00:00 Speaker A
Let’s talk about Walmart here. Um we just heard from the CFO, John David Rainey. Um and he seemed to indicate the rest of the year, we’re going to see growth sort of come back up to pace. So, you know, how do you think Walmart is navigating what looks like a a challenged low-income consumer?
00:23 Speaker B
Julie, Walmart’s been amazingly resilient and stable. At the core, there’s a wonderful grocery business with dominant market share, and the company stands for value and convenience. So they’re getting both higher household income shoppers, but they’re executing very well to a cash strapped middle and low-income customer. And that’s fueling a nice consistency of comps around 4 to 5%. As you speak to their guidance and look at their guidance, and this is a very conservative guider. So prospects are good that the company will beat and raise. They had some nice uh pockets of strength in apparel and general merchandise as well. That’s a key positive that we’re watching too. The bigger story here is also this transformation of AI meets retail. So what we see happening is the world moving from shopping list to solutions. And thinking about conversational commerce, for example, I’m planning a party. I am trying to learn how to DJ. You’re looking at these problems and you’re looking for solutions rather than searching and scrolling. Walmart’s very well positioned in the world of AI. At the same time, investors like money, free cash flow, profitability. And they had over 40 billion of free cash flow and a giant share repurchase too. So you’re getting this core value grocery business plus technology. and that’s part of the reason why we like this company for many years and it’s our top stock idea as well.
01:53 Speaker A
I mean, and and to your point also, e-commerce rose more than 20% in the fourth quarter, right? So they, you know, and they have this sort of, um, they have Silicon Valley people. They have a whole whole um office out there that is working on these kinds of solutions. Um our Brian Sozi was just talking with the CFO John David Rainey about Sparky, who is their AI character, avatar, whatever you want to call it. Um, so where are they in that evolution, in that development of that tool where I could go and say, listen, I’m making I’m having a dinner party. What should I make? What should I buy, um, at at Walmart? How, like can I do it now or how close is it to being able to do that?
02:35 Speaker B
Yeah, exactly, Julie and it what’s what the shift that we see is more from predictive to prescriptive and Sparky really helping you with everyday problems that you have and that will be a much better experience versus keywords. What they’ve seen so far is very impressive. about 50% of users of the mobile app using Sparky. and Sparky, when you use it, your average order value is about 35% higher. So as the world evolves, um what we think is AI is very, very sticky and agentic shopping will help you get things done and task rather than searching and scrolling. That’s a major shift that we’re seeing. Walmart’s been prudent about this and they’ve had different partners as well as a platform, but the future is Sparky and using these agents to help make your lives better at great prices. And also thinking about all the pressure points you might have from needing a meal in 30 minutes to restoking your house. Um it’s a lot easier to use an agent versus searching for each item which can be much more tedious. So this is broadly happening in retail. And as we think about the winners and losers here, uh you do need scale. You need volume of data, you need veracity, you need variety. And Walmart does capture this because you’re going there somewhat frequently for grocery, but I’m also buying fashion at Walmart too and I’m buying skin care to try to look good on TV. and I’m buying DJ equipment. Um so Walmart can really rise to this challenge. That’s part of what’s happening with this whole ecosystem that we see developing.