Steve Schmitt - VP of IR Doug McMillon - President & CEO Brett Biggs - EVP & CFO.

Analysts:.

Operator:.

Good morning and thank you for joining us to review Wal-Mart's Second Quarter Fiscal 2017 results. This is Steve Schmitt, Vice President of Investor Relations at Wal-Mart Stores, Inc. The date of this call is August 18, 2016. On today's call you will hear from Doug McMillon, President and CEO, and Brett Biggs, CFO.

This call contains statements that Wal-Mart believes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended and that are intended to enjoy the protection of the safe harbor for forward-looking information provided by that Act.

A cautionary statement regarding forward-looking statements is at the end of this call. As a reminder, our earnings materials include the press release, transcript and accompanying slide presentation, which are intended to be used together.

All of this information, along with our store counts, square footage, earnings infographic and other materials are available on the investors portion of our corporate website; stock.walmart.com. For fiscal year 2017, we utilize a 52-week comp reporting calendar.

Our Q2 reporting period ran from Saturday, April 30th, through Friday, July 29th, of this year. And, as previously announced, our annual meeting for the investment community will be in Bentonville, Arkansas on October 5th and 6th. We plan on having facility tours on the 5th with our meeting taking place on the 6th. We look forward to seeing you here.

Now, I'd like to turn it over to Wal-Mart CEO, Doug McMillon..

Thanks, Steve, and good morning everyone. Thank you for joining us to hear more about our second quarter results. We had a strong quarter with adjusted earnings per share of $1.07. Excluding the $2.7 billion currency impact, we delivered total revenue of $123.6 billion, an increase of 2.8% over last year. We exceeded our Walmart U.S.

comp sales guidance this quarter, with Walmart U.S. delivering comp sales of 1.6%, driven by a traffic increase of 1.2%. This was our 8th consecutive quarter of positive comp sales and our 7th consecutive quarter of positive traffic.

I’m encouraged by what I'm seeing when I visit stores and pleased with how Greg Foran, our leadership team and our associates are executing our plan to win. Our customer satisfaction scores continue to improve, and the team did a great job of managing the flow of inventory again this quarter.

Comp store inventory was down 6.5% and in-stock levels are up. We’re also showing progress in e-commerce. On a constant currency basis, GMV and e-commerce sales increased 13% and 11.8% respectively. The U.S. results were stronger than those in our key international markets.

This was primarily due to growth in our marketplace offering in the U.S., the continued roll out of online grocery and growth of pick-up in stores and clubs. We continue to see proof that our customers enjoy a seamless shopping experience.

The distinctions that we talk about today between stores, apps, pick-up, delivery and sites are continuing to blur into the background for customers. For them, it’s just Walmart. We've built a solid foundation in e-commerce under the leadership of Neil Ashe.

During Neil’s tenure, we more than doubled our e-commerce GMV, became the second most trafficked e-commerce site in the U.S., re-platformed Walmart.com, opened a national fulfillment center network and most importantly, became known as a great place to work for talented technologists and e-commerce professionals in Silicon Valley.

Neil also led our discussions with JD. Neil will be with Wal-Mart through the end of our fiscal year working on our e-commerce strategies in several international markets. I’d like to thank him for his significant contributions to our company.

Building on this solid foundation, we made some strategic decisions to position ourselves for the future in the priority markets of the U.S. and China, including the announcement last week to acquire Jet.com. Operating Walmart.com and Jet.com will allow us to reach even more customers and drive a higher level of growth more quickly.

One of the things we like about the technology they've developed is that it rewards customers in real time with savings on a basket of goods and puts them more in charge of the price they pay. This empowers customers in a way that is true to the spirit of Walmart.

When customers build a basket of goods online rather than ordering one item at a time, shipping economics are in their favor and ours. Wal-Mart's advantage has always been in providing the lowest prices on a basket, and Jet has created a unique way to deliver the lowest cost basket online.

It’s important to remember that customers won’t see changes immediately as we await government approval, and the necessary tech platform changes, which will take time. Once the acquisition is complete, we look forward to welcoming Marc Lore, current President and CEO of Jet.com.

He will join Wal-Mart as our new President and CEO of e-commerce, reporting to me. He will be responsible for both the Walmart and Jet brands in the U.S. Marc is a passionate merchant and innovative thinker who will definitely add value to our business. I look forward to working with him.

In China, our recently announced transaction with, and investment in, JD.com improves our position there. JD's significant presence online, where Wal-Mart and Sam's Club will feature prominently, affords us the opportunity to extend the reach of our brands to millions of new customers.

I made a couple of visits to JD's delivery and pickup points in Shanghai when I was last in China and am excited about the potential it creates for our customers there. Richard Liu, CEO of JD.com, is a talented e-commerce merchant and we look forward to our collaborations going forward. Additionally, we made advancements in the U.S.

on our key priorities to build digital relationships with customers, scale the assortment and expand online grocery. As of June, we have rolled out Wal-Mart Pay nationwide to all stores. Customers tell us they love the convenience of this unique service, and we've found that a majority of transactions come from repeat users.

If you haven't tried Wal-Mart Pay, please do and share your feedback. Customers also continue to enjoy our online grocery pickup service and give it high marks. We added grocery pickup to 30 more markets this quarter bringing our total to more than 60 markets and nearly 400 locations.

It's gratifying to see how much this service helps our customers save time. Next, we are growing our marketplace offering at a strong pace. Since the beginning of the year, we've added about 7 million new items to the assortment and today offer approximately 15 million SKUs.

Walmart International delivered another solid performance in the second quarter. Nine of our 11 markets posted positive comp sales and six of those grew comp sales by more than 4%. Walmex continued to lead the way, and I'm pleased with the fact that the momentum in the business is broad based across all formats and countries.

In China, in addition to expanding our reach through the strategic alliance with JD.com, we continue to grow our base of stores and clubs. In fact, we continue to gain market share in the hypermarket channel. China remains a strategic focus for us as it represents the largest retail growth opportunity globally.

In the U.K., the competitive environment and food deflation continued to challenge the market, significantly impacting traffic and comp sales. Our strategy to turn things around is focused on improving the retail basics.

We are simplifying and strengthening our offering through improved availability and assortment discipline, reducing costs and driving sales through strategic price investments. While our turn-around will take time, I'm confident in the new leadership team there and want to assure you we're addressing this with urgency.

At Sam’s Club, comp sales for the period were slightly above our expectations. Membership performance was the highlight, and there is quite a bit of innovation underway at Sam's related to the member experience. Earlier this year we launched a test of Scan and Go, a mobile checkout and payment solution, which lets members skip the checkout line.

We're pleased with the adoption of this service, and we expect to roll this out nationwide later this year. We also saw strong growth in the quarter from both Club Pickup and direct to home e-commerce. The new platform we are using to prospect for new members and better manage their accounts will help us deliver on our priority of growing membership.

These innovations are making it easy for members to shop and save time. Finally, I've enjoyed my time this week with more than 5,000 store leaders and merchants with the U.S. team at our annual Holiday Meeting in Denver. We've got a great plan for the busiest time of year, and the mood at the meeting was deservedly upbeat.

I'd like to thank our store managers and all of our associates for the job they're doing. In summary, I'm pleased with the momentum in the business. We have a plan, and we are executing against it and customers are responding favorably. Now, I’ll turn it over to Brett..

the amount of Walmart’s net sales and operating expenses denominated in U.S. dollar and various foreign currencies; trade restrictions and tariff rates; and natural disasters, public health emergencies, civil disturbances and terrorist attacks.

Such risks, uncertainties and factors also include the risks relating to Walmart’s operations and financial performance discussed in Walmart’s most recent annual report on Form 10-K filed with the SEC.

You should consider the forward-looking statements in this call in conjunction with that annual report on Form 10-K and Walmart’s quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC.

Walmart urges you to consider all of the risks, uncertainties and factors identified above or discussed in such reports carefully in evaluating the forward-looking statements in this call.

Walmart cannot assure you that the results reflected or implied by any forward-looking statement will be realized or, even if substantially realized, that those results will have the forecasted or expected consequences and effects for, or on Walmart’s operations or financial performance.

The forward-looking statements made in this call are as of the date of this call. Walmart undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances..

End of Q&A:.