Welcome to the Walmart Earnings Call for the Third Quarter of Fiscal Year 2013. The date of this call is November 15, 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, assumption, based on, estimate, expect, expects, forecast, goal, guidance, is expected, may experience, plan, projected, to be, to be completed, to deliver, to open, to range, to reduce, will continue, will do, will experience, will generate, will be, will be completed, will continue, will contribute, will drive, will help, will impact, will kick-start, will put, will recognize 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 in this call include statements relating to management's forecasts for Walmart's diluted earnings per share from continuing operations attributable to Walmart for the quarter and the year ending January 31, 2013, for the comparable store sales of the Walmart U.S. operating segment and the comparable club sales excluding fuel of the Sam's Club operating segment for the 13-week period ending January 25, 2013, the range for Walmart's effective tax rate for fiscal 2013 and the possibility of quarterly fluctuations in such rate, Walmart's capital expenditures for fiscal 2013 and…

Hello, this is Carol Schumacher, Vice President of Investor Relations for Wal-Mart Stores, Inc. Thanks for joining us today for our earnings call to review the third quarter of fiscal 2013. All information for this quarter, including our unit counts, square footage and financial metrics, is available on our website, new address, stock.walmart.com. Please note that while we update unit counts on a monthly basis on our website, in the earnings discussion today, units 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 cover the operating segments: first, Bill Simon, President and CEO of Walmart U.S.; followed by Doug McMillon, President and CEO of Walmart International; and Rosalind Brewer, President and CEO of Sam's Club. We'll close the call with our CFO, Charles Holley. He'll cover growth, leverage and returns, as well as provide our outlook for the remainder of the year. A number of you have asked about the potential impact of a 53-week year on our business. Let me remind you that unlike other retailers whose fiscal year coincides with a retail calendar, Walmart's fiscal year ends always on January 31. Walmart only reports comp store sales on a 4-5-4 basis for the U.S. segments. During last year's Q4 call, we stated that we would report fiscal 2013 comp store sales on a 53-week basis with 4-5-5 reporting for Q4. But to align with our company's internal operating…

Thanks, Carol. Good morning, everyone. We're very pleased with our financial performance for the third quarter and the dedication and hard work of our associates serving Walmart customers and communities around the world. Earnings per share were $1.08, which represents an 11.3% increase over the third quarter last year. At our October Analyst Meeting, you heard me talk about our disciplined approach to operating the business, the productivity loop and making investments. That discipline enabled the company to deliver really good profitability and expense leverage in a quarter of continued economic uncertainty for our customers. Here are some of the highlights for the quarter. Net sales were $113.2 billion, a 3.4% increase over last year. On a constant currency basis, net sales would have been almost $115 billion, an increase of roughly 5%. Consolidated operating income was up 4% from last year, again growing faster than sales. Return on investment was 18% and among the best in the retail industry. These results are a credit to the operating segments that drive our bottom line performance. So now I'll get into their key takeaways. Walmart U.S. posted a comp sales increase of 1.5% and delivered approximately $2.3 billion in net sales growth. Back-to-school activities drove sales early in the quarter, and the mid-September launch of layaway was important in helping customers. Operating income outpaced net sales growth for the quarter and was a key driver of our overall company profit. Bill and his team are executing very innovative plans to drive traffic and to help America's families have a great holiday season. That's what our customers expect, and we will deliver. We announced our extended Black Friday program, and customers are already working on their shopping list. Price will continue to be a major factor for customers over the holidays. Our…

Thank you, Mike. As Mike just mentioned, Walmart reported EPS of $1.08, which was within our guidance of $1.04 to $1.09 and compared to $0.97 last year. While the current quarter benefited from a 31.3% effective tax rate, this benefit was substantially offset by approximately $105 million in pretax charges, which are included in operating expenses. More specifically, they are an approximate $69 million for charges in estimated contingent liabilities related to employment claims in Brazil and an approximate $36 million for damages from superstorm Sandy, mainly in our Walmart U.S. business. Now let's cover the details on the third quarter's consolidated results. Net sales increased 3.4% or $3.7 billion to $113.2 billion for the third quarter. Our net sales included a negative impact from currency exchange rate fluctuations of approximately $1.7 billion. Therefore, on a constant currency basis, net sales would have increased 4.9% to $114.9 billion. Total U.S. comp sales, without fuel, were 1.7% for the 13-week period ended October 26. In a few minutes, Bill and Roz will discuss the comp performance for Walmart U.S. and Sam's Club. Membership and other income grew 2.1% compared to third quarter of last year. Therefore, the combination of net sales and membership and other income, which we refer to as total revenue, was $113.9 billion, up 3.4% from $110.2 billion last year. Consolidated gross profit rate was 24.5%, a 13-basis point reduction compared to the same time last year. You will hear more from our segment CEOs regarding their price investment in just a few moments. Now let's move our attention to leverage. We have 2 stated goals with respect to leverage: first, to grow operating expenses at a rate less than net sales growth; and second, to grow operating income at a rate greater than the net sales growth.…

Thank you, Jeff. Let me start by saying how pleased I am with the performance of our U.S. business. We've aligned the business around an effective strategy fueled by the productivity loop, and we continue to produce consistent financial results. During the quarter, we again delivered solid sales across the business. Comp sales increased 1.5% as we lapped a positive 1.3% comp last year. Year-to-date, we delivered almost $4 billion in comp sales growth. The earlier launch of our expanded layaway program generated approximately $300 million in additional third quarter volume versus last year, most of which we will recognize in the fourth quarter when the customers pay for and pick up the merchandise. With average fuel prices up approximately 6% versus this time last year, some customers are consolidating their shopping trips. Traffic was up approximately 0.1%, but we were particularly encouraged by the 1.4% lift in ticket given the continued downward inflationary trends in some food and electronics categories. We're also encouraged by the continued increases in market share across food, consumables and over the counter combined, with overall third quarter share in these categories increasing 50 basis points versus last year, according to Nielsen. We had positive comps across all geographies and store formats. During the quarter, we focused on being the destination for back-to-school and Halloween shopping. Our merchants and operators developed a strong cross-functional plan, and I'm pleased with our execution and the sales growth achieved this year. As a reminder, a slightly larger portion of Halloween sales versus last year will fall into the fourth quarter comp period given how the 4-5-4 calendar falls this year. Similar to other retailers, we were impacted by superstorm Sandy. We recognized approximately $35 million of expenses related to inventory damage, cleanup and other miscellaneous items. Our dedicated…

Thank you, Bill. Walmart International had solid results for the third quarter. In some markets, we faced a more challenging economic environment than in the first half of the year. But with the exception of China, we grew share everywhere we operate. I'm proud of the good work our associates are doing to drive those results. They're managing costs and doing what is necessary to deliver value to our customers, and it's as clear as ever that they need it. For the International segment, net sales were $33.2 billion, up 2.4% over last year's third quarter. We're now reporting the results of Massmart and our purchase of the Netto stores in the U.K. in our comparative results. Currency exchange rate fluctuations decreased sales by approximately $1.7 billion. Operating expenses were up 3%, and we would have leveraged operating expenses without the expense for the estimated contingent liabilities relating to employment claims in Brazil that Jeff mentioned earlier. Operating income was $1.5 billion, up 4.8% compared to the third quarter of last year and grew faster than sales. Currency exchange rate fluctuations decreased operating income by $29 million. Let me go through the numbers on a constant currency basis. First, third quarter net sales would have been up 7.6% to $34.8 billion. Our Latin American markets made the strongest contribution to our net sales growth with all countries in the region delivering positive comp sales. Overall, third quarter comp store sales increased in 4 of our 6 largest markets. In general, we're delivering healthy average ticket increases, but comparable store traffic remains a concern and it declined in the third quarter in our major markets. We're focused on improving our customer communications in all of our markets, but we're especially focused on the markets where consumer spending is under the most…

Thanks, Doug. Sam's Club third quarter net sales and operating income continued to grow. Strategic price investments, the membership pilot in Texas and holiday preparation led the focus for the quarter. Seven new clubs opened, the most since the fourth quarter in fiscal year 2006. Comp sales without fuel were up 2.7% for the 13-week period. This was achieved on top of a very healthy 5.7% comp sales increase last year. Comp traffic was up 1.5%, and ticket was up 1.2%. Although we are pleased with the positive results, we are disappointed that comp sales were below our guidance. This miss was driven by several factors. The combination of inflation and deflation across multiple categories affected comp sales. Inflation in some categories led members to trade down. Deflation in other categories came faster and deeper late in the quarter with October being the lowest inflation we have seen in some time. Finally, our business members continue to experience economic pressure and uncertainty, which led to slower growth in business member traffic. We anticipate this softening could remain a headwind in the fourth quarter. This quarter, we accelerated price investments in traffic-driving categories, which led to strong unit growth. Because of timing of these price investments, we expect them to have a greater impact on our fourth quarter margin rate than they did in the third quarter. In October, we announced the introduction of our new membership benefit and fee pilot program to all Texas clubs, which account for approximately 12% of our club base. The pilot includes a fee increase, our first since 2006 and simplifies our cardholder and fee structure. It also provides instant savings and cash rewards for qualifying purchases. We are encouraged by the member response thus far in Texas. I also mentioned we opened 7 new…

Thanks, Roz. We had a very good third quarter, once again highlighting both the value we offer our customers and the discipline we continue to drive in how we operate. Granted, the economies where we currently operate are still challenging, but our ability to drive productivity and Every Day Low Costs allow us to generate good returns in our businesses. Gross leverage and returns remain our consistent financial priorities. Our strong balance sheet and free cash flow provide flexibility to invest in both growth opportunities and new initiatives like eCommerce. We remain steadfast in our drive to reduce operating expenses as a percentage of sales by at least 100 basis points over the next 5 years. We'll do this by reducing costs and improving productivity to invest in lower prices in Walmart U.S. and Sam's Club and to achieve greater profitability in Walmart International. And last, of course, we strive to deliver strong returns for our shareholders. Let's start with the details on growth. In the third quarter, we added approximately $3.7 billion in net sales. This growth includes a negative impact from currency exchange rate fluctuations of approximately $1.7 billion. On a constant currency basis, our net sales growth would have approached $5.5 billion. Part of that growth came from the nearly 13 million retail square feet that we added for the quarter. Your takeaway should be that despite softness in the global economy, Walmart is still delivering very meaningful growth from a combination of stores and eCommerce. Year-to-date, net sales of $339 billion were 5.4% above last year. We remain on track to deliver consolidated net sales growth of around 5% for the full year. Remember, this includes a negative impact of approximately $5.2 billion from currency exchange rate fluctuations. We will grow through a variety of formats…