Paul Lejuez: Could you talk about what the net impact was on consolidated results this past year and what your expectations were built in to guidance for the upcoming year. I’m also just curious what the plans are for that business and their ownership of those businesses? And then just a quick one — sorry, I missed it. But you share repo or contention that built into your guidance for this upcoming year?
Doug McMillon: We had a difficult time hearing you. The question was about Flipkart and PhonePe and is it reflected in our guidance for the year forward. That’s all we got. Can you clarify a little bit more for us?
Paul Lejuez: Sure. It was very back Flipkart, PhonePe contributed to results this upcoming year. Also the ownership at there. And then the last question system share repo assumption over your share count assumption that’s in the guidance as it .
John David Rainey: Paul, this is John David. There is a little bit of a bad connection, so I’m going to attempt to answer this. And if we don’t completely address your question, then we can follow up after the call. The onetime costs related to the separation were called out separately from our results related to restructuring. But in terms of the core business and the way that, that affects our results, a lot of our GMV growth, a lot of our revenue growth is coming from, in particular, Flipkart. We see great progress over there. They continue to be a strong player in the market that they operate in. And as I noted in my comments on the call, we’re in much better position right now with respect to some of the investments that we’ve made historically.
Any e-commerce or any digital platform, you need an infrastructure that you can scale at a low marginal cost. And that’s what Flipkart has done. They’ve invested in that infrastructure over the last three years. So now, we’re able to see that contribution profit continue to expand. And so, we’re excited about that. I think there is a part of your question that was related to the separation of PhonePe and Flipkart and what that allows them to do, and feel free to jump in here. But to me, this is in some ways, very analogous to eBay and PayPal, where each of them operating independently can pursue their own initiatives and our they don’t necessarily need to be tied together. And so this is an opportunity for them to unlock and realize more value independently than they can by themselves.
Judith, anything you’d add before I go on?
Judith McKenna: Maybe just comment on the separation of the two businesses. You have to remember, we’ve — when we first invested into Flipkart, PhonePe had only just launched. It was four months old, and it had an annualized TPV as kind of like in the tens of millions of dollars. As that business has grown and as the Flipkart business whilst there are partnerships between the two commercially, actually, we recognize that each has been successful, and we’re setting them up on a path for long-term success. As I look at Flipkart now, and John David referenced it and so did Doug, I’m really impressed with the contribution margins, which are positive and been consistently positive for some time. And that structurally well, not only from a cost perspective, in terms of the infrastructure investment that we’ve made for the e-commerce business for their delivery and distribution business, but also the way they’re working on their margin mix.
In PhonePe, I think the highlights there are clearly, I talked about the size of their annualized TPV when we acquired them. That has reached $950 billion in last year. At the end of last year, that was their run rate and then now doing 4 billion transactions a month. So that separation allowed us to put both of them on the path to being the very best businesses. They can be in the long term and the fundamentals of India remains strong and interactive strengthening all the time. So, it was a challenge from some of the adjustments that we needed to make in order to do that, but really testament to the strength of both businesses and the economy in which we operate.
Doug McMillon: And I believe the last part of your question related to share count assumptions for this year. Let me take the opportunity to just talk about capital allocation broadly in answering that question. We’ve been historically very balanced with respect to our capital allocation, both investing organically done in mergers and acquisitions as well as dividend and share buyback, and we will remain balanced going forward. But as we sit here today, I think the scales tilt a little bit more towards organic investment when we look at the returns related to that. Every dollar of capital has to compete for the highest returns. And as noted in my comments earlier, we see the returns around some of these technology and supply chain investments, these are ones that we think translate into increased shareholder value.
And so relative to last year, you’ll probably see us do less on share buyback. And therefore, it will have less accretion in terms of the earnings impact. But last year, we saw a dislocation in our stock and we were opportunistic and more aggressive at that period of time, and we’ll always be responsive to factors like that in the market. But our planning assumption is to buy back less stock than we did last year.
Operator: Next question is from the line of Karen Short with Credit Suisse. Please proceed with your question.
Karen Short: Just two. First of all, I wanted to talk about the Walmart U.S. margin structure, specifically within your guidance? Obviously, ’22 or your fiscal ’23 had its own separate challenges, and we know there is a LIFO headwind in fiscal ’24. But I guess I want to talk a little bit about what the U.S. EBIT margin structure could be like going forward in fiscal ’24 relative to pre-pandemic? And then the second question, I would just ask is that you are obviously cautious for the reasons that you called out, but prior evidence that you actually tend to do very well in weak macro environment recessions. So, I’m just curious on why there’s such a much more cautious tone.
Doug McMillon: I’ll start, Karen. And it’s good to speak with you. John may want to jump in. But I’ll start with the first part of your question. So the EBIT structure related to the U.S. business, there’s a couple of factors there. One is, if you look over the last 12 months, we had a mix shift in our business from GM to food and consumables of over 300 basis points. And we actually don’t expect that to improve this year. In fact, we expect it to get a little bit worse, not by the same magnitude, but slightly worse. So that affects the margin structure. But as noted, our business composition the things like our initiatives, advertising, Walmart fulfillment services, those are contributing to a larger share of our overall business, which has less of an impact as we look at fiscal year.
It will be more pronounced as we get into the next year and the year thereafter that where you see the margin structure change a little bit more. And certainly, LIFO is something that we expect to have some impact this year, but not a prolonged effect in the years that follow. So hopefully, that gives you a little bit of color on the EBIT profile. With respect to our cautious tone and the fact that we tend to do well when the consumer is pressured, look, we recognize that. We also think that we’ve got a great value for consumers and good economic times too, and we’re eager to demonstrate that. But again, I would just point you to the fact that there’s just a lot that we don’t know. We could tilt into a recession. We don’t know what happens to consumer spending.
We don’t know what happens to layoffs household income. And so given that we’re so early into the year and there’s a lot of unknowns right now, we’re simply taking a cautious outlook.
Operator: Next question is from the line of Robbie Ohmes with Bank of America.
Robbie Ohmes: My question was just if we could get maybe a little more color maybe from Doug on Walmart+ and sort of how it’s doing versus your — more on how it’s doing versus expectations. And what the customer responding to for the new Sonus in Walmart+ and how do you see profitability in our first-party e-commerce business evolving? Is that key to getting back to that long-term algorithm of growing operating income faster than sales?
Doug McMillon: Robbie, I’ll go first. This is Doug. John is going to jump in here, too. I just say that the way that the business model is evolving, that includes 1P plus 3P, plus the services that go along with that, including advertising income to us, make a ton of sense. They’re mutually reinforcing. We’re excited about the progress that we’re making there. And Walmart+ is one ingredient of that. And we’ll continue to describe Walmart+ to you, but not do that in such a way that the market gets overly focused on that metric because we want to be evaluated on several metrics, not just one metric. And we’ve seen other companies with some sort of short and where people are watching one metric to determine the future of the Company that is just not that simple in Walmart.
Obviously, people want to pay for delivery in bulk with an annual membership, not per delivery. That’s what led us to this point. And now it opens all kinds of opportunities to us. And we like what’s happening behaviorally with Walmart+, but it’s just one component of a plan.
John Furner: Yes, I think that’s a great way, Doug, to describe it as an important part of what we’re building. And it’s a way that customers can access an interesting combination of all of our assets from our digital front end, which is become one experience over the last couple of years the fact that we have inventory within 10 miles and 90% of the population is another way that this call comes together. And the business model itself, and we’ve said this before, and I’ll just repeat it, it’s becoming more difficult to measure the differences in e-commerce and stores because stores are acting as fulfillment centers at times, their stores primarily and then there are fulfillment centers. So there are a lot of blurred lines between all these channels.
So having an offer that is great for consumers in terms of the behavior they’re seeking, which is convenience, and not worrying about incremental delivery fees is working fantastically. Now it’s also important to note that this tends to be a younger, more tech savvy consumer, which is great, in some cases, a higher income customer. So, as we’ve said in the most recent quarters, we’ve gained share with higher income customers. Walmart+ with delivery and then these other businesses like advertising, fulfill services marketplace, all add up to a better proposition for both the customer and the Company.
Operator: Next question is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.
Rupesh Parikh: I was hoping to ask more on food inflation. As your team looks forward, what’s your expectation for food inflation? And then I’m also curious on what you’re seeing right now on the inflation front for non-food?
