Doug McMillon: And generally speaking, food inflation has been the most stubborn of all the categories. We were in mid-double digits in Q3 and Q4 hasn’t come down all that much. A little bit, I guess we could say, has come down the last couple of months, but it still would be a high level of disinflation at this point. So this looks to be a little bit higher than what we were expecting going into the year, but this all leads back to the comments earlier on uncertainty. We would have hoped and expected it have to have come back more than have going into this year. There are other parts of the business where prices have come down more like in general merchandise. But overall, I think we’re taking a very cautious outlook and going to continue working on doing everything we can to try to keep prices as low as possible for our customers.
Doug McMillon: The way to think about it is dry grocery and consumables are stubborn mid-double digit, and those are going to just be with us for a while. And it will get a little confusing because you’ll probably hear inflation numbers that start to sound lower, but you’ll have to remember that’s on a two-year stack. So if inflation in dry grocery and consumables is only three or five, that’s on top of 15. And that’s still a problem for the customer and still a pressure in their wallet. In the fresh categories, things are a little bit different. Like eggs were at 200% inflated in January. They’re down now to being just 50% inflated. That’s still a problem. Milk is actually less than one year ago. Beef is lower in terms of pricing.
So the fresh categories is kind of bouncing around, going up and down and being more volatile. It’s dry grocery and consumables that we think are going to create the pressure that customers are going to feel and have the impact it relates to us on mix over the course of the year. And that’s one of the variables that’s a little hard to call what will GM look like in the back half of the year.
Operator: Next question is from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.
Kelly Bania: Just wanted to understand a little bit more some of the factors that were pressure or that were cycling from fiscal ’23, including the pressures from markdowns, mix and supply chain. Wondering if you can just help us understand the magnitude of those pressures this year and what is baked into your guidance for fiscal ’24? And particularly, I think I heard that you say maybe, correct me if I’m wrong, 300 basis point gap again between grocery and general merchandise again this year. So just trying to understand that the magnitude of that mix I’d assume markdowns are planned to be much lower, but maybe you can help us there? And then are you baking in some cushion for a more promotional environment? Or just help us understand really, what is baked into some of those major margin buckets as we look to next year?
Doug McMillon: Before these guys comment, I just want to quickly call out that we’re profitable in food, and I don’t want this to grow to the point where people think they make money in general merchandise, they don’t in food. There’s a delta between all things, food, consumables. But there are some really profitable businesses in fresh and other areas. So, we want to manage that mix, but I just don’t want this to get too far out of balance.
John Furner: And on the — great point, Doug. And on the 300 basis point, that comment was related to last year, the shift — the difference in mix between food and GM and the year that we just experienced. So, we do think we’ll have some mix impact going into this year, which we stated. But we don’t — we didn’t say it was $300 million for the year we’re going into. Certainly, food inflation and GM sales can change that number. And that’s why we, as we said, taking a cautious outlook because food inflation amongst other things, has remained more unstable than what we have expected. So, it’s higher than what we thought it would be. But that point on food being a profitable business at Walmart is important. So, we if the customer wants to spend more in the food categories and general merchandise will be there for them.
Of course, we’d like to sell both because we have a really strong seasonal business. And like we stated earlier, we had a strong Valentine’s strong New Year. Pleased with the holidays that we just went through in the fourth quarter, but we want to remain open and flexible for the customer given any environment that we find ourselves in.
John David Rainey: Yes. Kelly, this is John, David. I’ll add just a little bit more color. And maybe looking at the fourth quarter is a good way to frame this. Our gross profit declined a little over 100 basis points. I think it’s 112 basis points in the fourth quarter. That was predominantly if you had to bucket that. The largest contributor to that was markdowns followed by mix. And so, as we look at where we are today with a much better position around inventory and John jump in, if you disagree here, but I feel like this year will be more of a normal environment for markdowns were more — certainly more normal than what it was last year. And to John’s point, the mix impact is appreciably less than what the 300 basis points, a little more than 300 basis points last year.
John Furner: Yes. This is the time last year. Just to remind you, back in February, March last year, we were really getting caught up from ocean backlogs and receiving product that should have been onshore as much as six months prior to it being unloaded. — the cost, the markdowns, the impact and everything from store labor to creating over time. We expect some of those to be better. However, down 3% of inventory. We’re proud of that position, but there are still pockets of inventory in stores and some fulfillment centers and some categories like apparel, where there’s still more work to be done. So we want to make sure that we have room to address those things as we get into first half of the year.
Operator: Our final question is from the line of Greg Melich with Evercore ISI. Please proceed with your question.
Greg Melich: Really, I had a follow-up on the U.S. traffic trends and then on Sam’s Club. For the U.S., it sounds like in that guide, the deceleration to second half comp is all from less inflation and you still expect traffic to be up through the year. Just want to be sure that. And second, on Sam’s Club, any more insight in terms of the members you’ve won. And I know you had a fee hike last year. Has that had any influence in terms of the rate of growth of at least member counts? Or any sort of inflection there or anything on renewal rates given the first in a decade fee hike?
John Furner: It’s John. Yes, certainly, I would expect that there will be growth in traffic that’s what we’ve been seeing over the last several quarters, led by food and consumables. The growth of pickup and delivery and then e-commerce to home are also helping, so stronger results in e-commerce at its core and also stronger from the delivery business. John David mentioned in his remarks that we had $1 billion month in December, which is really exciting to see what the team has scaled from and to over the last or six years. Certainly some acceleration since the two channels, e-commerce and stores, were merged together last — about three years ago. But it continues to be a lot of great work done, increased capacity and fulfillment all across the network.
