But fundamentally, what’s happening here is exactly what was happening here three months ago, six months ago, we are executing our plan.
Robert Ohmes: And just anything on wage pressures, Doug?
Doug McMillon: Wage inflation is not as bad as it was before. We – as John mentioned earlier what happened in Walmart U.S. I’m not worried about wages. We’ve got an appropriate wage improvement for our associates planned for next year. I think we’re in good shape. We’re staffed, we’ve got a good plan. Not concerned about that aspect of it.
Robert Ohmes: Great. Thank you.
Doug McMillon: Sure.
Operator: The next question is from the line of Scot Ciccarelli with Truist Securities. Please proceed with your question.
Scot Ciccarelli: Good morning, guys. So another question, actually, on remodels, I know you had a lot over the last couple of months, as you referred to, but given the strong returns on the remodels, does it make sense to continue to accelerate that process even if it holds back earnings flow through a bit in the near term? And then related to that, if you do accelerate the process, where do you have to go on the timeline to where you start to see more benefit than incremental expense on a net basis? Thanks.
John Furner: I think the short answer is — it does make it does make sense to accelerate, and we have accelerated. So we will complete this year a couple of hundred more than we did the last few years. So the number of remodels has gone up. The team has got much more, I’d say got their arms around the process, the new fixtures, the changes. So the remodels are happening a bit quicker and more smoothly than they were years past. And also the supply chain is helping. We were doing remodels in ’21 and ’22, where we had a hard time getting fixtures and getting parts and getting the equipment in on time. So we’re feeling better about the way these are all coming together. The performance of the remodels we are — I mean, we continue to be pleased with on the top line, we continue to be pleased with the MPS numbers.
We see the customer reaction of the new assortment, particularly, as I mentioned earlier, apparel, pets, beauty, home, a number of categories is really great. And I mentioned I was in one that completed just a couple of weeks ago in Uvalde, Texas. And you know it’s just such great — such a great investment in the community. It makes the store feel new, refreshed. People are — there’s a different look in their eye and a smile. The associates are thrilled with the results and they were really proud of it. And as we go on the holidays, I think that customers will really love to see in these communities all across the U.S. more access to different products than they had before. And one of the things that’s important in all these remodel processes is that the customer notices the difference and they notice the difference not only in the facility but in the product.
And I think we’re delivering both of those in the remodel. So we’ll continue an aggressive plan for the remodel locations into next year
Scot Ciccarelli: And so is there a headwind to profit flow through as that process continues at that pace?
John Furner: No, it’s in the plan. What happened in Q3 is a few that had been in process, slipped into late October, and then 117 on one day was quite a big number. So what you’ll see going forward is a more balanced of remodels completing by quarter. Ideally, we would have liked to complete — we wouldn’t want to have those so close to the holiday. I think the teams have done a nice job of finishing the remodels and then getting back right into merchandising for the holiday. So to be more even across quarters, but that’s all built into our plan.
Scot Ciccarelli: Got it. Very helpful. Thank you.
John Furner: Thank you.
Operator: Our next question is from the line of Edward Kelly with Wells Fargo. Please proceed with your question.
Edward Kelly: Hi. Good morning, everyone. Thank you for taking my question. I have a question on the gross margin in the US, the margin was not touched year over year. I think the expectation was that it maybe could have been better than that. I was hoping that you could provide some of the puts and takes around that. I’m not sure if GLP-1 is maybe having a bigger impact there. So just thoughts on the gross margin this quarter and then maybe how we should think about that in Q4 and then a clarification around the legal charge. I think you said $75 million, but then 40 basis points. So I’m not really sure. I’m a little bit confused about that. Thank you.
John David Rainey: Yeah. The legal charge is 40 basis points, go with that number. And as it relates to our guidance for the year, I’ll point out that 7% to 7.5% operating income on our business is $125 million. That is really more — it’s kind of a precise number for the size business that we are. And so that the magnitude of some of these things, like the hurricane, like the legal charges, push us to the lower end of that range for the year. On general merchandise, we did see some of the impact from business mix in the quarter. We benefited from that. The U.S. was up, I think, 5 bps, if I remember correctly. But as Doug noted, too, like we’re certainly trying to be — to lower prices for our customers and make sure that we’re providing the value that they need. So there’s a balance of all of that that’s impacting those numbers.
