Simeon Gutman: One theme of a question is the flywheel and the balance between investments and bottom line growth. The near-term question of the theme is the ’24 outlook looks like it’s burdened by some maybe fleeting items, LIFO in particular, some of the bottom line. So, what’s the right way to think about it? Are these good guys into ’25 and/or the house money that you invest? And then, the conceptual question on the flywheel is what do you do with the high-margin earnings streams John David mentioned. Have you set out whether or not that goes back in the business and you grow your EBIT dollars faster? Or you do let your margins expand at a faster rate?
Doug McMillon: Simeon, this is Doug. I’ll kick it off and then John David can add. I think generally, it’s the latter. We feel like that our price gaps are in a good spot that we’ve made, the thoughtful wage investments that we need to make. That doesn’t mean that wages may not continue to go up over time. But generally, the shape of the income statement is in pretty good shape. And then we’ve got these other items that are selling they changed the business model. And so, you end up mixing yourself. I think John David did a great job in his remarks describing we’re going to face some merchandise mix pressure this year across markets, but the business model itself, the business mix is changing. That’s been our strategy, and now we’re starting to see some of those numbers grow as in — with advertising income.
I think in the investment category, the thing that we’re most excited about is the automation opportunity we have, and that’s reflected in our capital guidance. We’ve shared with some of you how excited we are about some of the things that are in front of us in distribution centers that will impact stores in a positive way, but that’s more of a CapEx and balance sheet investment view than shaping the income statement differently as we’ve done in recent years.
John David Rainey: Sure. And I’ll add, Simeon that we do expect to see our return on investment improve marginally this year. That’s what’s in our plan. But that’s before we expect a sharper acceleration in the years to follow. And we’ll give you more insight into that at our Investor Day. But we’re very mindful that we need to show a return for these investments. But the good news is the early reads on some of the things that we’re doing are really exciting and support that continued level of investment. I’ll give you an example, like our perishable DCs, where we put some automation in place, we had a plan around what that would result in increased throughput in terms of cases per hour. The actual results are almost 50% better than that.
And so that like gives us conviction to want to accelerate some of this. Same story with some of our e-commerce DCs, where we see a 12- step process going down to five steps, making us a lot more efficient. And so, these are high ROI investments where we’ve got clear line of sight into the return. So to your point, this allows us to not only invest appropriately with our associates and continued technology, but also to see margin expansion over time. Thank you.
Doug McMillon: Just quickly add. Our sales have been stronger these last few years. I mean the 6% CAGR over the last five is a much higher number than you look than you would have experienced with the Company previously. But then we had these unusual things happen with COVID costs and last year inflation and supply chain costs. And we’re hoping for something that looks a little more normal going forward that would enable us to push through the strategy in a way that you see it in operating income growth.
Operator: Our next question is from the line of Chris Horvers with JPMorgan. Please proceed with your question.
Chris Horvers: So can you talk about how you’re thinking about the Walmart U.S. comp guide of 2% to 2.5%? Inflation has barely ticked down in recent periods. It’s still up double digits. Are you expecting grocery unit trends to deteriorate? Is GenMark still down this year? And ultimately, do you expect the U.S. business to go negative in the back half on a potential recession? And speaking in a second, on the Sam’s side, the business has a lot of momentum with comp and strong KPIs. Can you talk about how you’re thinking about the opportunity to grow clubs Over the next three to five years, do you see it as an opportunity to fill in existing markets or expand in sort of less dense markets than new geographies on the coast?
John David Rainey: Chris, this is John David. I’ll start and then turn it over to Kath and John for a little more color on their segments. But with respect to our guidance, guidance is — it’s tricky in so far as you want to provide transparency, but you — and also you need to balance that with reliability. And as we sit here today, we look at the progress that we’re making in our business and got a lot of conviction and excitement around that, but there’s a lot of uncertainty with the macro backdrop. We’ve not been in a position where we’ve seen the Fed tighten this shortly. We see issues where delinquencies are up and things like auto loans, you’ve got savings rates that are coming down. And there’s a lot of unknowns in the back half of the year.
And so what we’ve attempted to balance with our guidance is a cautious outlook on the macro environment, but coupled with a lot of excitement about the progress that we’re making. And so, I think the read-through on our guidance is just that to be a lot of unknowns as we’re sitting here just a few weeks into the year.
