Welcome to the Wal-Mart Earnings Call for the Second Quarter of Fiscal Year 2013. The date of this call is August 16, 2012. This call is the property of Wal-Mart Stores Inc. and is intended for the use of Walmart shareholders and the investment community. It should not be reproduced in any way. [Operator Instructions] This call will contain statements that Walmart believes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended and that are intended to enjoy the protection of the Safe Harbor for forward-looking statements provided by that Act. These forward-looking statements generally are identified by the use of the words or phrases anticipate, are increasing, assumption, based on, estimate, expect, expects, expected, forecast, forecasting, forecasts, goal, goals, guidance, is expected, may be impacted, may see, plan, priority, prioritized, projected, scheduled, will continue, we're going to begin, will add, will begin, will continue, will grow, will have, will help, will increase, will likely continue, will open, will provide for, will result, will see and will spend and/or a variation of one of those words or phrases in those statements or by the use of words and phrases of similar import. Similarly, descriptions of Walmart's objectives, plans, goals, targets or expectations are forward-looking statements. The forward-looking statements made in this call discuss, among other matters, management's forecasts of Walmart's diluted earnings per share from continuing operations attributable to Walmart for the fiscal year ending January 31, 2013, and for the 3 months ending October 31, 2012, and the assumptions and types of assumptions underlying such forecasts and the comparable store sales of Walmart's Walmart U.S. operating segment and the comparable club sales, without fuel, of Walmart's Sam's Club operating segment for the 13-week period from July 28, 2012, through October 26,…

Hello. This Carol Schumacher, Vice President of Investor Relations for Wal-Mart Stores, Inc. Thanks for joining us today for our earnings call to review the second quarter of fiscal 2013. All information for this quarter, including our unit counts, square footage and financial metrics, is available on our website, and that's walmartstores.com/investors. Please note that while we update unit counts on a monthly basis on our website, in the earnings discussion today, unit counts and square footage are referred to as of the quarter end. Our press release is available on the website, and a full transcript of this call has already been posted there. Here's the agenda for today's call. Mike Duke, President and CEO of Wal-Mart Stores, Inc., will open the call with his thoughts about the quarter as well as highlights of our key results. Jeff Davis, SVP of Finance and Treasurer, will cover the consolidated financial details. Then we'll kick off the operations portion with Bill Simon, President and CEO of Walmart U.S. Next will be Doug McMillon, President and CEO of Walmart International. And Rosalind Brewer, President and CEO of Sam's Club, will round out that portion. Charles Holley, our CFO, will wrap up the call with an analysis of our financial priorities as well as EPS guidance for the third quarter and the full year. A few reminders before we get into the details. Walmart's consolidated financial statements are based on a fiscal year ending January 31 for both our U.S. and Canadian operations and December 31 for all other operations. We provide comparable sales guidance for Walmart U.S. and Sam's Club on the 4-5-4 calendar each quarter for the upcoming quarter. We do not give any annual comp guidance for the U.S. operations. We refer to the impact of changes in currency exchange…

Thanks, Carol, and good morning, everyone. Walmart had a strong second quarter, and I'm pleased with the earnings and overall results our company delivered. Our more than 2 million associates around the world did a fantastic job of serving our customers, and they really appreciate that we help our customers save money so that they can live better. Walmart reported second quarter diluted earnings per share of $1.18 at the top of our guidance of $1.13 to $1.18. This represents an 8.3% increase from last year's second quarter EPS of $1.09. Let's cover some of the highlights from the second quarter. Walmart U.S. continued its momentum this quarter with comp sales growth of 2.2%. Ticket and traffic were positive, and operating income grew faster than sales. Our Walmart U.S. business now has delivered positive comp sales for 4 consecutive quarters. I'm really proud of International's underlying performance. All countries delivered positive comp sales for the quarter. On a constant currency basis, sales would have grown 7.2%, and operating income would have been up 11.9%. Sam's Club continues to provide value to its members by delivering consistently strong results driven by positive traffic and ticket due to quality merchandise. Comp sales without fuel increased 4.2%, and operating income grew more than twice the rate of sales. We reported consolidated net sales of $113.5 billion, up 4.5%. Currency negatively impacted net sales by approximately $2.2 billion, and without that impact, net sales would have been $115.7 billion. It should be no surprise to hear me say that our company leveraged operating expenses again this quarter. Our intense focus on delivering productivity and reducing cost allows us to invest in lower prices for our customers and to deliver strong profitability for our shareholders. Consolidated operating income was $6.7 billion this quarter, up 4.9%…

Thank you, Mike. For the second quarter of fiscal 2013, Walmart reported diluted earnings per share from continuing operations of $1.18, which compares to $1.09 last year. Recall last year, we had $115 million of pretax items that increased operating expenses and $17 million of pretax items that reduced gross profit. The sum of these pretax items negatively impacted EPS from continuing operations by approximately $0.03. Now let's get to our results for the second quarter. Net sales increased 4.5% or $4.9 billion to $113.5 billion for the quarter. The increase included $1.9 billion of net sales from acquisitions, offset by a negative impact from currency exchange rate fluctuations of approximately $2.2 billion. On a constant currency basis, net sales would have increased 4.7% to $113.8 billion. As you can see, our company is not unlike many other global companies that were impacted by the strengthening of the U.S. dollar versus other foreign currencies. The U.S. dollar strengthened approximately 6% against our non-U.S. market currencies, with the greatest impact coming from Mexico and Brazil. As a result, net sales were negatively impacted by approximately $3 billion year-to-date. Moving to our comp sales. Total U.S. comps without fuel increased 2.5% for the 13-week period ended July 27. Bill and Roz will provide more details on the strength of our comp sales for Walmart U.S. and Sam's Club. Membership and other income grew 4.7% compared to the second quarter of last year. Therefore, we closed the quarter with total revenue of $114.3 billion, up 4.5% from $109.4 billion last year. Gross profit increased 3.8%, which corresponds to an 18-basis-point reduction in gross margin compared to last year. This is primarily due to price investments in Walmart U.S. and key international markets. Our company continues to drive operating expense leverage. Operating expenses as…

Thank you, Jeff. I'm very pleased to report today that Walmart U.S. had another strong quarter. We delivered positive comps and continued to grow sales. We leveraged expenses and contributed very strong profits to the company by growing operating income faster than sales. Now let's get into the specifics. Walmart U.S. generated a 2.2% sales comp, above the midpoint of our guidance of 1% to 3%. The momentum was continued throughout the quarter. In fact, July was one of our strongest months this year, delivering positive comps on top of positive comps last year. I'm particularly energized by these results and proud of this performance. It highlights the effectiveness of our strategy, which enables us to consistently deliver results for our customers and for our shareholders. We're focused and aligned, driving the productivity loop throughout our business. In the second quarter, we again leveraged expenses across our operation, invested in price and helped our customers save. Customers are responding to our continued focus on providing the right assortment at Every Day Low Prices. During the quarter, our average comp traffic increase was equal to serving, on average, 80,000 additional customers every day of the 13-week period. These visits represented a 0.4% increase in comp traffic in addition to a 1.8% increase in ticket for the quarter. When I think about our comp in terms of pure customer numbers, it's pretty amazing. Sales growth in the quarter was well balanced, with positive comps across all 3 geographic business units and in all of our store formats. Our 1.4 million associates did an outstanding job serving our customers, and I'm particularly pleased with the results we achieved during the key holiday events of Mother's Day, Father's Day and the Fourth of July. Despite a midweek holiday, July 4 sales, especially in key…

Thank you, Bill. Walmart International continues to drive sales growth and profitability. Net sales for the second quarter grew 6.4%, and operating income grew a little slower on a reported basis at 5.4%. On a constant currency basis, sales would have grown 7.2%, and operating income would have been up 11.9%. Every market delivered positive comps, and I'm pleased that our largest markets, the U.K., Mexico and Canada, collectively delivered stable growth, solid margins and expense leverage despite challenging environments. Let me take a moment to describe how we're driving growth in returns from the Walmart International perspective. As you know, we have a consistent purpose everywhere we operate: to save people money so they can live better. In addition to our purpose, our organizational culture is driving consistency. Our Walmart culture supports our expectations of the ways associates should behave in order to drive results. More recently, we've worked to strengthen the consistency of our operating principles. These principles include executing EDLP and EDLC, being merchandise driven, uncovering even greater opportunities for leverage across our markets and leading on social and environmental issues. And it's no surprise that when we implement these principles consistently, we get results. Driving our EDLP-EDLC business philosophy into our markets remained a key priority. Where we're doing it well, we're winning. For example, EDLP has progressed well in Brazil. And from a trend perspective, comp sales are better, and we leveraged operating expenses this quarter. Regardless of the market, customers want great merchandise at great prices. When we deliver that combination, we increase sales. In our Builders Warehouse format in South Africa, we recently launched a Great Value battery. As you know, Great Value is an important Walmart brand, and this battery retails for 35% less than the average national brand, and sales are…

Thanks, Doug. Sam's Club had another very impressive quarter. We grew the top line, delivered positive comps and most important, grew operating income faster than sales. We continue to deliver steady traffic to the clubs. We believe that the improvements in our quality and overall merchandise offerings are key to driving these results. In fact, member engagement scores continue to achieve record levels. We're also investing in price to deliver greater value on top of these quality improvements. Comp sales, without fuel, were up 4.2% for the 13-week period. Comp traffic and ticket for the 13-week period were up by 1.8% and 2.4%, respectively. This is on top of a 5% increase in the comparable period last year, indicating very strong member response to our business. Both Business and Advantage members helped drive increases in traffic and ticket. Net sales, including fuel, were $14.2 billion, a 3.8% increase over last year's second quarter. Fuel prices in the second quarter were down 5.6% compared to last year, and gallons sold were up 3.9%, thus creating a drag on overall comp sales of 0.8%. Gross profit rate was up 23 basis points. Operating expenses as a percentage of net sales increased only 2 basis points, and operating income increased 10.1% to $535.8 million. Although fuel is an important traffic driver for the clubs, volatility in fuel prices can have a notable impact on our financial results. Therefore, the remainder of our discussion today is focused on our core business and excludes fuel for comparative purposes, unless otherwise noted. Net sales were $12.5 billion, up 4.6% from last year. All geographic regions posted good comp performance, but the north division led sales performance for the quarter. This is the result of an intense focus by our operations team on improving the member shopping…

Thanks, Roz. As Mike said, sales and earnings were strong in the second quarter, and our associate morale continues to be strong as well. Customers and shareholders alike are seeing greater value from Walmart. Heading into the second half of the year, we feel very good about our momentum, especially in our Walmart U.S. business. Last quarter, I shared with you 4 key operating goals for having a successful year. Let me review each of these goals. The first goal, Walmart U.S. must continue its momentum. Walmart U.S. is delivering a broad assortment at the lowest price, and you heard today that customers continue to respond well. With the right mix of local relevance in every store, the breadth of assortment allows us to take better care of our customers. We have now delivered positive comp sales for 4 consecutive quarters. Our marketing is reinforcing our strong price positioning, and we believe this places us in a great position for the third and fourth quarters. Second goal, Sam's Club must continue the success it has experienced over the last several quarters. Sam's continues to deliver solid comp growth on top of last year's strong performance. Members are seeing greater quality, and we're providing superior value for the membership fee. Technology applications and operational initiatives, like self-checkout, are adding to an improved shopping experience. Third goal, we must improve profits and returns in Walmart International, especially for Brazil and China. Internationally, our more mature markets continue to generate the majority of our revenue and profit growth. We have seen the U.K., Mexico and Canada markets provide a solid growth foundation, and we expect that will continue through the rest of this year. We've shared that we still have challenges in Brazil and China, and results won't be quick. But with the…