Walmart Inc. (WMT)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

This discussion, which presents our results for the fiscal years ended January 31, 2025 ("fiscal 2025"), January 31, 2024 ("fiscal 2024") and January 31, 2023 ("fiscal 2023"), should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of each of the three segments of our business to provide a better understanding of how each of those segments and its results of operations affect the financial condition and results of operations of the Company as a whole.

Throughout this Item 7, we discuss segment operating income, comparable store and club sales and other measures.  Management measures the results of the Company's segments using each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income and other measures as determined by the information regularly reviewed by our chief operating decision maker.

Management also measures the results of comparable store and club sales, or comparable sales, a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, for a particular period from the corresponding prior year period. Walmart's definition of comparable sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as eCommerce sales. We measure the eCommerce sales impact by including all sales initiated digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our ecosystem, such as our advertising net sales. Sales at a store that has changed in format are excluded from comparable sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than 5%. Sales related to divested businesses are excluded from comparable sales, and sales related to acquisitions are excluded until such acquisitions have been owned for 12 months. Comparable sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable sales varies across the retail industry. As a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other companies.

In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. Additionally, no currency exchange rate fluctuations are calculated for non-USD acquisitions until owned for 12 months. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. Volatility in currency exchange rates have impacted and may continue to impact the results, including net sales and operating income, of the Company and the Walmart International segment.

We have taken certain strategic actions across our segments, including an increased emphasis on investments in automation and supply chain as well as diversifying our earnings streams through category and business mix. In December 2024, the Walmart U.S. segment completed the acquisition of VIZIO Holding Corp. for net cash consideration of $1.9 billion. Additionally, we have taken actions in the Walmart International segment to reshape our portfolio including the following highlights over the last three years:

•In November 2022, we completed the buyout of the noncontrolling interest shareholders of our Massmart subsidiary (Refer to Note 3) and in December 2022, we exited operations in certain countries in Africa.

•In December 2022, we increased our ownership in PhonePe as part of the separation from our majority-owned Flipkart subsidiary. Refer to Note 3.

•In August 2024, we sold our equity investment in JD.com for net proceeds of $3.6 billion. Refer to Note 8.

We operate in a highly competitive omni-channel retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as eCommerce, health and wellness, financial services, advertising and data service businesses. Many of these competitors are national, regional or international chains or have a national or international omni-channel or eCommerce presence. We compete with a number of companies for attracting and retaining quality associates. We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather and other risks related to climate change, global health epidemics and pandemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain, inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, inflation, deflation, fuel and energy prices, general economic

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conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment. Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in its securities can be found herein under "Item 1A. Risk Factors."

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low

costs. Our net sales and gross profit margin are influenced in part by our pricing and merchandising strategies in response to cost increases. Those pricing strategies include but are not limited to: absorbing cost increases instead of passing those cost increases on to our customers and members; reducing prices in certain merchandise categories; focusing on opening price points for certain food categories; and when necessary, passing cost increases on to our customers and members. Merchandising strategies include, but are not limited to: working with our suppliers to reduce product costs and share in absorbing cost increases; focusing on private label brands and smaller pack sizes; earlier-than-usual purchasing and in greater volumes or moderating purchasing in certain categories; and securing ocean carrier and container capacity. These strategies have and may continue to impact gross profit as a percentage of net sales.

We expect continued uncertainty in our business and the global economy due to inflationary trends; tariffs and trade restrictions; fluctuations in global currencies; swings in macroeconomic conditions and their effect on consumer confidence; volatility in employment trends; and supply chain pressures, any of which may impact our results. For a detailed discussion on results of operations by reportable segment, refer to "Results of Operations" below.

Company Performance Metrics

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs. At times, we adjust our business strategies to maintain and strengthen our competitive positions in the countries in which we operate. We define our financial priorities as follows:

•Growth - serve customers through a seamless omni-channel experience;

•Margin - improve our operating income margin through productivity initiatives as well as category and business mix; and

•Returns - improve our Return on Investment through margin improvement and disciplined capital spend.

Growth

Our objective of prioritizing growth means we will focus on serving customers and members however they want to shop through our omni-channel business model. This includes increasing comparable store and club sales through increasing membership at Sam's Club U.S. and through Walmart+, accelerating eCommerce sales growth and expansion of omni-channel initiatives that complement our strategy.

Comparable sales is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, including eCommerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable sales using the retail calendar (also known as the 4-5-4 calendar). To be consistent with the retail industry, we provide comparable sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable sales below, we are referring to our calendar comparable sales calculated using our fiscal calendar, which may result in differences when compared to comparable sales using the retail calendar. We report on comparable sales in the U.S. as we believe it is a meaningful metric within the context of the U.S. retail market where there is a single currency, one inflationary market and generally consistent store and club formats from year to year.

Calendar comparable sales, as well as the impact of fuel, for fiscal 2025 and 2024, were as follows:

Comparable sales in the U.S., including fuel, increased 4.8% and 4.9% in fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. Walmart U.S. comparable sales increased 4.8% and 5.5% in fiscal 2025 and 2024, respectively. For fiscal 2025, comparable sales growth was driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness. For fiscal 2024, comparable sales growth was driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness.Walmart U.S. eCommerce sales positively contributed approximately 2.9% and 2.6% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by store-fulfilled pickup and delivery.

Comparable sales at Sam's Club U.S. increased 4.7% and 2.3% in fiscal 2025 and 2024, respectively. For fiscal 2025, Sam's Club U.S. comparable sales increased due to growth in transactions and unit volumes, with strong sales in grocery and health and wellness. Sam's Club U.S. comparable sales for fiscal 2024 increased due to growth in transactions and average ticket,

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including strong sales in grocery and health and wellness. Additionally, fiscal 2025 and 2024 growth was partially offset by lower fuel sales primarily due to lower market prices. Sam's Club U.S. eCommerce sales positively contributed approximately 2.3% and 1.7% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

Margin

Our objective of prioritizing margin focuses on growth with a focus on incremental margin accretion through a combination of productivity improvements as well as category and business mix. We invest in technology and process improvements to increase productivity, manage inventory and reduce costs and we operate with discipline by managing expenses and optimizing the efficiency of how we work. We measure operating discipline through expense leverage, which we define as net sales growing at a faster rate than operating, selling, general and administrative ("operating") expenses. Additionally, we focus on our mix of businesses, including expanding our ecosystem in higher margin areas, such as digital advertising and marketplace. Our objective is to achieve operating income leverage, which we define as growing operating income at a faster rate than net sales.

(1) Gross profit defined as net sales less cost of sales.

Gross profit as a percentage of net sales ("gross profit rate") increased 40 and 27 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increases were primarily driven by the Walmart U.S. segment, due to managing prices aligned to our competitive historic price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories. Additionally, the increase in fiscal 2024 benefited from lapping higher markdowns incurred in the prior year.

Operating expenses as a percentage of net sales increased 36 and decreased 60 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increase for fiscal 2025 was primarily due to higher variable pay as a result of exceeding planned performance, increased marketing and higher depreciation expenses. The decrease for fiscal 2024 was primarily due to lapping charges of $3.3 billion related to opioid-related legal settlements and $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment in the prior year.

Operating income as a percentage of net sales increased 15 and 83 basis points for fiscal 2025 and 2024, respectively, due to the factors described above, as well as from strong growth in membership income globally.

Returns

As we execute our financial framework, we believe our return on capital will improve over time. We measure return on capital with our return on investment and free cash flow metrics. In addition, we provide returns in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section.

Return on Assets and Return on Investment

We include Return on Assets ("ROA") and Return on Investment ("ROI") as metrics to assess our return on capital. ROA is the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP") while ROI is considered a non-GAAP financial measure. Management believes ROI is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term strategic initiatives with possible short-term impacts.

Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in ROA, the most directly comparable GAAP financial measure. ROA is consolidated net income for the period divided by average total assets for the period. We define ROI as operating income plus interest income, depreciation and amortization, and rent expense for the trailing 12 months divided by average invested capital during the period. We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and amortization, less average accounts payable and average accrued liabilities for that period. Although ROI is a standard financial measure, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI.

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ROA was 7.9% and 6.6% for fiscal 2025 and 2024, respectively. The increase in ROA was primarily due to an increase in consolidated net income during the trailing 12 month period, as a result of higher operating income and changes in the fair value of our equity and other investments. ROI was 15.5% and 15.0% for fiscal 2025 and 2024, respectively. The increase in ROI was the result of an increase in operating income, primarily due to improvements in business performance, partially offset by an increase in average invested capital primarily due to higher purchases of property and equipment.

The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:

(1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by two.

Strategic Capital Allocation

Our strategy includes allocating the majority of our capital to higher-return areas focused on automation such as eCommerce, supply chain and store and club investments. The following table provides additional detail regarding our capital expenditures:

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Free Cash Flow

Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See Liquidity and Capital Resources for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities.

We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We had net cash provided by operating activities of $36.4 billion, $35.7 billion and $28.8 billion for fiscal 2025, 2024 and 2023, respectively. We generated free cash flow of $12.7 billion, $15.1 billion and $12.0 billion for fiscal 2025, 2024 and 2023, respectively. The increase in net cash provided by operating activities in fiscal 2025 is primarily due to an increase in cash provided by operating income and lapping the payment of accrued opioid legal charges in the prior year, partially offset by increased inventory purchases. Free cash flow for fiscal 2025 decreased when compared to fiscal 2024 due to an increase of $3.2 billion in capital expenditures to support our investment strategy, partially offset by the increase in net cash provided by operating activities described above. Net cash provided by operating activities for fiscal 2024 increased when compared to fiscal 2023 primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges. Free cash flow for fiscal 2024 increased when compared to fiscal 2023 due to the increase in net cash provided by operating activities described above, partially offset by an increase of $3.7 billion in capital expenditures to support our investment strategy.

Walmart's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows.

Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities.

(1) "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

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Results of Operations

Consolidated Results of Operations

(1)     Membership and other income includes membership fees and other items such as rental and tenant income, recycling income, gift card breakage income, as well as other income from corporate campus facilities.

(2)     Gross profit is defined as net sales less cost of sales. Operating expenses refers to operating, selling, general and administrative expenses.

Our total revenues increased $32.9 billion or 5.1% and $36.8 billion or 6.0% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. These increases in revenues were primarily due to increases in net sales, which increased $31.9 billion or 5.0% and $36.8 billion or 6.1% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increases were primarily due to strong positive comparable sales across our U.S. segments and international markets, driven primarily by growth in transactions and unit volumes, which included strength in eCommerce as well as strong sales in grocery, and health and wellness. Net sales were negatively impacted by $3.2 billion and positively impacted by $3.0 billion of fluctuations in currency exchange rates during fiscal 2025 and 2024, respectively. Membership and other income increased $1.0 billion and $0.1 billion for fiscal 2025 and fiscal 2024, primarily driven by growth in membership fee income globally.

Our gross profit rate increased 40 and 27 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increases were primarily driven by the Walmart U.S. segment, due to managing prices aligned to our competitive historic price gaps, as well as growth in higher margin businesses globally, partially offset by mix shifts into lower margin merchandise categories. Additionally, the increase in fiscal 2024 benefited from lapping higher markdowns incurred in the prior year.

Our operating expenses as a percentage of net sales increased 36 and decreased 60 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increase for fiscal 2025 was primarily due to higher variable pay as a result of exceeding planned performance, increased marketing and higher depreciation expenses. The decrease for fiscal 2024 was primarily due to lapping charges of $3.3 billion related to opioid-related legal settlements and $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment in the prior year.

Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period. Other gains and losses consisted of net losses of $0.8 billion and $3.0 billion in fiscal 2025 and 2024, respectively, which primarily consisted of changes in fair value of our equity and other investments driven by changes in their underlying stock prices.

Our effective income tax rate was 23.4%, 25.5%, and 33.6% for fiscal 2025, 2024 and 2023, respectively. The decrease in effective tax rate in fiscal 2025 compared to fiscal 2024 is primarily due to the tax impact on changes in fair value of our investments. The higher effective tax rate in fiscal 2023 compared to fiscal 2025 and fiscal 2024 is primarily related to the tax impacts of the separation of Flipkart and PhonePe. Our effective income tax rate may also fluctuate as a result of various factors, including changes in our assessment of unrecognized tax benefits, valuation allowances, business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, changes in tax law, changes in the administrative practices, principles, and interpretations related to tax, and the mix and size of earnings among our U.S. operations and international operations, which are subject to statutory rates that are generally higher than the U.S. statutory rate. The reconciliation from the U.S. statutory rate to the effective income tax rates for fiscal 2025, 2024 and 2023 is provided in Note 9.

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As a result of the factors discussed above, we reported $20.2 billion and $16.3 billion of consolidated net income for fiscal 2025 and 2024, respectively, which represents an increase of $3.9 billion and $5.0 billion for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. Diluted net income per common share attributable to Walmart ("EPS") was $2.41, $1.91 and $1.42 for fiscal 2025, 2024 and 2023, respectively.

Walmart U.S. Segment

Net sales for the Walmart U.S. segment increased $20.6 billion or 4.7% and $21.3 billion or 5.1% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increases in net sales were primarily due to increases in comparable sales of 4.8% and 5.5% for fiscal 2025 and 2024, respectively. Comparable sales in fiscal 2025 were driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness. Comparable sales in fiscal 2024 were driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness. Walmart U.S. eCommerce sales positively contributed approximately 2.9% and 2.6% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by store-fulfilled pickup and delivery.

Membership and other income increased $0.6 billion and $0.1 billion for fiscal 2025 and fiscal 2024, primarily driven by growth in membership fee income from Walmart+ and recycling income.

Gross profit rate increased 47 and 20 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increase in fiscal 2025 gross profit rate was primarily driven by managing prices aligned to our competitive historic price gaps and growth in higher margin businesses, partially offset by mix shifts into lower margin merchandise categories. The increase in fiscal 2024 gross profit rate was primarily due to managing prices aligned to our competitive historic price gaps and lapping higher net markdowns incurred in the prior year, partially offset by product mix shifts into lower margin categories.

Operating expenses as a percentage of segment net sales increased 44 and 9 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increase for fiscal 2025 was primarily due to increased marketing expenses, higher variable pay as a result of exceeding planned performance and increased depreciation expenses. For fiscal 2024, the increase was driven by higher variable pay relative to the prior year as a result of exceeding our planned performance.

As a result of the factors discussed above, segment operating income increased $1.7 billion and $1.5 billion for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

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Walmart International Segment

Net sales for the Walmart International segment increased $7.2 billion or 6.3% and $13.7 billion or 13.5% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. For fiscal 2025, the increase was primarily due to positive comparable sales in all of our international markets, which included strength in eCommerce, partially offset by negative fluctuations in currency exchange rates of $3.2 billion. For fiscal 2024, the increase was primarily due to positive comparable sales across our international markets and positive fluctuations in currency exchange rates of $3.0 billion.

Gross profit rate increased 20 basis points for both fiscal 2025 and 2024 when compared to the previous fiscal year. For fiscal 2025, the increase was primarily due to improved eCommerce margin and business mix changes, partially offset by ongoing channel and format mix changes. For fiscal 2024, the increase was primarily driven by supply chain efficiencies partially offset by ongoing channel and format mix shifts.

Operating expenses as a percentage of segment net sales decreased 5 and 152 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The decrease in operating expenses as a percentage of segment net sales for fiscal 2025 was primarily due to increased sales driving expense leverage, partially offset by planned investments in associate wages and strategic priorities in Mexico and Central America. The decrease in operating expenses as a percentage of segment net sales for fiscal 2024, was primarily due to the lapping of business reorganization and restructuring charges incurred related to Flipkart and Massmart in fiscal 2023 and an increase in sales in fiscal 2024.

As a result of the factors discussed above, segment operating income increased $0.6 billion and $1.9 billion for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

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Sam's Club U.S. Segment

(1) We believe the "Excluding Fuel" information is useful to investors because it permits investors to understand the effect of the Sam's Club U.S. segment's fuel sales on its results of operations, which are impacted by the volatility of fuel prices. Volatility in fuel prices may continue to impact the operating results of the Sam's Club U.S. segment in the future.

Net sales for the Sam's Club U.S. segment increased $4.1 billion or 4.7% and $1.8 billion or 2.2% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. The increases in net sales were primarily due to increases in comparable sales, including fuel, of 4.7% and 2.3% for fiscal 2025 and 2024, respectively. Comparable sales in fiscal 2025 were driven by growth in transactions and unit volumes, with strong sales in grocery and health and wellness. Comparable sales in fiscal 2024 were driven by growth in transactions and average ticket, including strong sales in grocery and health and wellness. Additionally, fiscal 2025 and 2024 growth was partially offset by lower fuel sales primarily due to lower market prices. Sam's Club U.S. eCommerce sales positively contributed approximately 2.3% and 1.7% to comparable sales for fiscal 2025 and 2024, respectively, which was primarily driven by club-fulfilled curbside pickup and delivery.

Membership and other income increased 13.3% and 7.5% for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. For fiscal 2025 and 2024, the increases were primarily due to growth in membership base and Plus penetration. Fiscal 2025 and 2024 were also positively impacted by the expiration of a promotional offering offsetting membership fee increases during the fourth quarter of fiscal 2024.

Gross profit rate increased 37 and 55 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. For fiscal 2025, the increase in gross profit rate was primarily due to improved operational efficiencies related to merchandise flow and increased margins in fuel, partially offset by higher eCommerce fulfillment costs. For fiscal 2024, the increase in gross profit rate was primarily due to the lapping of elevated markdowns in the prior year. Additionally, fiscal 2025 and 2024 gross profit rates were partially offset by product mix shifts into lower margin categories.

Operating expenses as a percentage of segment net sales increased 44 and 46 basis points for fiscal 2025 and 2024, respectively, when compared to the previous fiscal year. Fiscal 2025 operating expenses as a percentage of net sales increased primarily due to increased compensation related expenses, including associate wage investments and higher variable pay as a result of exceeding our planned performance, as well as elevated technology spend. Fiscal 2024 operating expenses as a percentage of net sales increased primarily due to lower fuel sales and elevated technology spend.

As a result of the factors discussed above, segment operating income increased $0.2 billion for both fiscal 2025 and 2024, respectively, when compared to the previous fiscal year.

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Liquidity and Capital Resources

Liquidity

The strength and stability of our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of the remaining available cash flow has been used to fund dividends on our common stock and share repurchases. We believe our sources of liquidity will continue to be sufficient to fund operations, finance our investment activities, pay dividends and fund our share repurchases for at least the next 12 months and for the foreseeable future.

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $36.4 billion, $35.7 billion and $28.8 billion for fiscal 2025, 2024 and 2023, respectively. The increase in net cash provided by operating activities in fiscal 2025, when compared to the previous fiscal year, is primarily due to an increase in cash provided by operating income and lapping the payment of accrued opioid legal charges in the prior year, partially offset by increased inventory purchases. The increase in net cash provided by operating activities for fiscal 2024, when compared to the previous fiscal year, was primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges.

Cash Equivalents and Working Capital Deficit

Cash and cash equivalents were $9.0 billion and $9.9 billion as of January 31, 2025 and 2024, respectively. Our working capital deficit, defined as total current assets less total current liabilities, was $17.1 billion and $15.5 billion as of January 31, 2025 and 2024, respectively. The increase in our working capital deficit is primarily driven by an increase in short-term borrowings for general corporate purposes and accounts payable due to timing of payments, partially offset by increased inventories and receivables related to higher sales growth. We generally operate with a working capital deficit due to our efficient use of cash in funding operations, consistent access to the capital markets and returns provided to our shareholders in the form of payments of cash dividends and share repurchases.

We use intercompany financing arrangements in an effort to ensure cash can be made available in the country in which it is needed with the minimum cost possible. Additionally, from time-to-time, we repatriate earnings and related cash from jurisdictions outside of the U.S. Under current law, repatriations of foreign earnings will generally be free of U.S. federal tax, but may incur other taxes such as withholding or state taxes. We do not expect current local laws, or other existing limitations on anticipated future repatriations of cash amounts held outside the U.S. to have a material effect on our overall liquidity, financial position or results of operations.

As of January 31, 2025 and 2024, cash and cash equivalents of $3.3 billion and $3.5 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions or are subject to the approval of the noncontrolling interest shareholders.

Net Cash Used in Investing Activities

Net cash used in investing activities was $21.4 billion, $21.3 billion and $17.7 billion for fiscal 2025, 2024 and 2023, respectively, and generally consisted of capital expenditures. Net cash used in investing activities increased $0.1 billion for fiscal 2025 when compared to the previous fiscal year. The increase is primarily due to increased purchases of property and equipment as well as the acquisition of VIZIO for net consideration of $1.9 billion, partially offset by net proceeds received from sales of certain strategic investments, including $3.6 billion related to the sale of our JD.com investment. Net cash used in investing activities increased $3.6 billion for fiscal 2024 when compared to the previous fiscal year, primarily due to increased payments for property and equipment.

Capital expenditures

Refer to the "Strategic Capital Allocation" section in our Company Performance Metrics for capital expenditure detail for fiscal 2025 and 2024. For the fiscal year ending January 31, 2026 ("fiscal 2026"), we project capital expenditures will be approximately $21 billion to $25 billion, with a focus on technology, supply chain and customer-facing initiatives.

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Net Cash Used in Financing Activities

Net cash used in financing activities generally consisted of debt transactions, dividends paid, repurchases of Company stock and transactions with noncontrolling interest shareholders. Fiscal 2025 net cash used in financing activities increased $1.4 billion when compared to the previous fiscal year. The increase is primarily due to lapping debt issuances in the prior fiscal year and increased share repurchases, partially offset by the purchase of certain noncontrolling interests in the prior fiscal year and higher short-term borrowings. Fiscal 2024 net cash used in financing activities decreased $3.6 billion when compared to the previous fiscal year. The decrease was primarily due to fewer share repurchases, partially offset by the purchase of certain noncontrolling interests.

Purchase and Sale of Subsidiary Stock

During fiscal 2024, we paid $3.5 billion to acquire shares from certain Flipkart noncontrolling interest holders and settle the liability to former noncontrolling interest holders of PhonePe. Additionally, we received $0.7 billion related to new rounds of equity funding for the Company's majority owned PhonePe subsidiary.

During fiscal 2023, we completed a $0.4 billion buyout of the noncontrolling interest shareholders of our Massmart subsidiary and completed a $0.4 billion acquisition of Alert Innovation, bringing our ownership to approximately 100% of both Massmart and Alert Innovation. The Alert Innovation entity was subsequently sold and deconsolidated in fiscal 2025.

Short-term Borrowings

We generally utilize the liquidity provided by short-term borrowings to provide funding for our operations, dividend payments, share repurchases, capital expenditures and other cash requirements. The following table includes additional information related to our short-term borrowings for fiscal 2025, 2024 and 2023:

Short-term borrowings as of January 31, 2025 and 2024 were $3.1 billion and $0.9 billion, respectively, with weighted-average interest rates of 5.3% and 7.7%, respectively. We also have $15.0 billion of various undrawn committed lines of credit in the U.S. as of January 31, 2025 that provide additional liquidity, if needed. Additionally, we maintain access to various credit facilities outside of the U.S. to further support our Walmart International segment operations, as needed.

As of January 31, 2025, we have $2.1 billion of syndicated and fronted letters of credit available, of which $1.5 billion was drawn and represents an unrecorded current obligation.

Long-term Debt

The following table provides the changes in our long-term debt for fiscal 2025:

Our total outstanding long-term debt decreased $3.6 billion during fiscal 2025, primarily due to maturities of certain long-term debt. Refer to Note 6 to our Consolidated Financial Statements for details on the issuances of long-term debt.

Estimated contractual interest payments associated with our long-term debt amount to $18.2 billion, with approximately $1.7 billion expected to be paid in fiscal 2026. Estimated interest payments are based on our principal amounts and expected maturities of all debt outstanding as of January 31, 2025, and assumes interest rates remain at current levels for our variable rate instruments.

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Dividends

Our total dividend payments were $6.7 billion, $6.1 billion and $6.1 billion for fiscal 2025, 2024 and 2023, respectively. Effective February 20, 2025, the Company approved the fiscal 2026 annual dividend of $0.94 per share, an increase over the fiscal 2025 annual dividend of $0.83 per share. For fiscal 2026, the annual dividend will be paid in four quarterly installments of $0.235 per share, according to the following record and payable dates:

Company Share Repurchase Program

From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Company's Board of Directors. All repurchases made during fiscal 2025 were made under the current $20.0 billion share repurchase program approved in November 2022, which has no expiration date or other restrictions limiting the period over which the Company can make repurchases. As of January 31, 2025, authorization for $12.0 billion of share repurchases remained under the share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status.

We regularly review share repurchase activity and consider several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, our results of operations and the market price of our common stock. We anticipate that a majority of the ongoing share repurchase program will be funded through the Company's free cash flow.

The following table provides, on a settlement date basis, the number of shares repurchased, average price paid per share and total amount paid for share repurchases for fiscal 2025, 2024 and 2023:

Material Cash Requirements

Material cash requirements from operating activities primarily consist of inventory purchases, employee related costs, taxes, interest and other general operating expenses, which we expect to be primarily satisfied by our cash from operations. Other material cash requirements from known contractual and other obligations include short-term borrowings, long-term debt and related interest payments, leases and purchase obligations. See Note 6 and Note 7 to our Consolidated Financial Statements for information regarding outstanding short-term borrowings and long-term debt, and leases, respectively.

As of January 31, 2025, the Company has $37.2 billion of unrecorded purchase obligations outstanding, of which $15.9 billion is due within one year. Purchase obligations include legally binding contracts, such as firm commitments for inventory and utility purchases, as well as commitments to make capital expenditures, software acquisition and license commitments and legally binding service contracts. Contractual obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Contracts that specify the Company will purchase all or a portion of its requirements of a specific product or service from a supplier, but do not include a fixed or minimum quantity, are excluded from the obligations quantified above. Accordingly, purchase orders for inventory are also excluded as purchase orders represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current inventory needs and are fulfilled by our suppliers within short time periods. We also enter into contracts for outsourced services; however, the obligations under these contracts are not significant and the contracts generally contain clauses allowing for cancellation without significant penalty. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Capital Resources

We believe our cash flows from operations, current cash position, short-term borrowings and access to capital markets will continue to be sufficient to meet our anticipated cash requirements and contractual obligations, which includes funding seasonal buildups in merchandise inventories and funding our capital expenditures, acquisitions, dividend payments and share repurchases.

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We have strong commercial paper and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in capital markets. As of January 31, 2025, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:

Credit rating agencies review their ratings periodically, and therefore, the credit ratings assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain consistent over time. Factors that could affect our credit ratings include changes in our operating performance, the general economic environment, conditions in the retail industry, our financial position, including our total debt and capitalization, and changes in our business strategy. Any downgrade of our credit ratings by a credit rating agency could increase our future borrowing costs or impair our ability to access capital and credit markets on terms commercially acceptable to us. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper markets with the same flexibility that we have experienced historically, potentially requiring us to rely more heavily on more expensive types of debt financing. The credit rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.

Other Matters

In Note 10 to our Consolidated Financial Statements, which is captioned "Contingencies" and appears in Part II of this Annual Report on Form 10-K under the caption "Item 8. Financial Statements and Supplementary Data," we discuss, under the sub-captions "Settlement of Certain Opioid-Related Matters," and "Ongoing Opioid-Related Litigation," certain opioid-related matters, as well as the Prescription Opiate Litigation, and other matters, including certain risks arising therefrom. In that Note 10, we discuss "Asda Equal Value Claims" the Company's indemnification obligation for the Asda Equal Value Claims matter, "Money Transfer Agent Services Matters," a United States Federal Trade Commission complaint related to money transfers and the Company's anti-fraud program and a government investigation by the U.S. Attorney's Office for the Middle District of Pennsylvania into the Company's consumer fraud prevention and anti-money laundering compliance related to the Company's money transfer agent services, as well as matters related to independent contractor drivers on our Spark platform under "Driver Platform Matters." In Note 10, under "Mexico Antitrust Matter," we also discuss a quasi-judicial administrative process initiated by COFECE against Walmex and Walmex's related constitutional challenge. In Note 10, we also discuss a show cause notice and requests issued by the Directorate of Enforcement to Flipkart regarding Foreign Direct Investment rules and regulations in India and an India Antitrust Matter. We reference various legal proceedings related to the Prescription Opiate Litigation, the DOJ Opioid Civil Litigation, Opioids-Related Securities Class Actions, Shareholder Derivative Litigation and False Claims Act Litigation; Asda Equal Value Claims; Money Transfer Agent Services Litigation; Driver Platform Litigation; and Mexico Antitrust Matter in Part I of this Annual Report on Form 10-K under the caption "Item 3. Legal Proceedings," under the sub-caption "I. Supplemental Information." The foregoing matters and other matters described elsewhere in this Annual Report on Form 10-K represent contingent liabilities of the Company that may or may not result in the incurrence of a material liability by the Company upon their final resolution.

Summary of Critical Accounting Estimates

Management strives to report our financial results in a clear and understandable manner, although in some cases accounting and disclosure rules are complex and require us to use technical terminology. In preparing the Company's Consolidated Financial Statements, we follow accounting principles generally accepted in the U.S. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations as reflected in our financial statements. These judgments and estimates are based on past events and expectations of future outcomes. Actual results may differ from our estimates.

Management continually reviews our accounting policies including how they are applied and how they are reported and disclosed in our financial statements. Following is a summary of our critical accounting estimates and how they are applied in preparation of the financial statements.

Contingencies

We are involved in a number of legal proceedings and certain regulatory matters. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. We also perform an assessment of the materiality of loss contingencies where a loss is either reasonably possible or it is reasonably possible that a loss could be incurred in excess of amounts accrued. If a loss or an additional loss has at least a reasonable possibility of occurring and the impact on the financial statements would be material, we provide disclosure of the loss contingency in the footnotes to our financial statements. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a

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reasonable estimate of the loss or the range of the loss can be made. Although we are not able to predict the outcome or reasonably estimate a range of possible losses in certain matters described in Note 10 to our Consolidated Financial Statements and have not recorded an associated accrual related to these matters, an adverse judgment or negotiated resolution in any of these matters could have a material adverse effect on our business, reputation, financial position, results of operations or cash flows.

Uncertain Tax Positions

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions. The benefits of uncertain tax positions are recorded in our financial statements only after determining a more likely than not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, we reassess these probabilities and record any changes in the financial statements as appropriate. We account for uncertain tax positions by determining the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Accordingly, the determination of our uncertain tax positions requires judgment, the use of estimates in certain cases and the interpretation and application of complex tax laws.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

This discussion, which presents our results for the fiscal years ended January 31, 2024 ("fiscal 2024"), January 31, 2023 ("fiscal 2023") and January 31, 2022 ("fiscal 2022"), should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of each of the three segments to provide a better understanding of how each of those segments and its results of operations affect the financial position and results of operations of the Company as a whole.

Throughout this Item 7, we discuss segment operating income, comparable store and club sales and other measures.  Management measures the results of the Company's segments using each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income and other measures as determined by the information regularly reviewed by our chief operating decision maker.

Management also measures the results of comparable store and club sales, or comparable sales, a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, for a particular period from the corresponding period in the previous year. Walmart's definition of comparable sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as eCommerce sales. We measure the eCommerce sales impact by including all sales initiated digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our ecosystem, such as our Walmart Connect advertising business. Sales at a store that has changed in format are excluded from comparable sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than five percent. Sales related to divested businesses are excluded from comparable sales, and sales related to acquisitions are excluded until such acquisitions have been owned for 12 months. Comparable sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable sales varies across the retail industry. As a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other companies.

In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. Additionally, no currency exchange rate fluctuations are calculated for non-USD acquisitions until owned for 12 months. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company and the Walmart International segment in the future.

On February 23, 2024, the Company effected a 3-for-1 forward split of its common stock and a proportionate increase in the number of authorized shares. All share and per share information, including share based compensation, throughout this Annual Report on Form 10-K has been retroactively adjusted to reflect the stock split.

We have taken certain strategic actions across our segments, including an increased emphasis on investments in automation and supply chain as well as diversifying our earnings streams through category and business mix. Additionally, in the Walmart International segment, we have taken strategic actions to reshape our portfolio including the following highlights over the last three years:

•In February 2021, we completed the sale of Asda for net consideration of $9.6 billion. Refer to Note 12.

•In March 2021, we completed the sale of Seiyu for net consideration of $1.2 billion. Refer to Note 12.

•In November 2022, we completed the buyout of the noncontrolling interest shareholders of our Massmart subsidiary (Refer to Note 3) and in December 2022, we exited operations in certain countries in Africa.

•In December 2022, we increased our ownership in PhonePe as part of the separation from our majority-owned Flipkart subsidiary. Refer to Note 3.

We operate in a highly competitive omni-channel retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as eCommerce, health and wellness, financial services, advertising and data service businesses. Many of these competitors are national, regional or international chains or have a national or international omni-channel or eCommerce presence. We compete with a number of companies for attracting and retaining quality associates. We, along with other retail companies, are

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influenced by a number of factors including, but not limited to: catastrophic events, weather and other risks related to climate change, global health epidemics and pandemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain, inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, inflation, deflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment. Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in its securities can be found herein under "Item 1A. Risk Factors."

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low

costs. Merchandise costs for fiscal 2024 continued to be impacted by inflation, however at a lower rate than we experienced in fiscal 2023. The impact to our net sales and gross profit margin is influenced in part by our pricing and merchandising strategies in response to cost increases. Those pricing strategies include but are not limited to: absorbing cost increases instead of passing those cost increases on to our customers and members; reducing prices in certain merchandise categories; focusing on opening price points for certain food categories; and when necessary, passing cost increases on to our customers and members. Merchandising strategies include, but are not limited to: working with our suppliers to reduce product costs and share in absorbing cost increases; focusing on private label brands and smaller pack sizes; earlier-than-usual purchasing and in greater volumes or moderating purchasing in certain categories; and securing ocean carrier and container capacity. These strategies have and may continue to impact gross profit as a percentage of net sales.

We expect continued uncertainty in our business and the global economy due to inflationary trends; swings in macroeconomic conditions and their effect on consumer confidence; volatility in employment trends; supply chain pressures; and ongoing uncertainties related to global health epidemics or pandemics, any of which may impact our results. For a detailed discussion on results of operations by reportable segment, refer to "Results of Operations" below.

Company Performance Metrics

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs.  At times, we adjust our business strategies to maintain and strengthen our competitive positions in the countries in which we operate.  We define our financial priorities as follows:

•Growth - serve customers through a seamless omni-channel experience;

•Margin - improve our operating income margin through productivity initiatives as well as category and business mix; and

•Returns - improve our Return on Investment ("ROI") through margin improvement and disciplined capital spend.

Growth

Our objective of prioritizing growth means we will focus on serving customers and members however they want to shop through our omni-channel business model. This includes increasing comparable store and club sales through increasing membership at Sam's Club and through Walmart+, accelerating eCommerce sales growth and expansion of omni-channel initiatives that complement our strategy.

Comparable sales is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, including eCommerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable sales using the retail calendar (also known as the 4-5-4 calendar). To be consistent with the retail industry, we provide comparable sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable sales below, we are referring to our calendar comparable sales calculated using our fiscal calendar, which may result in differences when compared to comparable sales using the retail calendar. We focus on comparable sales in the U.S. as we believe it is a meaningful metric within the context of the U.S. retail market where there is a single currency, one inflationary market and generally consistent store and club formats from year to year.

Calendar comparable sales, as well as the impact of fuel, for fiscal 2024 and 2023, were as follows:

Comparable sales in the U.S., including fuel, increased 4.9% and 8.2% in fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. Walmart U.S. comparable sales increased 5.5% and 7.0% in fiscal 2024 and 2023, respectively. For fiscal 2024, comparable sales growth was driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness. For fiscal 2023, comparable sales growth was driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in

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transactions. Walmart U.S. eCommerce sales positively contributed approximately 2.6% and 0.7% to comparable sales for fiscal 2024 and 2023, respectively, which was primarily driven by store pickup and delivery.

Comparable sales at Sam's Club increased 2.3% and 14.6% in fiscal 2024 and 2023, respectively. For fiscal 2024, Sam's Club comparable sales benefited from growth in transactions and average ticket, including strong sales in grocery and health and wellness. Sam's Club comparable sales for fiscal 2023 benefited from growth in transactions and average ticket and included higher inflation impacts in certain merchandise categories. Sam's Club eCommerce sales positively contributed approximately 1.7% and 0.8% to comparable sales for fiscal 2024 and 2023, respectively.

Margin

Our objective of prioritizing margin focuses on growth with a focus on incremental margin accretion through a combination of productivity improvements as well as category and business mix. We invest in technology and process improvements to increase productivity, manage inventory and reduce costs and we operate with discipline by managing expenses and optimizing the efficiency of how we work. Additionally, we focus on our mix of businesses, including the expansion of connected value streams with higher margins, such as advertising and membership income. Our objective is to achieve operating income leverage, which we define as growing operating income at a faster rate than net sales.

Gross profit as a percentage of net sales ("gross profit rate") increased 27 and decreased 98 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. For fiscal 2024, the increase was primarily driven by the Walmart U.S. segment, due to managing prices aligned to our competitive historic price gaps and lapping higher markdowns incurred in the prior year, partially offset by product mix shifts into lower margin categories. For fiscal 2023, the decrease was primarily due to markdowns and merchandise mix in the U.S., higher supply chain costs and inflation related LIFO charges in the Sam's Club segment.

For fiscal 2024, operating expenses as a percentage of net sales decreased 60 basis points when compared to the previous fiscal year. Operating expenses as a percentage of net sales were positively impacted by lapping charges of $3.3 billion related to opioid-related legal settlements and $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment in the prior year.

For fiscal 2023, operating expenses as a percentage of net sales increased 23 basis points when compared to the previous fiscal year. Operating expenses as a percentage of net sales were negatively impacted by the charges related to opioid-related legal settlements and the reorganization and restructuring of certain businesses in the Walmart International segment discussed above. These charges were partially offset by growth in net sales and lower incremental COVID-19 costs.

Operating income as a percentage of net sales increased 83 basis points and decreased 120 basis points for fiscal 2024 and 2023, respectively, due to the factors described above.

Returns

As we execute our financial framework, we believe our return on capital will improve over time. We measure return on capital with our return on assets, return on investment and free cash flow metrics. We also provide returns in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section.

Return on Assets and Return on Investment

We include Return on Assets ("ROA"), the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), and Return on Investment ("ROI") as metrics to assess returns on assets. While ROI is considered a non-GAAP financial measure, management believes ROI is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term strategic initiatives with possible short-term impacts. ROA was 6.6% and 4.6% for fiscal 2024 and 2023, respectively. The increase in ROA was primarily due to the increase in consolidated net income, which was driven by higher operating income. ROI was 15.0% and 12.7% for fiscal 2024 and 2023, respectively. The increase in ROI was the result of an increase in operating income, primarily due to lapping charges associated with opioid-related legal settlements as well as reorganization and restructuring expenses, all recorded in fiscal 2023, as well as improvements in business performance, partially offset by an increase in average invested capital, primarily due to higher purchases of property and equipment.

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We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing twelve months divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and average amortization, less average accounts payable and average accrued liabilities for that period.

Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. As mentioned above, we consider ROA to be the financial measure computed in accordance with GAAP most directly comparable to our calculation of ROI. ROI differs from ROA (which is consolidated net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; and adjusts total assets for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities to arrive at total invested capital. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA. Although ROI is a standard financial measure, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI.

The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:

(1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2.

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Strategic Capital Allocation

Our strategy includes allocating the majority of our capital to higher-return areas focused on automation such as eCommerce, supply chain and store and club investments. The following table provides additional detail regarding our capital expenditures:

Free Cash Flow

Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See "Liquidity and Capital Resources" for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities.

We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We had net cash provided by operating activities of $35.7 billion, $28.8 billion and $24.2 billion for fiscal 2024, 2023 and 2022, respectively. We generated free cash flow of $15.1 billion, $12.0 billion and $11.1 billion for fiscal 2024, 2023 and 2022, respectively. The increase in net cash provided by operating activities in fiscal 2024 is primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges. Free cash flow for fiscal 2024 increased when compared to fiscal 2023 due to the increase in operating cash flows described above, partially offset by an increase of $3.7 billion in capital expenditures to support our investment strategy. Net cash provided by operating activities for fiscal 2023 increased when compared to fiscal 2022 primarily due to moderated levels of inventory purchases, partially offset by a decline in operating income and the timing of certain payments. Free cash flow for fiscal 2023 increased when compared to fiscal 2022 due to the increase in net cash provided by operating activities described above, partially offset by an increase of $3.8 billion in capital expenditures to support our investment strategy.

Walmart's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows.

Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities.

(1) "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

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Results of Operations

Consolidated Results of Operations

(1)     Unit counts and associated retail square feet are presented for stores and clubs generally open as of period end, and reflects the removal of stores in the U.K. and Japan subsequent to closing the divestitures in fiscal 2022. Permanently closed locations are not included in these metrics.

Our total revenues, which includes net sales and membership and other income, increased $36.8 billion or 6.0% and $38.5 billion or 6.7% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. These increases in revenues were primarily due to increases in net sales, which increased $36.8 billion or 6.1% and $38.1 billion or 6.7% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. For fiscal 2024, the increase was primarily due to positive comparable sales for the Walmart U.S. and Sam's Club segments, which were driven by growth in transactions, combined with growth in average ticket, including strong sales in grocery and health and wellness, along with positive comparable sales across our international markets. Net sales were positively impacted by $3.0 billion of fluctuations in currency exchange rates during fiscal 2024. For fiscal 2023, the increase was primarily due to strong positive comparable sales for the Walmart U.S. and Sam's Club segments which was driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in transactions, along with positive comparable sales in all of our international markets. Additionally, net sales were negatively impacted by a decrease of $5.0 billion related to the divestiture of our operations in the U.K. and Japan, which closed in the first quarter of fiscal 2022 and $3.7 billion of fluctuations in currency exchange rates during fiscal 2023.

Our gross profit rate increased 27 basis points and decreased 98 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. For fiscal 2024, the increase was primarily driven by the Walmart U.S. segment, due to managing prices aligned to our competitive historic price gaps and lapping higher markdowns incurred in the prior year, partially offset by product mix shifts into lower margin categories. For fiscal 2023, the decrease was primarily due to markdowns and merchandise mix in the U.S., higher supply chain costs and inflation related LIFO charges in the Sam's Club segment.

For fiscal 2024, operating expenses as a percentage of net sales decreased 60 basis points when compared to the previous fiscal year. Operating expenses as a percentage of net sales were positively impacted by lapping charges of $3.3 billion related to opioid-related legal settlements and $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment in the prior year. For fiscal 2023, operating expenses as a percentage of net sales increased 23 basis points when compared to the previous fiscal year. Operating expenses as a percentage of net sales were negatively impacted by the charges related to opioid-related legal settlements and the reorganization and restructuring of certain businesses in the Walmart International segment discussed above. These charges were partially offset by growth in net sales and lower incremental COVID-19 costs.

Loss on extinguishment of debt was $2.4 billion in fiscal 2022 due to the early retirement of certain higher rate long-term debt to reduce interest expense in future periods. There were no such early retirements of debt in fiscal 2024 and fiscal 2023.

Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period. Other gains and losses consisted of a net loss of $3.0 billion and $1.5 billion for fiscal 2024 and 2023, respectively. The net loss in fiscal 2024 primarily consists of net losses associated with the fair value changes of our equity and other investments. The net loss in fiscal 2023 primarily consists of: net losses associated with the fair value changes of our equity and other investments; a gain of $0.4 billion recognized on the sale of our remaining equity method investment in Brazil; and a $0.2 billion dividend from one of our investments.

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Our effective income tax rate was 25.5%, 33.6%, and 25.4% for fiscal 2024, 2023 and 2022, respectively. The higher effective tax rate in fiscal 2023 as compared to both fiscal 2024 and fiscal 2022 is primarily due to the tax impact of the business reorganization resulting in the full separation of PhonePe from Flipkart in fiscal 2023. Our effective income tax rate may also fluctuate as a result of various factors, including changes in our assessment of unrecognized tax benefits, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix and size of earnings among our U.S. operations and international operations, which are subject to statutory rates that are generally higher than the U.S. statutory rate. The reconciliation from the U.S. statutory rate to the effective income tax rates for fiscal 2024, 2023 and 2022 is presented in Note 9.

As a result of the factors discussed above, we reported $16.3 billion and $11.3 billion of consolidated net income for fiscal 2024 and 2023, respectively, which represents an increase of $5.0 billion and a decrease of $2.6 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. Diluted net income per common share attributable to Walmart ("EPS") was $1.91, $1.42 and $1.62 for fiscal 2024, 2023 and 2022, respectively.

Walmart U.S. Segment

Net sales for the Walmart U.S. segment increased $21.3 billion or 5.1% and $27.3 billion or 6.9% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. The increases in net sales were primarily due to increases in comparable sales of 5.5% and 7.0% for fiscal 2024 and 2023, respectively. Comparable sales in fiscal 2024 were driven by growth in transactions combined with growth in average ticket, including strong sales in grocery and health and wellness. Comparable sales in fiscal 2023 were driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in transactions. Walmart U.S. eCommerce sales positively contributed approximately 2.6% and 0.7% to comparable sales for fiscal 2024 and 2023, respectively, which was primarily driven by store pickup and delivery.

Gross profit rate increased 20 basis points for fiscal 2024 and decreased 85 basis points for fiscal 2023, when compared to the respective previous fiscal year. The increase in fiscal 2024 gross profit rate was primarily due to managing prices aligned to our competitive historic price gaps and lapping higher net markdowns incurred in the prior year, partially offset by product mix shifts into lower margin categories. The decrease in fiscal 2023 gross profit rate was primarily due to net markdowns and product mix shifts into lower margin categories and increased supply chain costs, partially offset by price management impacts driven by cost inflation.

Operating expenses as a percentage of segment net sales increased 9 basis points for fiscal 2024 when compared to the previous fiscal year primarily driven by higher variable pay relative to last year as a result of exceeding our planned performance. For fiscal 2023, operating expenses as a percentage of segment net sales decreased 25 basis points primarily driven by strong sales growth and lower incremental COVID-19 related costs, partially offset by increased wage costs.

As a result of the factors discussed above, segment operating income increased $1.5 billion and decreased $1.0 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

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Walmart International Segment

Net sales for the Walmart International segment increased $13.7 billion or 13.5% for fiscal 2024 and were flat for 2023, when compared to the previous fiscal year. For fiscal 2024, the increase was primarily due to positive comparable sales across our international markets and positive fluctuations in currency exchange rates of $3.0 billion during fiscal 2024. For fiscal 2023, net sales benefited from positive comparable sales across all of our international markets, offset by the impacts of a decrease of $5.0 billion related to the divestiture of our operations in the U.K. and Japan, which closed in the first quarter of fiscal 2022, as well as $3.7 billion of fluctuations in currency exchange rates during fiscal 2023.

Gross profit rate increased 20 basis points and decreased 50 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. For fiscal 2024, the increase was primarily driven by supply chain efficiencies partially offset by ongoing format and channel shifts. For fiscal 2023, the decrease was primarily driven by continued growth in lower margin formats and channels in China and category mix shifts into lower margin categories.

Operating expenses as a percentage of segment net sales decreased 152 basis points and increased 41 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. The decrease in operating expenses as a percentage of segment net sales for fiscal 2024 was primarily due to the lapping of business reorganization and restructuring charges incurred related to Flipkart and Massmart in fiscal 2023 and an increase in sales in the current year. The increase in operating expenses as a percentage of segment net sales for fiscal 2023, was primarily due to incurring these business reorganization and restructuring charges.

As a result of the factors discussed above, segment operating income increased $1.9 billion and decreased $0.8 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

Sam's Club Segment

(1) We believe the "Excluding Fuel" information is useful to investors because it permits investors to understand the effect of the Sam's Club segment's fuel sales on its results of operations, which are impacted by the volatility of fuel prices. Volatility in fuel prices may continue to impact the operating results of the Sam's Club segment in the future. Management uses such information to better measure underlying operating results in the segment.

Net sales for the Sam's Club segment increased $1.8 billion or 2.2% and $10.8 billion or 14.7% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. The increases in net sales were primarily due to increases in comparable sales, including fuel, of 2.3% and 14.6% for fiscal 2024 and 2023, respectively. Comparable sales benefited from growth in transactions and average ticket, including strong sales in grocery and health and wellness. Additionally, fiscal 2024 growth was partially offset by lower fuel sales due to deflation in this category. Sam's Club eCommerce sales positively contributed approximately 1.7% and 0.8% to comparable sales for fiscal 2024 and 2023, respectively, which was primarily driven by curbside pickup and ship to home.

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Gross profit rate increased 55 basis points and decreased 155 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. For fiscal 2024, the increase in gross profit rate was primarily due to the lapping of elevated markdowns in the prior year, partially offset by product mix shifts into lower margin categories. For fiscal 2023, the decrease in gross profit rate was primarily due to inventory markdowns, elevated supply chain and eCommerce fulfillment costs and inflation related LIFO charges.

Membership and other income increased 7.5% and 7.0% for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. For fiscal 2024 and 2023, the increases were primarily due to growth in membership base and Plus penetration. Fiscal 2024 was also positively impacted by higher Plus renewals, as well as the expiration of a promotional offering offsetting membership fee increases during the fourth quarter of fiscal 2024.

Operating expenses as a percentage of segment net sales increased 46 basis points and decreased 97 basis points for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year. Fiscal 2024 operating expenses as a percentage of net sales increased primarily due to lower fuel sales and elevated technology spend. Fiscal 2023 operating expenses as a percentage of net sales decreased primarily due to higher sales.

As a result of the factors discussed above, segment operating income increased $0.2 billion and decreased $0.3 billion for fiscal 2024 and 2023, respectively, when compared to the previous fiscal year.

Liquidity and Capital Resources

Liquidity

The strength and stability of our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. Generally, some or all of the remaining available cash flow has been used to fund dividends on our common stock and share repurchases. We believe our sources of liquidity will continue to be sufficient to fund operations, finance our global investment activities, pay dividends and fund our share repurchases for at least the next 12 months and for the foreseeable future.

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $35.7 billion, $28.8 billion and $24.2 billion for fiscal 2024, 2023 and 2022, respectively. The increase in net cash provided by operating activities in fiscal 2024 is primarily due to higher cash provided by operating income, as well as timing of certain payments and strategic inventory management as part of working capital initiatives, partially offset by payment of the remaining accrued opioid legal charges. The increase in net cash provided by operating activities for fiscal 2023, when compared to the previous fiscal year, was primarily due to moderated levels of inventory purchases, partially offset by a decline in operating income and the timing of certain payments.

Cash Equivalents and Working Capital Deficit

Cash and cash equivalents were $9.9 billion and $8.6 billion as of January 31, 2024 and 2023, respectively. Our working capital deficit, defined as total current assets less total current liabilities, was $15.5 billion and $16.5 billion as of January 31, 2024 and 2023, respectively. The decrease in our working capital deficit is primarily driven by a decrease in accrued liabilities primarily due to the payment of the remaining accrued opioid legal charges and an increase in cash, partially offset by an increase in accounts payable and a decrease in inventories as part of working capital initiatives. We generally operate with a working capital deficit due to our efficient use of cash in funding operations, consistent access to the capital markets and returns provided to our shareholders in the form of payments of cash dividends and share repurchases.

We use intercompany financing arrangements in an effort to ensure cash can be made available in the country in which it is needed with the minimum cost possible. Additionally, from time-to-time, we repatriate earnings and related cash from jurisdictions outside of the U.S. Under current law, repatriations of foreign earnings will generally be free of U.S. federal tax, but may incur other taxes such as withholding or state taxes. We do not expect current local laws, or other existing limitations on anticipated future repatriations of cash amounts held outside the U.S. to have a material effect on our overall liquidity, financial position or results of operations.

As of January 31, 2024 and 2023, cash and cash equivalents of $3.5 billion and $2.9 billion, respectively, may not be freely transferable to the U.S. due to local laws or other restrictions or are subject to the approval of the noncontrolling interest shareholders.

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Net Cash Used in Investing Activities

Net cash used in investing activities was $21.3 billion, $17.7 billion and $6.0 billion for fiscal 2024, 2023 and 2022, respectively, and generally consisted of capital expenditures. Net cash used in investing activities increased $3.6 billion for fiscal 2024 when compared to the previous fiscal year primarily due to increased payments for property and equipment. Net cash used in investing activities increased $11.7 billion for fiscal 2023 when compared to the previous fiscal year, primarily due to the result of lapping the net proceeds received from the divestitures of our operations in the U.K. and Japan and an increase in capital expenditures to support our investment strategy.

Capital expenditures

Refer to the "Strategic Capital Allocation" section in our Company Performance Metrics for capital expenditure detail for fiscal 2024 and 2023. For the fiscal year ending January 31, 2025 ("fiscal 2025"), we project capital expenditures will be approximately $20 billion to $24 billion, with a focus on technology, supply chain, and customer-facing initiatives.

Net Cash Used in Financing Activities

Net cash from financing activities generally consists of debt transactions, dividends paid, repurchases of Company stock and transactions with noncontrolling interest shareholders. Fiscal 2024 net cash used in financing activities decreased $3.6 billion when compared to the previous fiscal year. The decrease is primarily due to fewer repurchases of Company stock, partially offset by the purchase of certain noncontrolling interests. Fiscal 2023 net cash used in financing activities decreased $5.8 billion when compared to the previous fiscal year. The decrease was primarily due to repayments of long-term debt and related payment of premiums for the early extinguishment of certain notes in the prior fiscal year, partially offset by the equity funding from the sale of subsidiary stock in the prior fiscal year.

Purchase and Sale of Subsidiary Stock

During fiscal 2024, we paid $3.5 billion to acquire shares from certain Flipkart noncontrolling interest holders and settle the liability to former noncontrolling interest holders of PhonePe. Additionally, we received $0.7 billion related to new rounds of equity funding for the Company's majority owned PhonePe subsidiary.

During fiscal 2023, we completed a $0.4 billion buyout of the noncontrolling interest shareholders of our Massmart subsidiary and completed a $0.4 billion acquisition of Alert Innovation, bringing our ownership to approximately 100% of both Massmart and Alert Innovation.

During fiscal 2022, we received $3.2 billion primarily related to a new equity funding for our majority-owned Flipkart subsidiary.

Short-term Borrowings

We generally utilize the liquidity provided by short-term borrowings to provide funding for our operations, dividend payments, share repurchases, capital expenditures and other cash requirements. The following table includes additional information related to the our short-term borrowings for fiscal 2024, 2023 and 2022:

Short-term borrowings as of January 31, 2024 and 2023 were $0.9 billion and $0.4 billion, respectively, with weighted-average interest rates of 7.7% and 6.6%, respectively. We also have $15.0 billion of various undrawn committed lines of credit in the U.S. as of January 31, 2024 that provide additional liquidity, if needed. Additionally, we maintain access to various credit facilities outside of the U.S. to further support our Walmart International segment operations, as needed.

As of January 31, 2024, we have $2.1 billion of syndicated and fronted letters of credit available, of which $1.7 billion was drawn and represents an unrecorded current obligation.

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Long-term Debt

The following table provides the changes in our long-term debt for fiscal 2024:

Our total outstanding long-term debt increased $0.7 billion during fiscal 2024, primarily due to the issuance of new long-term debt in April 2023, partially offset by the maturities of certain long-term debt. Refer to Note 6 to our Consolidated Financial Statements for details on the issuances of long-term debt.

Estimated contractual interest payments associated with our long-term debt amount to $20.2 billion, with approximately $1.8 billion expected to be paid in fiscal 2025. Estimated interest payments are based on our principal amounts and expected maturities of all debt outstanding as of January 31, 2024, and assumes interest rates remain at current levels for our variable rate instruments.

Dividends

Our total dividend payments were $6.1 billion, $6.1 billion and $6.2 billion for fiscal 2024, 2023 and 2022, respectively. Effective February 20, 2024, the Company approved the fiscal 2025 annual dividend of $0.83 per share, an increase over the fiscal 2024 annual dividend of $0.76 per share. For fiscal 2025, the annual dividend will be paid in four quarterly installments of $0.2075 per share, according to the following record and payable dates:

Company Share Repurchase Program

From time to time, the Company repurchases shares of its common stock under share repurchase programs authorized by the Company's Board of Directors. All repurchases made during fiscal 2024 were made under the current $20.0 billion share repurchase program approved in November 2022, which has no expiration date or other restrictions limiting the period over which the Company can make repurchases. As of January 31, 2024, authorization for $16.5 billion of share repurchases remained under the share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status.

We regularly review share repurchase activity and consider several factors in determining when to execute share repurchases, including, among other things, current cash needs, capacity for leverage, cost of borrowings, our results of operations and the market price of our common stock. We anticipate that a majority of the ongoing share repurchase program will be funded through the Company's free cash flow.

The following table provides, on a settlement date basis, the number of shares repurchased, average price paid per share and total amount paid for share repurchases for fiscal 2024, 2023 and 2022:

Material Cash Requirements

Material cash requirements from operating activities primarily consist of inventory purchases, employee related costs, taxes, interest and other general operating expenses, which we expect to be primarily satisfied by our cash from operations. Other material cash requirements from known contractual and other obligations include short-term borrowings, long-term debt and related interest payments, leases and purchase obligations. See Note 6 and Note 7 to our Consolidated Financial Statements for information regarding outstanding short-term borrowings and long-term debt, and leases, respectively.

As of January 31, 2024, the Company has $34.3 billion of unrecorded purchase obligations outstanding, of which $14.6 billion is due within one year. Purchase obligations include legally binding contracts, such as firm commitments for inventory and

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utility purchases, as well as commitments to make capital expenditures, software acquisition and license commitments and legally binding service contracts. Contractual obligations for the purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Contracts that specify the Company will purchase all or a portion of its requirements of a specific product or service from a supplier, but do not include a fixed or minimum quantity, are excluded from the obligations quantified above. Accordingly, purchase orders for inventory are also excluded as purchase orders represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current inventory needs and are fulfilled by our suppliers within short time periods. We also enter into contracts for outsourced services; however, the obligations under these contracts are not significant and the contracts generally contain clauses allowing for cancellation without significant penalty. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Capital Resources

We believe our cash flows from operations, current cash position, short-term borrowings and access to capital markets will continue to be sufficient to meet our anticipated cash requirements and contractual obligations, which includes funding seasonal buildups in merchandise inventories and funding our capital expenditures, acquisitions, dividend payments and share repurchases.

We have strong commercial paper and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in capital markets. As of January 31, 2024, the ratings assigned to our commercial paper and rated series of our outstanding long-term debt were as follows:

Credit rating agencies review their ratings periodically and, therefore, the credit ratings assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain consistent over time. Factors that could affect our credit ratings include changes in our operating performance, the general economic environment, conditions in the retail industry, our financial position, including our total debt and capitalization, and changes in our business strategy. Any downgrade of our credit ratings by a credit rating agency could increase our future borrowing costs or impair our ability to access capital and credit markets on terms commercially acceptable to us. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper markets with the same flexibility that we have experienced historically, potentially requiring us to rely more heavily on more expensive types of debt financing. The credit rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.

Other Matters

In Note 10 to our Consolidated Financial Statements, which is captioned "Contingencies" and appears in Part II of this Annual Report on Form 10-K under the caption "Item 8. Financial Statements and Supplementary Data," we discuss, under the sub-captions "Settlement Framework Regarding Multidistrict and State or Local Opioid Related Litigation," and "Other Opioid Related Litigation" the Prescription Opiate Litigation, the Settlement Framework, and other matters, including certain risks arising therefrom. In that Note 10, we also discuss under the sub-caption "Asda Equal Value Claims" the Company's indemnification obligation for the Asda Equal Value Claims matter, under the sub-caption "Money Transfer Agent Services Matters," a United States Federal Trade Commission complaint related to money transfers and the Company's anti-fraud program and a government investigation by the U.S. Attorney's Office for the Middle District of Pennsylvania into the Company's consumer fraud prevention and anti-money laundering compliance related to the Company's money transfer agent services as well as under the sub-caption "Mexico Antitrust Matter," we disclose the main Mexican operating subsidiary of Wal-Mart de México was notified of the initiation of a quasi-judicial administrative process against it for alleged relative monopolistic practices in connection with the supply and wholesale distribution of certain consumer goods, retail marketing practices of such consumer goods and related services. We discuss various legal proceedings related to the Federal and State Prescription Opiate Litigation, the Settlement Framework, DOJ Opioid Civil Litigation and Opioids Related Securities Class Actions and Derivative Litigation in Part I of this Annual Report on Form 10-K under the caption "Item 3. Legal Proceedings," under the sub-caption "I. Supplemental Information." We also discuss the Foreign Direct Investment Matters in Part I of this Annual Report on Form 10-K under the caption "Item 3. Legal Proceedings," under the sub-caption "II. Certain Other Matters." We also discuss an environmental matter with the State of California in Part I of this Annual Report on Form 10-K under the caption "Item 3. Legal Proceedings," under the sub-caption "III. Environmental Matters." The foregoing matters and other

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matters described elsewhere in this Annual Report on Form 10-K represent contingent liabilities of the Company that may or may not result in the incurrence of a material liability by the Company upon their final resolution.

Summary of Critical Accounting Estimates

Management strives to report our financial results in a clear and understandable manner, although in some cases accounting and disclosure rules are complex and require us to use technical terminology. In preparing the Company's Consolidated Financial Statements, we follow accounting principles generally accepted in the U.S. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations as reflected in our financial statements. These judgments and estimates are based on past events and expectations of future outcomes. Actual results may differ from our estimates.

Management continually reviews our accounting policies including how they are applied and how they are reported and disclosed in our financial statements. Following is a summary of our critical accounting estimates and how they are applied in preparation of the financial statements.

Contingencies

We are involved in a number of legal proceedings and certain regulatory matters. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. We also perform an assessment of the materiality of loss contingencies where a loss is either reasonably possible or it is reasonably possible that a loss could be incurred in excess of amounts accrued. If a loss or an additional loss has at least a reasonable possibility of occurring and the impact on the financial statements would be material, we provide disclosure of the loss contingency in the footnotes to our financial statements. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or the range of the loss can be made. Although we are not able to predict the outcome or reasonably estimate a range of possible losses in certain matters described in Note 10 to our Consolidated Financial Statements and have not recorded an associated accrual related to these matters, an adverse judgment or negotiated resolution in any of these matters could have a material adverse effect on our business, reputation, financial position, results of operations or cash flows.

Uncertain Tax Positions

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions. The benefits of uncertain tax positions are recorded in our financial statements only after determining a more likely than not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, we reassess these probabilities and record any changes in the financial statements as appropriate. We account for uncertain tax positions by determining the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Accordingly, the determination of our uncertain tax positions requires judgment, the use of estimates in certain cases and the interpretation and application of complex tax laws.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

This discussion, which presents our results for the fiscal years ended January 31, 2023 ("fiscal 2023"), January 31, 2022 ("fiscal 2022") and January 31, 2021 ("fiscal 2021"), should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of each of the three segments to provide a better understanding of how each of those segments and its results of operations affect the financial position and results of operations of the Company as a whole.

Throughout this Item 7, we discuss segment operating income, comparable store and club sales and other measures.  Management measures the results of the Company's segments using each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income and other measures as determined by the information regularly reviewed by our chief operating decision maker.

Management also measures the results of comparable store and club sales, or comparable sales, a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, for a particular period from the corresponding period in the previous year. Walmart's definition of comparable sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as eCommerce sales. We measure the eCommerce sales impact by including all sales initiated digitally, including omni-channel transactions which are fulfilled through our stores and clubs as well as certain other business offerings that are part of our flywheel strategy, such as our Walmart Connect advertising business. Sales at a store that has changed in format are excluded from comparable sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than five percent. Sales related to divested businesses are excluded from comparable sales, and sales related to acquisitions are excluded until such acquisitions have been owned for 12 months. Comparable sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable sales varies across the retail industry. As a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other companies.

In discussing our operating results, the term currency exchange rates refers to the currency exchange rates we use to convert the operating results for countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. Additionally, no currency exchange rate fluctuations are calculated for non-USD acquisitions until owned for 12 months. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company and the Walmart International segment in the future.

We have taken certain strategic actions to strengthen our portfolio, primarily in the Walmart International segment, including the following highlights over the last three years:

•In November 2020, we completed the sale of Walmart Argentina and recorded a pre-tax non-cash loss in fiscal 2021 of $1.0 billion, primarily due to cumulative foreign currency translation losses. Refer to Note 12.

•In February 2021, we completed the sale of Asda for net consideration of $9.6 billion, for which we recognized an estimated pre-tax loss in fiscal 2021 of $5.5 billion, and an incremental loss of $0.2 billion in fiscal 2022 upon closing of the transaction. Refer to Note 11 and Note 12.

•In March 2021, we completed the sale of Seiyu for net consideration of $1.2 billion, for which we recognized an estimated pre-tax loss in fiscal 2021 of $1.9 billion, and an incremental loss of $0.2 billion in fiscal 2022 upon closing of the transaction. Refer to Note 12.

•In November 2022, we completed the buyout of the noncontrolling interest shareholders of our Massmart subsidiary (Refer to Note 3) and in December 2022, we exited operations in certain countries in Africa.

•In December 2022, we increased our ownership in PhonePe as part of the separation from our majority-owned Flipkart subsidiary. Refer to Note 3.

We operate in a highly competitive omni-channel retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as eCommerce, health and wellness, financial services, advertising, and data service businesses. Many of these competitors are national, regional or international chains or have a national or international omni-channel or eCommerce

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presence. We compete with a number of companies for attracting and retaining quality associates. We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather and other risks related to climate change, global health epidemics, including the COVID-19 pandemic, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain, inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, inflation, deflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment. Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in its securities can be found herein under "Item 1A. Risk Factors."

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low

costs. However, like other retail companies, we have seen supply chain disruptions contributing to higher than

normal inventory levels throughout the year. In addition, our merchandise costs for the fiscal year ended January 31, 2023 have been impacted by high inflation, greater than what we have experienced in recent years. The impact to our net sales and gross profit margin is influenced in part by our pricing and merchandising strategies in response to cost increases. Those pricing strategies include, but are not limited to: absorbing cost increases instead of passing those cost increases on to our customers and members; reducing prices in certain merchandise categories; focusing on opening price points for certain food categories; and when necessary, passing cost increases on to our customers and members. Merchandising strategies include, but are not limited to: working with our suppliers to reduce product costs and share in absorbing cost increases; focusing on private label brands and smaller pack sizes; earlier-than-usual purchasing and in greater volumes or moderating purchasing in certain categories; and securing ocean carrier and container capacity. These strategies have and may continue to impact gross profit as a percentage of net sales.

We expect continued uncertainty in our business and the global economy due to pressure from inflation; swings in macroeconomic conditions and their effect on consumer confidence; volatility in employment trends; supply chain pressures; and ongoing uncertainties related to global health epidemics or pandemics, any of which may impact our results. For a detailed discussion on results of operations by reportable segment, refer to "Results of Operations" below.

Company Performance Metrics

We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs.  At times, we adjust our business strategies to maintain and strengthen our competitive positions in the countries in which we operate.  We define our financial framework as:

•strong, efficient growth;

•consistent operating discipline; and

•strategic capital allocation.

As we execute on this financial framework, we believe our returns on capital will improve over time.

Strong, Efficient Growth

Our objective of prioritizing strong, efficient growth means we will focus on the most productive growth opportunities, increasing comparable store and club sales through increasing membership at Sam's Club and through Walmart+, accelerating eCommerce sales growth and expanding omni-channel initiatives that complement our flywheel strategy. At times, we make strategic investments which are focused on the long-term growth of the Company.

Comparable sales is a metric that indicates the performance of our existing stores and clubs by measuring the change in sales for such stores and clubs, including eCommerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable sales using the retail calendar (also known as the 4-5-4 calendar). To be consistent with the retail industry, we provide comparable sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable sales below, we are referring to our calendar comparable sales calculated using our fiscal calendar, which may result in differences when compared to comparable sales using the retail calendar.

Calendar comparable sales, including the impact of fuel, for fiscal 2023 and 2022, were as follows:

Comparable sales in the U.S., including fuel, increased 8.2% and 7.7% in fiscal 2023 and 2022, respectively, when compared to the previous fiscal year. Walmart U.S. comparable sales increased 7.0% and 6.4% in fiscal 2023 and 2022, respectively. For

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fiscal 2023, comparable sales growth was driven by growth in average ticket, including strong food sales and higher inflation impacts in certain merchandise categories, as well as growth in transactions. For fiscal 2022, comparable sales growth was driven driven by growth in average ticket and transactions, which included strong consumer spending from government stimulus and some higher inflation impacts in certain merchandise categories compared to recent years. Walmart U.S. eCommerce sales positively contributed approximately 0.7% to comparable sales for both fiscal 2023 and 2022 as we continue to focus on a seamless omni-channel experience for our customers.

Comparable sales at Sam's Club increased 14.6% and 15.0% in fiscal 2023 and 2022, respectively. For fiscal 2023, Sam's Club comparable sales benefited from growth in transactions and average ticket and included higher inflation impacts in certain merchandise categories. Sam's Club comparable sales for fiscal 2022 benefited from growth in transactions and average ticket and was aided by consumer spending due to government stimulus, and also included some higher inflation impacts in certain merchandise categories compared to recent years. The growth in comparable sales was partially offset by our decision to remove tobacco from certain club locations. Sam's Club eCommerce sales positively contributed approximately 0.8% and 1.3% to comparable sales for fiscal 2023 and 2022, respectively.

Consistent Operating Discipline

We operate with discipline by managing expenses, optimizing the efficiency of how we work and creating an environment in which we have sustainable lowest cost to serve. We invest in technology and process improvements to increase productivity, manage inventory and reduce costs. We measure operating discipline through expense leverage, which we define as net sales growing at a faster rate than operating, selling, general and administrative ("operating") expenses.

For fiscal 2023, operating expenses as a percentage of net sales increased 23 basis points when compared to the previous fiscal year. Operating expenses as a percentage of net sales were impacted by charges of $3.3 billion related to opioid-related legal settlements and charges of $0.8 billion related to the reorganization and restructuring of certain businesses in the Walmart International segment. These charges were partially offset by growth in net sales and lower incremental COVID-19 costs.

For fiscal 2022, operating expenses as a percentage of net sales decreased 19 basis points when compared to the previous fiscal year. Operating expenses as a percentage of net sales benefited from growth in comparable sales and lower incremental COVID-19 related costs of $2.5 billion as compared to the previous year, partially offset by increased wage investments primarily in the Walmart U.S. segment.

Strategic Capital Allocation

Our strategy includes improving our customer-facing initiatives in stores and clubs and creating a seamless omni-channel experience for our customers. As such, we continue to allocate more capital to supply chain, omni-channel initiatives, technology and store remodels and less to new store and club openings. The following table provides additional detail:

Returns

As we execute our financial framework, we believe our return on capital will improve over time. We measure return on capital with our return on assets, return on investment and free cash flow metrics. We also provide returns in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section.

Return on Assets and Return on Investment

We include Return on Assets ("ROA"), the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), and Return on Investment ("ROI") as metrics

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to assess returns on assets. While ROI is considered a non-GAAP financial measure, management believes ROI is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term strategic initiatives with possible short-term impacts. ROA was 4.6% and 5.6% for fiscal 2023 and 2022, respectively. The decrease in ROA was primarily due to the decrease in net income, which was driven by lower operating income, partially offset by lapping debt extinguishment charges. ROI was 12.7% and 14.9% for fiscal 2023 and 2022, respectively, which was primarily due to a decrease in operating income which included charges associated with opioid-related legal settlements as well as reorganization and restructuring expenses, all recorded in fiscal 2023.

We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the trailing twelve months divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and average amortization, less average accounts payable and average accrued liabilities for that period.

Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable GAAP financial measure. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. As mentioned above, we consider ROA to be the financial measure computed in accordance with GAAP most directly comparable to our calculation of ROI. ROI differs from ROA (which is consolidated net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; and adjusts total assets for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities to arrive at total invested capital. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA. Although ROI is a standard financial measure, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI.

The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP financial measure, is as follows:

(1) The average is based on the addition of the account balance at the end of the current period to the account balance at the end of the prior period and dividing by 2.

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Free Cash Flow

Free cash flow is considered a non-GAAP financial measure. Management believes, however, that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See "Liquidity and Capital Resources" for discussions of GAAP metrics including net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities.

We define free cash flow as net cash provided by operating activities in a period minus payments for property and equipment made in that period. We had net cash provided by operating activities of $28.8 billion, $24.2 billion and $36.1 billion for fiscal 2023, 2022 and 2021, respectively. We generated free cash flow of $12.0 billion, $11.1 billion and $25.8 billion for fiscal 2023, 2022 and 2021, respectively. Net cash provided by operating activities for fiscal 2023 increased when compared to fiscal 2022. The increase is primarily due to moderated levels of inventory purchases, partially offset by a decline in operating income and the timing of certain payments. Free cash flow for fiscal 2023 increased when compared to fiscal 2022 due to the increase in operating cash flows described above, partially offset by an increase of $3.8 billion in capital expenditures to support our investment strategy. Net cash provided by operating activities for fiscal 2022 decreased when compared to fiscal 2021 primarily due to an increase in inventory costs and purchases to support strong sales and lapping the impact of accelerated inventory sell-through in fiscal 2021, as well as timing and payment of wages. Free cash flow for fiscal 2022 decreased when compared to fiscal 2021 due to the same reasons as the decrease in net cash provided by operating activities, as well as $2.8 billion in increased capital expenditures.

Walmart's definition of free cash flow is limited in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows.

Although other companies report their free cash flow, numerous methods may exist for calculating a company's free cash flow. As a result, the method used by management to calculate our free cash flow may differ from the methods used by other companies to calculate their free cash flow.

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to net cash provided by operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow, as well as information regarding net cash used in investing activities and net cash used in financing activities.

(1) "Net cash used in investing activities" includes payments for property and equipment, which is also included in our computation of free cash flow.

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Results of Operations

Consolidated Results of Operations