRICE. THE WAY WE LOOK AT THIS, WE TALK ABOUT THE PRICE EVERY WEEK. AND WE’RE LOOKING AT PRICE, AND THE CORE OF THE ASSORTMENT, WE’RE ALSO LOOKING AT PRICE ACROSS THE BAR, AND WHAT I SAID EARLIER IS IMPORTANT THAT WE ARE REENERGIZING OUR BUSINESS AND FRESH FOOD AND FRESH FOOD HELPS THROUGH A LOT OF THINGS LIKE FUN PRICING IN OTHER AREAS, AND THE IMPROVEMENT MEMBERS MARK, THE 17% WE TALK ABOUT TWO YEARS AGO, THAT WAS 17%, AND THAT WAS ALL OF OUR PRIVATE BRANDS SO IT WAS NOT JUST A SHIFT TO THE ONE BRAND BUT WE INCREASED THE BUSINESS FROM 17 TO 23, AND THAT BUSINESS IS GREAT FOR MEMBERS, GREAT FOR US, AND HELPING OUR PAYABLES AND HELPS INVENTORY, AND ALL THAT PUT TOGETHER. WE SEE A REALLY GOOD PATH BEING ABLE TO BE EXTREMELY COMPETITIVE OR ANYONE ELSE IN THE MARKET.>>ONE OF OUR PRINCIPLES IS DELIVERING VALUE. THAT’S PRETTY CORE TO THE DISCUSSIONS THAT WE HAVE EVERY WEEKEND, THE WAL-MART U.S. STORES, BUSINESS, AND MARC AND I SPEND A LOT OF TIME TALKING ABOUT PRICE, AS WELL. SO WE ARE GOING TO MAINTAIN THE POSITION TRUE TO THAT PRINCIPLE AND WHAT IT MEANS IS THAT YOU HAVE TO WORK HARD IN OTHER PARTS OF THE BUSINESS TO WORK OUT HOW TO DEAL WITH THAT. IT’S NOT JUST ONE SIDE OF THE EQUATION. YOU HAVE GOT TO LOOK AT THE OTHER SIDE OF THE EQUATION, AND THAT’S WHY THE WORK YOU DO AROUND WHAT ARE YOUR FRESH THROWS AND YOUR UNSHOWN SHRINK — RINKAGE AND HOW MUCH YOU ARE SPENDING ON RETURNS AND ANYTHING THAT GOES INTO THAT EQUATION THAT WE CAN HELP TO OFFSET IT. BUT THE MARKET WILL BE THE MARKET, AND ALWAYS HARD TO PREDICT EXACTLY WHAT’S GOING TO HAPPEN BUT WE WILL REMAIN TRUE TO OUR VALUE.>>ANY OTHER QUESTIONS OVER HERE YOU AND THEN PAUL.>>THANKS. CHUCK FROM [INAUDIBLE]. YOU TALKED ABOUT IMPROVED PROFITEDDABILITY. CAN YOU SPEAK TO THE DRIVERS OF THAT AND CAN YOU FORESEE A SCENARIO WHERE EVENTUALLY THE DIGITAL BUSINESS BECOMES BREAK EVEN, AND THEN MY SECOND QUESTION FOR THE REST OF THE TEAM IS BRAND PERCEPTION. YOU TOUCHED ON IT BRIEFLY THROUGHOUT THE PRESENTATION BUT IT’S HARD FOR A RETAILER TO CHANGE ITS IMAGE FROM THE CONSUMER, AND YOU CAN LOOK BACK TO SAY J.C. PENNEY A FEW YEARS AGO BUT YOU ARE CLEARLY DOING THAT, SO I AM CURIOUS WHAT YOU ARE DOING TO CAPITALIZE ON THAT MOMENTUM, PARTICULARLY WITH THE MILLENNIAL CUSTOMER.>>AS IT RELATES TO BRAND AND THE SECOND QUESTION TONIE ROGERS, WHY DON’T YOU BOTH SPEAK TO THAT.>>DO YOU WANT TO GO FIRST?>>SURE. WHAT WAS THE FIRST QUESTION?>>E-COMMERCE PROFITABILITY.>>COMMERCE PROFITABILITY. IT IS A SCALE GAME SO AS WE GO SCALED THE PROFITABILITY SHOULD IMPROVE, NEXT YEAR WE WILL IMPROVE IT A BIT. AND OBVIOUSLY LONG-TERM WE DO EXPECT AT SOME POINT TO MAKE MONEY BUT PRIORITY NOW WE’RE IN A HEAVY INVESTMENT PHASE.>>IF YOU BREAK IT DOWN MORE YOU HAVE GOT THE FULFILLMENT COST PART OF THE EQUATION, AND WE HAVE ROOM TO BRING THAT NUMBER DOWN, IMPROVEMENT THROUGH PROCESS, ETC. WE HAVE GOT A MARGIN NUMBER THAT WE CAN IMPROVE THROUGH MIX SO ADDING TO THE ASSORTMENT FIRST PARTY AND THEN THIRD PARTY TAKE AWAY HELPS WITH THE MARGIN WHICH IS WHAT IS DRIVING THE ACQUISITIONS, SO IF YOU HAVE ENOUGH SCALE, YOU HAVE GOT YOUR MARGINS STARTING TO IMPROVE, FULFILLMENT COSTS COMING DOWN. YOU CAN MAKE A CHOICE ABOUT HOW MUCH YOU WANT TO DO IN TERMS OF MARKETING TO DROP THE TOP LINE. SO THAT’S THE WAY WE THINK ABOUT THE EQUATION, AND WE HAVE GOT OPPORTUNITIES ALL OVER THE PLACE.>>THANKS, DOUG. AND I AM TONIE FROM MARKETING. I THINK THE QUESTION ON BRAND PERCEPTIONS IS A REALLY GOOD ONE, AND I THINK WHAT WE SEE IS ENORMOUS OPPORTUNITY AS WE SHIFT BRICK AND MORTAR ONLY SHOPPERS TO BECOME OMNICHANNEL SHOPPERS WITH US, AND THERE WAS A QUESTION ON THAT EARLIER AS WELL. THE OPPORTUNITY LIES IN TWO CAMPS. ONE IS GETTING FOLKS THAT ARE JUST KIND OF COMING ONLINE THAT SHOP OUR STORES BUT GETTING INTO THE E-COMMERCE REALM AND TURNING, AND CAPTURING THEIR OMNICHANNEL VOLUME AND KEEPING IT WITHIN THE BRAND IS THE FIRST GROUP, AND THE SECOND GROUP IS PEOPLE THAT ARE SHOPPING US LOYALLY BRICK AND MORTAR BUT THEY ARE SHOPPING OTHER WEBSITES, AND THEY HAVE DEVELOPED HABITS SHOPPING OTHER WEBSITES FOR THEIR E-COMMERCE BEHAVIOR. AND WE’RE SEEING THAT THAT’S EQUALLY FERTILE GROUND FOR US AS WE GO AND CONVERT THOSE FOLKS AND BRING THEM BACK IN. WE TRACK OUR SHOPPERS, WE BREAK THEM INTO THREE GROUPS, FOLKS THAT SHOP US IN THE STORE, ONLY SHOP US ONLINE, AND SHOP OMNICHANNEL. AND THAT PERCENTAGE OF OUR SHOPPERS THAT ARE OMNICHANNEL WAL-MART SHOPPERS GROWS EVERY YEAR, AND WE’RE SOURCING IT FROM BOTH OF THOSE BUCKETS, SO A BIG OPPORTUNITY FOR THE BRAND, AND I THINK YOU KNOW, YOU SEE THROUGH ONLINE GROCERY, FREE TWO-DAY SHIPPING AND A LOT OF THE OTHER INITIATIVES THAT WE HAVE, CUSTOMERS ARE READY TO SHOP US IN THAT WAY, AND IT’S JUST REALLY BEEN ABOUT US SHOWING UP WITH THE OFFERING FOR THEM TO TAKE PART IN.>>I HAVE GOT THREE DIRECT REPORTS NOT UP HERE. JEFF GEARHART IF YOU WOULD STAND. JEFF LEADS GLOBAL GOVERNANCE WHICH INCLUDES ETHICAL, LEGAL, JACKIE, JACKIE LEADS THE PEOPLE AREA. AND YESTERDAY WAS HER BIRTHDAY, SO WE HAVE ALL BEEN GIVING HER A HARD TIME ABOUT THAT. AND DAN BARTLETT LEADS COMMUNICATIONS, CORPORATE AFFAIRS, SUSTAINABILITY, THOSE AREAS, AND DAN YOU’VE BEEN DOING A LOT OF WORK ON REPUTATION AND THE OVERLAP BETWEEN BRAND AND REPUTATION, AND ANYTHING THAT YOU WOULD ADD TO WHAT TONIE SAID?>>THE ONLY THING THAT I WOULD ADD IS THAT A LOT OF COMPANIES HAVE MORE OF A ARM’S LENGTH RELATIONSHIP, BUT WAL-MART WITH 145 MILLION TRANSACTIONS A WEEK, MORE THAN 60% OF THE PUBLIC GOING THROUGH THE STORES IN ANY GIVEN MONTH, WE HAVE AN INTIMATE RELATIONSHIP WITH THE PUBLIC. WE TALK ABOUT THE DAILY REFERENDUM ON OUR REPUTATION, SO THE THINGS THAT WE ARE DOING TO ATTRACT NEW CUSTOMERS THROUGH BRAND PROPOSITIONS WHETHER IT BE ONLINE ARE CRITICALLY IMPORTANT BUT I THINK IT ALSO REINFORCES THE FUNDAMENTAL WORK THAT WE’RE DOING IN OUR STORES BECAUSE THOSE ARE WHERE MOST OF THE INTERACTIONS ARE TAKEN PLACE. WE HAVE A REAL OPPORTUNITY NOT IN JUST SOLVING THE DAY IN AND DAY OUT BASIC ISSUES THAT CUSTOMERS EXPECT OF YOU BUT ALSO GIVES AN OPPORTUNITY TO TELL A BIT MORE ABOUT THE COMPANY AND WHAT WE’RE DOING BEYOND JUST THE FOUR WALLS INSIDE THE FOUR WALLS OF A STORE SO WHEN DOUG TALKED ABOUT EARLIER THAT WE HAVE AN OPPORTUNITY TO TELL OUR STORY IN A DIFFERENT WAY, THAT’S SOMETHING THAT WE WILL BE LEANING INTO BECAUSE WE HAVE THIS GREAT RELATIONSHIP AND THIS ACCESS TO SO MUCH OF THE PUBLIC THAT OTHER STORES DON’T, AND COMPANIES DON’T ENJOY THAT WE CAN TAKE AN ADVANTAGE OF IT.>>PAUL.>>THANKS, PAUL, DEUTSCHEA BANK. TWO QUESTIONS FIRST ON REAL ESTATE. WE ALL PROBABLY AGREE AND UNDERSTAND THE SHIFT IN CAPITAL, YOU KNOW, TOWARDS TECHNOLOGY AND E-COMMERCE. BUT I WANT TO MAKE SURE THAT I UNDERSTAND THE RATIONALIZATION AROUND THE MEANINGFUL SLOWDOWN IN REAL ESTATE GROWTH THAT WE HAVE SEEN OVER THE PAST FEW YEARS PARTICULARLY IN THE U.S. IS IT NO LONGER PROVIDING THE RETURNS? HAVE WE REACHED A POINT OF SATURATION, PERHAPS YOU CAN JUST GIVE US A BIT MORE COLOR ON HOW TO THINK ABOUT WHERE YOU ARE RIGHT NOW FROM A U.S. STORE’S STANDPOINT, AND SECOND ON THE E-COMMERCE FRONT, YOU OUTLINED THE 40% GROWTH IN THE U.S. IF AT ALL CAN YOU GIVE DETAILS ON HOW YOU ARE SEEING THOSE GROWTH RATES ACROSS THE WAL-MART.COM BANNER VERSUS JET VERSUS SOME OF THE ACQUISITIONS THAT YOU HAVE MADE? AND THEN HOW SHOULD WE THINK ABOUT THE GROWTH RATE FOR THE GLOBAL E-COMMERCE, THE 17.5 BILLION. ARE THERE ANY TARGETS ON THAT FRONT? AND IF THERE IS ANY KIND OF QUICK COMMENTS YOU CAN GIVE ON THE LATEST WITH JD.COM PARTNERSHIP.>>LET’S START WITH THE CUSTOMER QUESTION. MARC YOU GO FIRST AND DAVE IF YOU WOULD CHIME IN AND BRETT AND I WILL TAKE THE OTHER ONE.>>SO WE’RE NOT GIVING ANY GUIDANCE ON THE GLOBAL NUMBER IN TERMS OF THE SALES GROWTH, JUST REALLY ARE TALKING ABOUT THE U.S. WE ALSO HAVEN’T TALK ABOUT YOU KNOW, WHETHER IT’S COMING MORE FROM THE ACQUISITIONS, SO WAL-MART.COM OR GROCERY. I THINK THAT IT’S FAIR TO SAY THAT IT’S A NICE BLEND BETWEEN THE THREE CHANNELS.>>FROM AN INTERNATIONAL PERSPECTIVE, THINK OF IT IN THREE GROUPS, SO THE GROCERY ONLINE SHOPPING BUSINESS WHICH LEVERAGES THE EXISTING ASSETS. WE GROW EVERYWHERE. IT’S VERY DOMINANT BY THE U.K. WHICH HAS HAD THEIR BUSINESS FOR A WHILE SO THAT’S A HUGE CHUNK OF THE BUSINESS RELATIVELY MATURE AND HIGH SINGLE DIGITS GROWTH WHEREAS WE WOULD BE DOUBLE DIGIT GROWTH IN THE OTHER MARKETS. THE SECOND, THE MARKETS ADJACENT TO THE U.S. AND MEXICO AND CANAD. WITHOT DISTRACTING FROM WHAT MARC IS DOING IN THE U.S. WE HAVE ONGOING SESSIONS TO WORK OUT HOW AND WHEN WE CAN LEVERAGE THOSE, BUT BOTH THOSE MARKETS HAVE THEIR OWN MARKETPLACE SET UP BUT THERE IS A LOT OF SYNERGIES WHEN THE TIME IS RIGHT WE’LL BE ABLE TO BUILD INTO THOSE TWO MARKETS. FOR THE REST OF THE GLOBE THE EXTENDED TALE, THINK OF IT AS PARTNERSHIPS LIKE THE ONE THAT WE HAVE WITH J.D. IN CHINA. WE ARE MORE LIKELY WORKING WITH A PARTNER WHO CAN HELP US TO BUILD THE CAPABILITY IN THAT MARKET. AND THEN ULTIMATELY OPEN UP SOME CHANNELS TO START DISTRIBUTING UNIQUE ASSETS IN THE GLOBE. SO THE ASSORTMENTS THAT GREG BUILDS ARE, ACTUALLY, A LOT OF THEM ARE RELEVANT IN A LOT OF COUNTRIES SO THE GLOBAL STORE WE OPENED WITH J.D. ALLOWS A PORTABLE THAT MOVES PRODUCTS TO THE CUSTOMERS INTO THE OTHER MARKETS. AND YOU FIND WEIRD THINGS, ONE OF THE BEST-SELLING ITEMS ON J.D. IS A LONG LIFE MILK FROM THE U.K. BECAUSE THERE IS AN EVERY WITH FOOD SAFETY AND PEOPLE BELIEVE IT’S GREAT SO CONNECTING UP COUNTRIES WILL BE A BIG REVENUE SOURCE FOR US IN THE FUTURE.>>DAVID MENTIONED GROCERY ONLINE SHOPPING. THAT’S THE SAME AS ONLINE JUST ANOTHER FORM OF ENGLISH DESCRIPTION THERE. PROPERTY. REAL ESTATE. I THINK IT VARIES BY COUNTRY BUT YOU ASKED ABOUT THE U.S. SPECIFIALLY, I THINK, PAUL. IF YOU THINK ABOUT THE SUPERCENTERS THEY ARE LARGELY BUILT OUT. THERE WILL STILL BE OPPORTUNITIES TO DO A FEW HERE AND THERE BUT THAT’S LARGELY THE CASE WITHIN 90% OF THE POPULATION. WE HAVE AN OPPORTUNITY WITH [INAUDIBLE] MARKETS, BUT THE CHOICE WE’RE MAKING RIGHT NOW IS TO PUT THE ASSETS, THE INVESTMENT TOWARDS E-COMMERCE RATHER THAN THAT OPPORTUNITY. WE MAY BE BACK AROUND TO IT LATER BUT WE’RE MAKING A DELIBERATE CHOICE WE WILL GO IN WITH E-COMMERCE IN THIS MARKET AND BRING OMNI TOGETHER. IF YOU EXPAND BEYOND THAT, AND THAT APPLIES TO THE SAM’S CLUB QUESTION, TOO. THE SAME SITUATION I THINK AS THE SUPERCENTERS MOSTLY. WE LOOK MORE BROADLY THAN THE U.S., I THINK THE SUPERCENTER BUILDOUT IN CANADA LOOKS MORE LIKE WHAT THE UNITED STATES LOOKS LIKE BUT WE HAVE TREMENDOUS OPPORTUNITIES FOR NEW STORES AND OTHER INTERNATIONAL MARKETS THAT ARE NOT AS DEVELOPED. DAVE YOU MIGHT PUT U.K., JAPAN, KIND OF CLOSER TO THE CANADIAN BUCKET BUT WE HAVE GOT A LOT OF GREAT STORE OPPORTUNITIES THROUGHOUT LATIN AMERICA, CENTRAL AMERICA. I WAS TRAVELING A FEW WEEKS AGO IN SOUTH AMERICA, AND THIS DISCOUNT COMPACT THAT WE HAVE THAT OPERATES UNDER THE BODEGA NAME IS A FANTASTIC STORE FORMAT. FINANCIALLY TERRIFIC INVESTMENT. WE’LL CONTINUE TO HAVE A NEW STORE PROGRAM AS IT RELATES TO THE OPPORTUNITIES LIKE THAT.>>I THINK THAT’S A BIG IMPROVEMENT. THAT IS SO MUCH MORE FOCUS AROUND WHERE WE GET GOOD RETURNS SO THE SAM’S BUSINESS IN CHINA, IT’S A GREAT BUSINESS. WE HAD 12 CLUBS IN THE FIRST 20 YEARS. WE HAVE LEARNED THROUGH THE PIPELINE BECAUSE WHEN YOU HAVE A PHYSICAL CLUB AND YOU PUT AN ONLINE BUSINESS WE HAVE, WHICH WE HAVE WITH J.D., IT WORKS BETTER THAN IN ISOLATION SO YOU CAN SEE US DRAMATICALLY IMPROVING THE NUMBER OF PHYSICAL CLUBS OVER THE NEXT FEW YEARS BUT WELL THOUGHT THROUGH. AND WORK WITH BRETT’S TEAM ON THE WAY WE LOOK AT THE FORECASTING AND OUR CONTROL OF CAPITAL HAS MADE IT BETTER AT EVERYTHING FROM WHAT THE FORMAT IS TO WHAT GOLDEN PRINCIPLES APPLY TO MAKE SURE THAT WE ARE MORE CONFIDENT IN THE RETURNS THAT WE GET. SO MUCH MORE DISCIPLINED.>>THE OTHER BIT IS WE HAVE GOT A LOT OF STORES THAT OPENED IN 2003, 2004, 2005, 2006, WE WERE DOING 300 SUPERCENTERS A YEAR DURING THAT PERIOD. SO A LOT OF THOSE NEED A GOOD REMODEL. AND AS WE GET AROUND THE COUNTRY YOU KNOW, YOU OFTEN GO INTO A TOWN OR A CITY, AND USUALLY THE WAL-MART IS ON THE CORNER OF MAIN AND CENTRAL. HUGELY A FANTASTIC PIECE OF REAL ESTATE, 25 ACRES. AND WE WANT TO MAKE SURE THAT WE KEEP THAT FACILITY UP AND RUNNING AND IN THE BEST POSSIBLE CONDITION, AND WE HAVE WE CAN WE ARE DOING THING LIKE MAKING SURE THAT WE GET THE ONLINE GROCERY OFFER IN THERE. PICKUP GETS MOVED TO THE FRONT. THE STORE GETS A REALLY NICE REMODEL, AND WE LIKE THAT APPROACH OF KEEPING OUR ASSET REALLY CURRENT AND UP TO DATE. 500 IS AN ENORMOUS UNDERTAKING IN A BUSINESS LIKE OURS. SO I DON’T KNOW HOW MANY THOUSANDS THAT WE HAVE WORKING ON REMODELS BUT IT’S A LOT, JUDITH, WHEN YOU PUT EVERYONE OUT THERE IN THE FIELD DOING IT.>>ONE THING I WILL SAY, I HAVE GOTTEN SIMILAR QUESTIONS EVEN LAST NIGHT AND TODAY, YOU KNOW, WHAT WE’RE TRYING TO DO IS COMMUNICATE IN A WAY THAT MAKES SENSE WITH WHERE THE BUSINESS IS GOING. IF YOU WOULD HAVE LOOKED AT THE PRESENTATIONS THREE OR FOUR YEARS AGO IT WAS HERE’S WAL-MART U.S. AND SAM’S CLUB AND INTERNATIONAL AND HERE’S SQUARE FOOTAGE GROWTH AND NUMBER OF STORES, AND IT’S NOT HOW THE WORLD IS WORKING OR WE ARE OPERATING ANY MORE. AS WE LOOK AT AN OPPORTUNITY IN THE U.S. WE MAY SAY THAT’S A BETTER SERVE OF THE STORE, BETTER SERVED WITH E-COMMERCE, AND SAME THING IN COUNTRIES, DELIVERY IN CHINA VERSUS PUTTING OUT A NEW STORE OR PARTNERSHIP WITH J.D. SO ALL THESE THINGS MAKING A LITTLE MORE CHALLENGING TO HOW WE FRAME THE BUSINESS FOR YOU, THAT YOU CAN COMPARE A BIT TO HOW YOU WOULD HAVE THOUGHT ABOUT THE COMPANY THREE OR FOUR YEARS AGO.>>ONE MORE OVER HERE AND GET TO A FEW PEOPLE OVER HERE. GO AHEAD.>>THANKS. [INAUDIBLE] WITH STEVENS. IN THE STORE TOURS AND PRESENTATION TODAY WE SAW AND HEARD A LOT OF EXAMPLES OF TESTS AROUND INITIATIVES IN STORES. CAN YOU HELP US THINK ABOUT THE CRITERIA THAT YOU CONSIDER IN DETERMINING WHETHER A TEST NEEDS TO BE ABANDONED OR EXPANDED TO A BROADER SET OF STORES?>>YEAH. GREG DO YOU WANT TO TALK ABOUT THAT?>>YEAH. WE CERTAINLY DO, AND ISN’T THAT A GREAT THING? AND OFTEN WITH MANY OF THE THINGS THAT WE DO, WE ACTUALLY AREN’T QUITE SURE HOW BIG THAT THEY ARE GOING TO BE OR HOW SUCCESSFUL THEY ARE GOING TO BE UNTIL YOU START GETTING THEM OUT THERE. SOMETIMES WE’LL BEGIN WITH ONE STORE AND WE’LL WORK HARD AT THAT, AND WE SEE THE RESULTS, AND WE’LL SAY IN THIS CASE LET’S TAKE THAT TO FIVE STORES, AND SOMETIMES WE DON’T FEEL THE NEXT GROUP SHOULD BE FIVE STORES BUT 30 STORES. WE ALWAYS WILL GET TO A POINT, AND WE HAVE THINGS LIKE REVIEW MEETINGS AND A CAPITAL MEETING EVERY MONTH WHERE WE WILL SIT DOWN AND WE WILL START ASKING THE QUESTIONS, SO IS THIS ACHIEVING BUSINESS CASE? ISN’T IT? WHAT DID WE LEARN? DO WE HAVE TO CHANGE IT? I LIKE THE FACT THAT WE HAVE GOT MANY THINGS HAPPENING. THERE IS A BALANCE, OF COURSE, THAT YOU CAN TALK ABOUT IT AND YOU DON’T EXECUTE IT, SO MAKE SURE THAT BEFORE YOU ABANDON IT, YOU GAVE A REALLY GOOD SHOT AT EXECUTING IT, BUT THERE IS A STRINGENT PROCESS, WE ARE NOT JUST THROWING THINGS AT A WALL. WE THINK ABOUT IT INTIMATELY AND THAT’S HOW WE MAKE THE DECISIONS>>YEAH. DAVID MENTIONED THAT THE SUPPLY CHAIN WAS, I THINK, 20 BASIS POINTS OF IMPROVEMENT IN INTERNATIONAL, AND IT SEEMS TO ME AS THE WORLD CHANGES AND WE GO DOWN THE NEXT 10 TO 15 YEARS, TRANSPORTATION IS GOING TO CHANGE, AND THERE IS GOING TO BE SIGNIFICANT OPPORTUNITIES, WHERE ARE YOU AND WHAT YOU HAVE DONE FOR THE REST OF THE COMPANY AND THE SUPPLY CHAIN AND WHAT DO YOU THINK IT WILL BE AND DOES THAT LEAD DOWN TO A THOUGHT PROCESS OF MAYBE SOMEWHERE DOWN THE LINE, YOU GET FULFILLMENT COSTS DOWN AND OTHER THINGS DOWN? TO A PERMANENT PRICE PREDEDUCTION AND THE SHIPPING THRESHOLD? AND I ALSO HAVE A QUESTION ABOUT MERCHANDISING STRUCTURES. MAYBE AFTER YOU TALK ABOUT THAT.>>GREG.>>SURE. SO GREG SMITH, GREG JOINED US BACK IN JANUARY. HE JOINED US FROM GOODYEAR AND CONAGRA AND RUNS THE SUPPLY CHAIN FOR THE U.S. STORE’S PIECE, AND I WILL HAND IT TO HIM IN JUST A MINUTE. BUT YOU KNOW IS SUPPLY CHAIN GOING TO BE AN ENORMOUS COMPETITIVE ADVANTAGE IN IT HAS TO BE DOESN’T IT, WHEN YOU HAVE A BUSINESS THAT’S DOING IN THE U.S. 300 BILLION, AND YOU ARE DOING ANOTHER 140 BILLION OUTSIDE OF THE U.S., MOST OF THAT IS FOCUSED ON 300,000 SKUs, YOUR ABILITY TO PROVE THAT PRODUCT MORE EFFECTIVELY THAN ANYONE ELSE IN THE WORLD HAS GOT TO BE ENORMOUS, AN ENORMOUS COMPETITIVE ADVANTAGE, AND WE ARE FOCUSED ON THAT. THERE’S A LOT OF WORK THAT BREAKING AND THE TEAM ARE DOING, AND GREG OVER TO YOU.>>THANK YOU. A LOT OF WORK, AND WE ARE EXCITED ABOUT THIS OPPORTUNITY, FIRST OF ALL IT’S REALLY THE FLOW OF THE PRODUCTS AND REALLY BEING SPEED AND PRECISE. A LOT OF FOCUS WITH THE VENDOR PARTNERS THROUGH THE NETWORK TO GET OUR PRODUCTS MOVING THROUGH QUICKLY AND VERY EFFICIENTLY. GREG INDICATED THE BENEFITS THAT WE HAVE ON THE PRODUCT WITH PRODUCE, KEY FOCUS THERE, AND ALSO IN THE WAY THAT WE LEVERAGED THE TRANSPORTATION, LOOK AT OUR NETWORK, WE HAVE A TREMENDOUS DENSITY IN THIS NETWORK SO WE ARE REALLY EXCITED ABOUT HOW WE LEVERAGE OUR PRIVATE FLEET AND THE THIRD PARTY RESOURCE THAT WE HAVE IN TRANSPORTATION, AND TO REALLY GET TO THE MOST EFFICIENT MODEL THAT WE CAN THERE, AND WHILE LEVERAGING OUR ASSET BASE AS WELL. WE ARE ALSO LEARNING A NEW TECHNOLOGY, SO YOU WILL START TO SEE US JUST LIKE THE STORES ARE TESTING, WE’RE DOING A LOT OF TESTING AROUND ROBOTICS AND AUTOMATION AND STARTING TO BRING IN THOSE INTO THE WORKPLACE TO BE ABLE TO HELP US SIGNIFICANTLY IMPROVE OUR EFFECTIVENESS AND THE COST OF THE CHAIN SO VERY EXCITED ABOUT THE NEXT FEW YEARS HAS TO BRING, AND WHAT WE HAVE AHEAD OF US IN THE SUPPLY CHAIN.>>IT’S ANOTHER AREA WHERE I THINK HAVING A GLOBAL BUSINESS IS AN ASSET BECAUSE IF YOU LOOK AROUND THE GLOBE, WITH OUR RELATIONSHIP, AND A NEW DAUGHTER IN CHINA WE HAVE A CLEAR PLAY CROWD SOURCE SOLUTION SO WE ARE GETTING A GOOD UNDERSTANDING ABOUT HOW THAT WORKS AND DOESN’T. IN THE U.K. OUR FLEET THAT DOES THE DELIVERY AND WE UNDERSTAND HOW THAT WORKS AND OUR ABILITY TO WORK WITH GREG’S TEAM AND LOOK AT DIFFERENT MARKETS, IN SOME CASES IT’S UNIQUE TO THE MARKET AND NOT GOING TO APPLY ANYWHERE ELSE BUT WE HAVE GOT INSIGHTS, THAT THE BUSINESS STOOD ON ITS OWN WOULDN’T HAVE, AND WE CAN LEARN VERY QUICKLY.>>GO AHEAD.>>YOU FOLLOW-UP WITH IT.>>IT’S GOING TO ASK ON WHAT YOU HAVE GOTTEN, FROM MAYBE OTHER PARTS OF THE COMPANY, AND OTHER PARTS OF THE WORLD, AND THE IDEA OF A PERSONAL PRICE REDUCTION SOMEWHERE DOWN THE ROAD, AND THE SHIPPING THRESHOLD FOR E-COMMERCE, DOES THAT LEAD TO THAT MOVING THAT? YOU HAVE MADE A BIG CASE ABOUT THAT. OUR MEMBERSHIP PLAN.>>I THINK IT COULD. THERE’S BASICALLY THIS BIG OPTIMIZATION THAT WE THINK IS GOING TO HAPPEN, AS YOU THINK ABOUT CONNECTING PEOPLE WITH PRODUCT, THE MORE NODES YOU HAVE DISPERSED CLOSE TO THEM. THE MORE OPPORTUNITY THAT YOU HAVE TO RUN THIS BIG REGRESSION ACROSS THE TOP AND FIGURE OUT HOW TO MEET THE DEMAND, AND THE MORE THEY TELL US AHEAD OF TIME WITH THEIR VOICE OR ON AN APP THAT THEY WANT SOMETHING, IT’S MORE OF AN OPPORTUNITY TO STAGE THAT, PROVIDE THAT BACK TO THEM IN A WAY THAT’S LOWER COST. I THINK WE HAVE THE COMPONENTS, BUT I DON’T THINK THAT THERE IS GOING TO BE THIS MOMENT IN NEXT YEAR’S PLAN WHERE THERE IS A SUBSTANTIAL PRICE REDUCTION BECAUSE WE HAD SOME BREAKTHROUGH IN FULFILLMENT. IT WILL BE MORE GRADUAL THAN THAT.>>DAN WHY DON’T YOU BRING US ON, FOR THOSE THAT WE HAVE NOT FORGOTTEN TO THE QUESTIONS THESE GUYS WILL BE AROUND FOR A WHILE DURING LUNCH TO HAVE A CHANCE TO ASK A QUESTION TO.>>DAN WITH JEFFRIES. SINCE I AM LAST I WILL ASK TWO QUESTIONS, ONE IS AROUND FRICTION ONLINE. YOU TALKED A LOT ABOUT REDUCING FRICTION. TWO AREAS I WOULD LIKE YOU TO ADDRESS IF YOU COULD IS FULFILLMENT BY WAL-MART. THAT DOES NOT EXIST TODAY, AND DOES IT NEED TO LONGER TERM TO COMPETE WITH THE MARKETPLACE? ESPECIALLY ON TWO-DAY THOROUGHFARE, OBVIOUSLY, BECAUSE WE CAN GET THAT ON 2 MILLION ITEMS WITH WAL-MART BUT PROBABLY A LOT MORE WITH ONE OF THE BIG COMPETITORS. ALSO ONE CLICK IF YOU CAN ADDRESS THAT. I THINK WHEN I GO THROUGH WAL-MART CHECKOUT IT’S PROBABLY FIVE OR SIX CLICKS RIGHT NOW. BETTER THAN IT USED TO BE BUT PROBABLY ROOM FOR IMPROVEMENT. AND THEN THE SECOND QUESTION WAS REALLY AROUND THE PORTFOLIO OF ASSETS. EARLY IN THE PRESENTATION YOU TALKED ABOUT DIVESTING NON-CORE. WE HAVE SEVERAL EXAMPLES OF THAT ALREADY, JUST CURIOUS, YOU KNOW, YOUR THOUGHTS GOING FORWARD. IS THAT LARGELY DONE OR IS THERE MORE TO DO? ANY COMMENTS YOU COULD PROVIDE.>>MARC YOU WANT TO GO FIRST?>>YEAH. TALKING ABOUT HOW MANY CLICK ITSELF — CLICKS IT TAKES TO NAVIGATE THE WEBSITE.>>YEAH.>>THREE.>>YOU ARE GETTING YOUR MONEY’S WORTH. SO REGARDING CHECKOUT, I MEAN, THAT’S ONE OF THE THINGS THAT WE ARE DOING. WE HIRED A NEW HEAD OF CUSTOMER EXPERIENCE THAT STARTED ABOUT A YEAR AGO, RIGHT, WHEN I WAS STARTING, AND HE’S BEEN REALLY BUILDING OUT THE ENTIRE CUSTOMER EXPERIENCE TEAM. WE HAVE GOT A REALLY GOOD TEAM. YOU ARE GOING TO START TO SEE A LOT OF IMPROVEMENTS IN THE ACTUAL ON-SITE SHOPPING EXPERIENCE WHICH WILL INCLUDE THE CHECKOUT FLOW. THAT’S AN AREA THAT WE KNOW THAT WE CAN STREAMLINE. SO WE’LL BE FOCUSED. THAT’S SORT OF PART OF THE FOCUS ON FIXING THE FUNDAMENTALS. THAT WAS THE ONE QUICK QUESTION AND THE OTHER ONE BY WAL-MART.>>YEAH, FULFILLMENT BY WAL-MART.>>WE HAVE ACTUALLY GOT A FEW PARTNERS THAT WE’RE USING TO DO FULL EQUIPMENT ON BEHALF OF THE THIRD PARTIED MERCHANTS. WE ARE AT A PLACE THAT WE WANT TO BRING THAT — WE ARE NOT AT A PLAY IS THAT WE WANT TOO BRING THAT IN BECAUSE — THERE IS SO MUCH OPPORTUNITY TO BRING IN THE THIRD PARTY WHICH IS THE EXPERIENCE THAT WE ARE FOCUSED ON FIXING RIGHT NOW. WE WILL SEE HOW IT EVOLVES BUT THERE ARE OPTIONS FOR 3P SELLERS RIGHT NOW.>>ON THE PORTFOLIO, THERE IS MORE WORK TO BE DONE. THERE IS SOME THINGS IN THE QUEUE. OBVIOUSLY WE CANNOT TALK ABOUT SOME OF THOSE THINGS UNTIL THEY ARE DONE BUT IT’S A DELIBERATE PIECE OF WORK, AND WE’RE PRIORITIZING NORTH AMERICA. YOU CAN HEAR US PRIORITIZING OMNICHANNEL. WE WANT TO MAKE SURE THAT OUR RESOURCES, PEOPLE, FINANCIAL RESOURCES, EVERYTHING ARE AIMED AT WINNING IN THE MOST IMPORTANT PLACES. THAT’S THE WAY THAT WE THINK ABOUT IT. ANYTHING YOU WANT TO ADD TO THAT>>CAN I SAY THANK YOU. I APPRECIATE THE ENGAGEMENT THAT YOU ALL HAVE IN THE COMPANY. A LOT OF YOU INVESTED YOUR TIME TO UNDERSTAND WHAT WE’RE WORKING ON. REALLY DO APPRECIATE YOU DOING THAT. I HOPE YOU CAN SENSE FROM US TODAY THAT OUR POSTURE IS IMPROVING AND WITH WHAT WE CAN SEE AHEAD OF US WE THINK THAT WE HAVE A GREAT OPPORTUNITY TO CONTINUE TO MAKE IMPROVEMENT AND WE’RE WORKING HARD TO DO THAT. SO THANKS FOR INVESTING YOUR TIME AND ENERGY TO UNDERSTAND WAL-MART.>>SO THANKS EVERYONE AGAIN. THIS CONCLUDES OUR WEBCAST PORTION OF THE MEETING. WE ARE GOING TO HAVE LUNCH SERVED IN A BIT. I WILL LET YOU ASK FOLLOW-UP QUESTIONS OR OTHER QUESTIONS THAT YOU WERE NOT ABLE TO.




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