Walmart Inc. (WMT) CEO Doug McMillon Hosts 2020 Annual Shareholders’ Meeting (Transcript)

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Walmart Inc. (NYSE:WMT) 2020 Annual Shareholders’ Meeting June 3, 2020 11:30 AM ET

Company Participants

Greg Penner – Chairman

Cesar Conde – Chairman of NBC Universal Telemundo Enterprises and NBC Universal

Conrad McCarran – Senior Vice President, As You Sow

Tim Flynn – Retired Chairman and CEO, KPMG

Sarah Friar – CEO, Nextdoor Inc

Carla Harris – Vice Chair, Wealth Management and Head of Multicultural Client Strategy

Tom Horton – Partner, Global Infrastructure Partners; and retired Chairman, American Airlines

Marissa Mayer – Co-founder, Lumi Labs Inc.; and Former President and CEO, Yahoo! Inc

Doug McMillon – President and CEO, Walmart

Steve Reinemund – Managing Partner, Highline Group

Rob Walton – Retired Chairman, Walmart

Steuart Walton – Founder and Chair, RZC Investments

Rachel Brand – Corporate Secretary

Christy Sees – Rafael Living Trust

Cynthia Murray – Walmart Shareholder, Memeber of United for Respect

Carolyn Davis – United for Respect

Kary Bruner – Senior Director of Investor Relations

Brett Biggs – CFO

Dacona Smith – EVP, Chief Operating Officer of Walmart U.S.

Donna Morris – Chief People Officer

Kathleen McLaughlin – Chief Sustainability Officer

Dan Bartlett – Executive Vice President of Corporate Affairs

Operator

Hello and welcome to the Annual Shareholders’ Meeting of Walmart’s Inc. Please note that the meeting is being recorded. There will be a general question-and-answer session after the formal meeting adjourns. You can submit a question at any time by clicking on the Submit question button on your screen. Walmart would like to remind you that some of the comments today may contain forward-looking statements. Additional information about this is included among the meeting materials available on your screen.

It is now my pleasure to turn the meeting over to Greg Penner, Chairman of the Board of Directors of Walmart. Mr. Panner, I now turn the meeting over to you.

Greg Penner

Thank you and good morning everyone. It’s my honor as Chair of the Walmart Board of Directors to welcome you and formally open our 50th Annual Shareholders Meeting. Although a virtual meeting isn’t how we envisioned holding our 50th Shareholders Meeting, I’m proud of who we are and what we’ve accomplished as a company over the past 50 years. Obviously, we’re meeting under extraordinary circumstances. There’s the pandemic which we have been responding and adapting to for the past months, but also we’re meeting under the shadow being cast by the violence of racism which is tearing at our country.

We mourn the senseless death of George Floyd and our hearts are with his family. Unfortunately, and tragically, his death is just one of far too many instances of injustice. We also stand with our associates and communities. We share your deep sense of frustration and pain. We know we have a role to play in helping create a more just and fair country and to ensuring that we uphold and strengthen our commitment to diversity and inclusion within our company. And I know these sentiments are shared by all the members of our Board of Directors, who have joined our virtual meeting.

Also joining online are representatives from Ernst & Young Walmart’s independent accountants. Inspectors of Election today are from Broadridge Financial Solutions. Based on their report, a majority of the shareholders entitled to participate in the meeting are represented online. We have a quorum and may proceed with a business portion of the meeting. Therefore our meeting is officially called the order.

It is now 10:35 a.m. The polls are open and will close after the presentation of the last shareholder proposal. Only shareholders who held shares as of the record date for this meeting are entitle to vote shares. If you’ve already voted your shares, there is no need to vote again unless you wish to change your vote. If you would like to vote your shares or change your vote, you may do so while the polls are open by following the instructions on your screen.

Now, I’d like to acknowledge the 11 director nominees, including myself who were up for reelection this year. They are Cesar Conde, Tim Flynn, Sarah Friar, Carla Harris, Tom Horton, Marissa Mayer, Doug McMillon, Steve Reinemund, Rob Walton and Steuart Walton. Thank you all for your willingness to continue to serve our company.

Next, I’ve asked Walmart President and CEO, Doug McMillon, to share an update on the Company’s priorities during this unusual year. Then I’ve asked Rachel Brand our Corporate Secretary to take us through the formal business portion of the meeting. Doug?

Doug McMillon

Thank you, Greg. Good morning everyone and thanks for your interest in our company. As you would know, we’ve been operating in a difficult and volatile environment. We’re proud of our associates for how they’ve responded. Most of my comments will be related to how we’ve been navigating the global health and economic crises, but I want to start by speaking to what we’re all currently experiencing here in the U.S.

The killing of George Floyd is tragic, painful, and unacceptable. It’s important that we all understand that our problems as a nation run much deeper than one horrible event. The pain we’re feeling reminds us of the need to support each other and come together until we as a nation confront and address these hard realities, we will never achieve the best of what we can be.

Walmart is an inclusive company that is fundamental to our values and culture. We remain committed, committed to these principles. We’re motivated to continue our work related to diversity and inclusion inside our company, and defining ways to influence the various systems that exist in our country in a more impactful, positive, and inclusive way.

With an ever given the disruption and volatility we and the rest of the world are facing, we’ve learned that it’s critical to keep our purpose and values top of mind because they serve as guideposts to help us navigate the health and economic crises as successfully as possible. We developed a set of five priorities to guide our decision making since the crisis began, and I’ll use them to frame the rest of my comments.

They are. One, support our associates that are serving on the front line. Two, serve our customers that need access to food and critical supplies. Three, help others including the communities we serve, new associates looking for work. The suppliers we partner with, those who lease space in our stores, plus the work of federal state and local governments. Four, manage the short-term well, operationally and financially, including our cash position and inventory level. And five, drive our strategy forward even as we navigate a crisis.

First, our associates, they have been flat out amazing. So, our first priority has been supporting them in every country where we operate their physical safety, financial health and emotional wellbeing have been at the top of our list, in the U.S. we’ve done that by providing extra pay and benefits, including two special cash bonuses, to all hourly associates and assistant managers and our stores, Sam’s clubs, distribution, and fulfillment centers.

We’ve done similar things in our international markets to support and reward associates. From an operational standpoint, we reduced store hours to allow for additional cleaning and sanitizing, implemented protocols for temperature checks and installed these guards at pharmacies and checkouts. Also all associates are required to wear face coverings, which we’ve provided to them.

We’ve hired more than 300 associates in the U.S., the majority on a temporary basis to help relieve some of the burden faced by our current associates in stores and supply chain facilities, as well as to help provide opportunities for people who’ve been displaced from their previous jobs. We’ve also implemented a number of benefits to support associate health and wellbeing, and we’re pursuing strategies for testing associates for the virus, including in the longer-term antibody testing.

Of course, COVID-19 has affected many communities and our people. We felt the impact of this awful virus within our Walmart family and we mourn the loss of some of our own. Our hearts go out to their families. After supporting our associates, our next priority is serving customers. This has meant adjusting to rapidly changing demands. When the crisis first hit, we saw sales shift heavily toward food and consumables, as we had previously experienced in China.

This was followed by a do-it-yourself phase related to home projects, entertaining and educating. We saw a third phase begun influenced by stimulus dollars, call it release spending. Year sales increased in categories such as apparel, televisions, video games, sporting goods and toys. Our supply chain is among the most capable in the world, but in this environment, we’ve stretched it. We’re working intensely to recover in stock position.

The third priority for us has been to help others. This has included taking steps to support suppliers in some instances with greater flexibility with delivery windows and financing. For our in-store tenants, we waived or discounted rent through April in May. It’s also meant supporting community organizations that serve as a social safety net. Through the Company and foundation, we’ve given more than $35 million to COVID-19 relief and response initiatives.

Finally, we’re collaborating with federal and state governments. As of today, we’ve opened 187 COVID-19 testing sites in 31 states. We’ve worked with our apparel suppliers to produce PPE for healthcare workers. This has led to the delivery of 10 million additional medical gowns so far with 81 million scheduled for delivery through the end of June with the help of McKesson.

As we’ve supported associates and serve customers and communities, we’ve also been able to effectively manage the business and continue to make progress against our long-term strategy. Before this crisis, we were already seeing robust adoption of online pickup and delivery, as this crisis created the need for social distancing and required people to stay-at-home. Customers embrace the pickup and delivery even more.

In the U.S., we quickly rolled out ship from store to temporarily meet the surge in orders placed on walmart.com. We also launched Express Delivery to provide customers the convenience of having their orders delivered to their door in under two hours. Express Delivery is available from nearly a 1,000 stores today and our goal is to be in around 2,000 by the end of June.

At Sam’s Club, the value of the membership has never been more evident, and we’ve seen strong growth with samsclub.com as we’ve seen with walmart.com. Our 26 international countries are experiencing different impacts and timing, as it relates to COVID-19. I’m really proud of the work we’ve done around the world to serve our customers during this time.

I want to close where I began by thanking our associates. We’re more grateful to them than I can articulate. The effect this virus has having around the world has made it clear that we all need to do everything we can to help each other and our communities get through this. At Walmart, we’re blessed to have a unique set of assets and a strong business to put us in a good position to support our associates and serve our customers, communities and shareholders. I wish you and your families could help and thanks again for your interest in Walmart.

Now, please allow me to turn it over to Rachel Brand, our Executive Vice President of Global Governance. She’ll take us through the presentation of the proposals.

Rachel Brand

Thank you, Doug. We’ll conduct this virtual meeting in the same order we’ve conducted our in-person shareholders’ meetings in the past. We will address formal business first moving into a Q&A session after the meeting adjourns. The rules of conduct for the meeting are available on the virtual meeting site. Under those rules, each person presenting a shareholder proposal will have three minutes to present it. The time will be played when there are 30 seconds remaining and another time when there are 10 seconds remaining.

There are eight matters to be brought before the meeting today. Only these eight items is properly presented will be voted on. The first four items are the Company proposals. They appear in the proxy statement as proposals one through four.

The first is the election of 11 directors. Information about each director nominee can be found in the proxy statement.

The second proposal is a non-binding advisory vote to prove the compensation of Walmart’s named executive officers. The vote on this proposal is advisory, but the Board will consider the results in evaluating our executive compensation program.

The third proposal is to ratify the appointment of Ernst &Young as the Company’s independent accountants for the fiscal year ending January 31, 2021.

The fourth proposal is to amend the ASDA Sharesave Plan 2000 by increasing the number of shares available for issuance under that plan.

Now, we will move on to the shareholder proposals. The Company’s response to each one can be found in the proxy statement. I’ll recognize each presenter when it is his or her turn to speak for three minutes.

The first shareholder proposal appeared as #5 in the proxy statement. It was submitted by BWB Investors and as our co-filers. Conrad McCarran will present it on behalf of the shareholder proponents. Operator is Mr. McCarran on the line?

Operator

Yes.

Rachel Brand

Thank you, Mr. McCarran, you have three minutes.

Conrad McCarran

Thank you and good morning. I’m Conrad McCarran, Senior Vice President of As You Sow, which filed proposal #5 on the proxy statement today, which asked the Company to issue a report assessing the environmental impacts of continuing to use single use plastic shopping bags.

Walmart distributes an estimated 18 billion to 20 billion single use plastics carryout shopping bags per year which contribute to plastic pollution. About 1 trillion single use plastic bags are used annually across the globe for about 2 million distributed every minute. Plastic bags are a major component of the global plastic pollution crisis. Every year, Americans reportedly throw away 100 billion plastic grocery bags most used for only a very short time.

Only an estimated 1% to 3% of these plastic bags are recycled, which means that the rest are either landfills burned or escaped into the environment. It’s estimated that about 100,000 marine animals are killed by plastic bags every year they end up in the ocean. Further plastic bags can take 1,000 years to break down in a landfill and are among the top 10 most commonly collected plastic materials in the Ocean Conservancy’s annual International coastal cleanup.

For many years, our competitors including Costco, Trader Joe’s and Whole Foods have not distributed plastic shopping bags. Competitor Kroger has agreed to ban plastic shopping bags by 2025. Kroger CEO, Rodney McMillan has commented, “The plastic shopping bag days are numbered. Our customers have told us it makes no sense to have so much plastic only to be used once before being discarded and they’re exactly right.”

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We believe that Walmart failure to match its peers and fully phased out plastic bags poses reputational on financial risks because of the potential contradicts Walmart’s public positioning on sustainability. The Company’s public communications, statements and advertising clearly emphasize environmental sustainability and social responsibility and acknowledge the need for reduction of plastic bags distribution.

Walmart management has failed to provide evidence to shareholders that it has adequately studied the financial and reputational risks of continuing to use plastic shopping bags. This proposal merits shareholder support to send a message to management that a stronger response is warranted. Shareholders would receive benefit from a more detailed discussion of the Company’s awareness of and plans to deal with the environmental threat.

Rachel Brand

Mr. McCarran, your time is expired. Please conclude.

Conrad McCarran

Posed by continued distribution of these bags therefore we respectfully ask for your support on proposal #5. Thank you.

Rachel Brand

Thank you, Mr. McKesson. We appreciate your viewpoint. The Board recommends the vote against this particular proposal for the reasons explained in the proxy statement. The next proposal appeared as #6 in the proxy statement. It was submitted by The Rafael Living Trust and other co-filers. Christy Sees will present on behalf of the shareholder proponents. Operator, is Mr. Sees on the line?

Operator

Yes.

Rachel Brand

Thank you. Ms. Fees, you have three minutes.

Christy Sees

Thank you. Good morning. My name is Christy Sees and I would like to thank you for the opportunity today to move shareholder proposal #6. I want to of course recognize that our attention today is focused on the pandemic of racism in our country. And these past months, we’ve all been focused on the COVID-19 pandemics threatening many lives and livelihoods around the world, where really living in a historic moment in American history.

Our shareholder proposal requests for Walmart’s due diligence in preventing a future global health crisis of our own making, the growing threat of antibiotic resistance. The current pandemic eliminates the need to act to reduce or avoid threats before they result in significant loss of life and economic disruption.

Antibiotics are the foundation of human medicine and they are losing their effectiveness. Scientists estimate that by 2050 antibiotic resistance could cause 300 million premature deaths and up to $100 trillion in global economic damage, if no action is taken to protect these medicines. And one of the biggest causes of antibiotic resistance is the overuse of antibiotics and food animals.

Walmart has an immense impact on the way food products are grown and raised as one of the largest purchasers of meat products in the country. Currently, the Company allows us suppliers to administer antibiotics important to human medicine to farm animals a practice that fuels the spread of antibiotic resistant superbugs. In fact, the last fall, consumer advocates reported binding superbugs in samples of pork purchased at Walmart stores.

Reputational damage and litigation from such reports is a clear threat to our company, but even more importantly, this is an incredible risk to public health. Walmart currently asks its meat and poultry suppliers to report on the use of antibiotics on farms. Our proposal asks the Company to then investigate this data and provide strategies for how the Company might act to reduce its risks related to antibiotic resistance.

The Board’s opposition statement rightfully points out that antibiotic use and food animals is a very complex issue among those complexities, as the current regulations which allow use of antibiotics and healthy animals that are “at risk”. Well, on the surface that sounds logical, the term at risk is often interpreted to include animals that are raised in poor unsanitary conditions. And in fact, instead of cleaning up those conditions, farms are permitted to use critically important antibiotics to prevent sickness in animals.

If Walmart is truly committed to changing systems for the better protecting its business and its consumers, it will benefit the Company to assess which suppliers are using such poor practices and shift its purchasing accordingly. This responsive action would reflect and implement the Company’s real priority to preserve antibiotic effectiveness and thereby reduce risk for the Company’s shareholders. Thank you for your time.

Rachel Brand

Thank you, Ms. Sees. We appreciate your views. The Board recommends a vote against this proposal for the reasons explained in the proxy statements.

The next proposal appeared as #7 in the proxy statement. It was submitted by Cynthia Murray. Operator, is Ms. Murray on the line?

Operator

Yes.

Christy Sees

Thank you. Ms. Murray, you have three minutes.

Cynthia Murray

Good morning. And thank you. My name is Cynthia Murray. I’m a Walmart shareholder and Associates for 19 years and a member of United for Respect. I’m a proponent of proposal seven, which urges the Board to adopt the policy to include army associates on the list of director candidates. The coronavirus creates huge risk at Walmart. We keep seeing outbreaks connected to Walmart stores in the news and thousands of Walmont workers have tested positive for the disease.

And these 22 people who worked at Walmart have died. Walmart’s delays, failures, and inconsistencies have exposed a serious disconnect between board oversight and what’s needed in the stores. Our experience serving our customers, keeping stores open and leading safer efforts show how valuable it would be to Walmart to have associates in the Boardroom. With coronavirus, it’s like Black Friday in my store. Even though, there are policies on customers limits, there’s no enforcement inside the store.

I will be 67 this month and have asthma. My husband and son are both at high risk. I took two leaves of absence after my daughter reminded me that my job shouldn’t put my life at risk, came back to work at Walmart to find that my store now has its four new manager in a year, raising serious concerns about consistency. It’s not just my store. We surveyed over 1,500 associate’s weeks after Walmart announced, they were limiting the number of people in stores, fewer than one in 10 reported. They could always maintain appropriate distancing.

Coronavirus is new, but the failures of Walmart’s responses aren’t new to us. Paid sick leaves is one of the areas where we’ve told management for years that the policy incentivized people to come to work sick. Now, even with the pandemic leave policy, 45% of those surveyed will still likely to come to work, if they don’t feel well, largely due to fear of discipline or being unable to afford to stay home. These and other gaps in Walmart’s responses are life and death for us and for customers and a huge risk to the Company.

Sam Walton said the folks on the front lines, the ones who actually talked to the customer are the only ones who really know what’s going on out there, but don’t make it up the chain. On the Board we could be a balance against short term thinking and risky corporate behavior. Every day Walmart army associates show our commitment to the longterm success of the Company. We need a seat on the Board for ourselves, our families, our communities, and shareholders. I urge shareholders to vote, yes on proposal seven. Thank you.

Rachel Brand

Thank you. Thank you, Ms. Murray, we appreciate your views. As Doug mentioned, some of the many actions to prioritize the safety of associates and customers that the Company has taken and more sensitive information about this including actions taken regarding safety, pay and benefits can be found on the corporate website. The Board recommends a vote against a particular proposal you made for the reasons explained in the proxy statement. We’ll now move on to the final proposal, which appeared as #8 in the proxy statement.

Carolyn Davis will present it on behalf of organization United for Respect. Ms. Davis prerecorded her presentation, which we will now play.

Carolyn Davis

Shareholders of Walmart Inc. Walmart urge the Board of Directors to strengthen Walmart’s prevention of workplace sexual harassment by formalizing the Board’s oversight responsibility, aligning senior executive compensation incentives, reviewing and necessary overseeing a revision of company policies and reporting to shareholders by December 31, 2020, where actions taken admitting confidential and priority information.

My name is Cat Davis. I worked at Walmart for 12 years. I am a member of United for Respect. I was a victim of sexual harassment at Walmart some years ago. We had an assistant manager who was very flirtatious and open about his sexual advances towards women. My colleagues discussed he was making sexual advances regularly.

One day while I was working, he approached me with his credit card in your hand. I asked him, why are you handing me your credit card? He said, you can take it and buy whatever you want clothes, nails, other things that he thought women were more interested in. I thought it was a joke. He told me to take the card and go on a spending spree, but in return I had to check into a hotel in my name. So, he can meet me there after he got off work.

I didn’t accept his offer, but he did repeat himself and I said no. He seems surprised that I had turned down the offer, which made me wonder how many times he had made this offer at Walmart. I am reporting this to you now from the first time. I didn’t report it before because no one has stopped him before. I assumed that my voice would not make a difference.

At some point another associate there reported him, and instead of being fired, he was transferred to another store about 30 minutes away. He was terminated eventually, but it took too long for Walmart to take the complaint seriously. As a member of United for Respect, I am committed to approach for thousands of stores and have heard stories about managers, vendors and consumers, who have sexual harassed associates without significant consequence.

Walmart’s harassment policy must be improved and must be apply consistently. We need to ensure when a complaint is filed, Walmart immediately launches an investigation and informs the person who filed the complaint with their findings and any action that Walmart is taken. When a manager or supervisor commits sexual harassment, Walmart should terminate them.

The stories of how I and others were sexually harassed at Walmart do not need to happen. Walmart policies are not following its own policies means that shareholders face a significant risk. Workplace sexual harassments have gotten a major attention from an elected official, the media and policymakers and spurred significant public debate. Additionally, a company whose culture tolerates sexual harassment tends to have higher turnover and less productive employees.

Mr. McMillon, Chairman Penner, if our associates had a voice in our corporate boardrooms we can work together to ensure that all associates are safe. Robust Board oversight is an especially important in Walmart to address ongoing sexual harassment issues. Our shareholders who vote yes on this proposal, as the largest corporate employee of women in the U.S., Walmart can and should be a leader in preventing sexual harassment and hold on wrongdoers accountable. We urge shareholders to vote for this proposal. Thank you.

Rachel Brand

Ms. Davis, thank you for your views and for telling your story. Although, we don’t support your specific proposal, we agree with much of what you said. We do not tolerate sexual harassment in the workplace. Any report of sexual harassment must be taken seriously and investigated and they are. We encourage associates to report misconduct. We investigate those reports and we take action when misconduct is found. Using that process, we will investigate the concerns you’ve raised today. You can find more information about all of this in the proxy statement.

This concludes all the matters presented for shareholder consideration at the meeting. It is now 10:59 a.m. and the polls are closed. Based on the initial reports from the inspectors of election, the preliminary voting results are as follows. Each director nominee has been reelected by a majority of the votes cast. Each of the other company proposals has passed, and each shareholder proposal has failed to receive a majority of the votes cast.

The preliminary voting results will be announced in a press release later today and the official results will be disclosed in the filing with the SEC. The 2020 Annual Shareholders Meeting is now formally adjourned. We will not pause briefly before moving into a Q&A session moderated by Kary Bruner, Senior Director of Investor Relations.

Kary Bruner

Good morning. I’m Kerry Bruner, Senior Director of Investor Relations. We will now take the next 30 minutes to respond to questions submitted through the virtual meeting platform. We will answer as many questions as we can in the remaining time. Relevant questions that could not be answered due to time constraints, the Company will provide responses on the Investor Relations section of our corporate website as soon as possible. Essentially similar questions will be grouped together and responded to collectively.

Question-and-Answer Session

A – Kary Bruner

The first questionis while we recognize that Walmart has taken many steps to protect workers, customers and investors from adverse impacts related to COVID-19, given reports of ongoing workforce and operational issues at Walmart facilities. Is the Board of directors tracking and able to disclose the following performance metrics to illustrate the effectiveness of its broader response strategy, including days loss due to COVID related illnesses, workforce turnover rate, changes in workforce productivity, changes in workforce compensations incentive and employee engagement and morale. Doug?

Doug McMillon

Thanks for the question and happy to respond. The answer is yes, we have been keeping the Board up to speed routinely through video conferences, written messages, and individual conversations. And we’ve shared metrics for how to describe this quantitatively as well as qualitatively.

As you may know, we’ve done a number of different things including trying to create an environment where associates that shouldn’t come to work, don’t whether they feel uncomfortable, might not be feeling well have a pre-existing condition. We created a three tiered leave policy. And we’re happy to report that since it’s been established more than 270,000 associates have access that leave policy and taking advantage of it.

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That gives us some confidence that it’s been effective that it’s so important that those that are uncomfortable don’t come to work. As you also know, we’ve been hiring people to help, get the work done fill in those gaps, and we’re pleased to have had the opportunity to hire more than 300,000 people since the middle of March to work in Walmart U.S. to help cover for those that have taken leaves or have called in.

Our calling rates, by the way, have been fairly consistent during the crisis. And that’s one of the metrics that we’ve been sharing with the Board. In addition to the leave policy, I think you’re aware of the many operational changes that we’ve made is the use of we’re making PPE, the steps we’ve taken to increase social distancing. That includes things like closing earlier so that we can clean, having associates answer a series of questions, taking their temperature, providing masks.

We’ve shipped during the crisis to the U.S. alone with 110 million masks to our associates and stores, clubs, distribution centers, fulfillment centers. And you’ve probably noticed we’re using plexiglass in different parts of the store, making hand-sanitizer available. As it relates to social distancing, limiting the number of customers coming into the store has been an important step, but we’ve also done things like put one way arrows down on the floor to encourage customers to avoid each other as they’re going down the aisle.

In addition, we’ve created some extra pay and benefits to appreciate those associates, whether they called in or whether they came to work. We’ve announced two special cash bonuses that totaled approximately $755 million. In our fulfillment centers, we increased our temporary pay by $2 an hour. We also pulled forward our first quarter MyShare bonus, which helped get cash in the hands of our associates early in the crisis, and we got a lot of good feedback from them as it relates to that.

They’ve just done an incredible job. And as you heard me say earlier, we created these five priorities to remind us all each day what it is we were trying to do. And the first party on our list was to support our associates on the front line. Nothing happens if they’re not supportive, and they’re not pleased with how the Company is taking care of them. And a number of us have been going to visit tours, clubs, distribution centers, e-commerce fulfillment centers around the country during the crisis.

I’ve been there quite a few states myself and have visited a lot of our associates and ask repeatedly on those visits, what more do, what can, what more can we do to support them. And, as the thing was, starting in the beginning, we were getting really good ideas from our associates as it relates to what we could do. And as far as I can remember, we implemented all of those.

And as of late, for more than a month now, folks have had a hard time coming up with additional things that we can do. But if we come across any more ideas to help keep them safe, we’ll certainly consider those and most likely do them. So, as it relates to granular data, you can follow up with a team if we didn’t sufficiently answer all of your questions, but I hope we did.

Kary Bruner

The next question is, what effects has the pandemic had on Walmart from an earnings perspective and in regards to our feature business model? Brett Biggs, our CFO, will take that.

Brett Biggs

Thanks for the question. As probably most of you know, we released earnings a couple of weeks ago, and we described the quarter as really several quarters within a quarter, and as Doug mentioned, we had initial stock up. And then stimulus dollars came out in the middle of part of April and we had another acceleration of sales. And when you look at the mix shift that we had between e-commerce in our stores, that is something that we think will accelerate going into the future.

So our e-commerce business will become even more important than it has in the past. We also had additional costs. We had about $900 million in additional costs in the quarter, some of those will be more permanent, like cleaning and sanitation, but about three fourths of those costs are what Doug alluded to a minute ago around associate bonuses and pulling forward bonuses and things that we did for our associates, which we’re very happy to be able to do that.

The strategy that we’ve been implementing around omni-channel is the right strategy. And I think this period of time has shown that to us even more, I think to our investors and our customers as well that we’re there for them, no matter how they want to shop or their stores versus pickup or delivery e-commerce, we have the ability to do that. And when you combine that with the greatest format, and the great prices that we’ve always been known for, it’s a strategy that we believe is very, very important and very, very viable for the future.

Doug McMillon

I’d just add that, we had this strategy for a while now and a vision for our future business model, which results in a flywheel and the experience over the last few months has really accelerated that and increase our conviction that we’ve got the right plan, and thankful to have the assets to put together to bring it to life, not only in the U.S. but around the world. And we are seeing customer behavior, across countries exhibit some consistency.

People still want to shop in stores and clubs. And it’s great that we’ve got a bunch of them. And they also want to shop on their app online and in the future want to shop in even more ways. And what we’ll do is just keep building new products and making them available to customers in a way that that we can be there in a way they want us to be.

And then have a supply chain behind it, which includes the usage of stores to be able to fulfill those orders in the way that they expect, quickly and cost effectively. So I just leave this experience so far, saying it feels like we’re on the right track strategically, it will drive change in our business model, and we were well on our way to make that happen. And now we’ve even filling the more strongly about it.

Kary Bruner

Thank you. The next question, we actually received several questions on online competition. And if there is a second wave in this pandemic, logistics and delivery to customers, how will they be improved? And how do you appraise competition in that last mile delivery? And also, are you applying robotics to better compete with online competition?

Doug McMillon

Kary, that’s a lot of questions. I’ll try to be concise my answer, but it’ll take me a little bit of time to get through all of that. Again, we think our omni-channel strategy is the winning strategy, and it’s great to have the capabilities that we have today. Appreciate the support to be able to make investments in e-commerce as we have. I’ll focus on the U.S. but a lot of what I’m about to say would apply to international as well. Now let me start with the supply chain because we don’t have the product.

We can’t take care of customers, and I’m appreciative of our merchandising team, our replenishment teams around the world and the way that they’ve responded. So the changing demand that Brett just outlined a few minutes ago because the categories were impacted in different ways at different times. And I’ve been doing this almost 30 years now, and I’ve never seen anything like the pressure that our supply chain has been on, but our teams have done a nice job responding, being creative. And they just worked really hard, which leads me to the next group of think which is our suppliers.

Our suppliers have been collaborative, transparent with the situations that they’d been dealing with. We sell a lot of different categories. So, you know, we touch the food categories. You’ve seen the pressure that the meat business has been under, for example, but it’s more than that. We’ve had some stress and kind of shelf stable, dry grocery goods as well. But all the way across the store from food into apparel in general merchandise, there have been pressures there too.

I have not been in stores in a long time and seeing the kind of pressure that our craft and fabric department’s been put under from an in stock point of view. I haven’t seen puzzles sell in a long time like we’ve still been recently. And so being able to predict those things, both us and the suppliers and respond back quickly has been a challenge. But again, the suppliers have done a great job of helping us recover and make that happen both for our e-commerce business, as well as our stores.

So that step, recovers and we improve our in-stock. Then the question becomes, where do we put the inventory based on how customers want to shop and of course we want to improve our in-stocks at store level that’s the number one focus that we have at the moment. But as those of you that follow the Company know we’ve increasingly been supplementing our e-commerce fulfillment with store fulfillment, and we’ve got a great assortment of around 120,000 items in our super centers. And it can be used for pickup experience for customers as well as delivery.

And over the last years, we’ve expanded that pickup business. As we shared before, it’s got a very high net promoter score. Our customers love it. I’ve been out in parking lots the last few weeks. And our associates are especially grateful of the opportunity, even the virus, to be able to pull up in the parking lot and, and get their orders. And that capability being able to pick efficiently in store, which dates back to our UK business, where we started it to begin with an important it over to us and unlocks the ability to deliver.

And we use a variety of delivery capabilities to service the customer’s needs. We have our own independent contractor platform called spark, but we also work with a number of third party providers to cover off our last mile. And that variety of capabilities we think Steve gives us not only some resilience, but also the ability to scale quickly.

And I’ve been impressed with the latest innovation that the team has been able to accomplish. And that’s this Express Delivery opportunity for customers to be able to get an order in less than two hours. And we went through a period of the time during the crisis where we were really suffering from an incident point of view and had to reduce the number of pickup and delivery windows out of the super centers, because our in-stock wasn’t reliable.

That lasted for a few weeks, but the team recovered. And as in stock got better, we opened up more and more slots for pickup and delivery. And then they layered on top of the express capability and scaling and as I mentioned earlier, we got to 1,000 stores and the team’s working quickly to get to 2,000 stores and more. And I think that’s going to be something our customers are going to love in addition to the services that we offer already.

So we’ll keep innovating as it relates to last mile and be competitive in that space. And then Kary, I think the last part of the question was related to robotics. And there are a number of technologies, machine learning artificial intelligence which apply to our demand forecasting ability, but also robotics insides stores, and automation in our distribution centers that we will continue to pursue.

We have a history of doing that the Company’s innovated over time with self distribution and the things that we do in our supply chain, and that will continue. But our business will always be a people business. Now, we have had real significant increase in the number of associates that we’ve had the last few months, we’ve gotten now globally North of 2,350,000 associates. So we’ve seen that number tick up as we’ve hired all these additional associates, including the temporary help.

And I think for a generation of retail to come, we’ll still have a lot of people and a lot of jobs, and those jobs will change. And they need to we’ve got to prepare our associates for the future of work. Our businesses around the world and as countries we need to all continue to drop productivity. But if we do that, we want to bring our people along. We want them to be trained and equipped to be ready for change and understand the new system that we’re trying to build.

So it’s exciting to see that our teams have put in place a number of different pieces of automation, I think we’re still very much in a test and learn phase. In some cases, we’ve scaled things like fast and loaders to help the associates in the backroom manage freight. We do some self scanning these days with a device that roams up and down the aisles. And that’s been helpful as it relates to modular accuracy. And those are just two examples of technology that we’ll put together to bring this higher level of productivity through. But as I mentioned, we’ll do that with our people and bring them along in the process.

Kary Bruner

Thank you, Doug. Brett, you can take the next question. How secure is the dividends and share buybacks?

Brett Biggs

So the Company is an excellent financial position as you would have seen our first quarter results. We held more cash, hold more cash currently, and it’s just a way for us to have more flexibility as we go forward. We have very strong access to the capital markets and our cash flow is very strong. It’s been strong in the past and it was strong again in the first quarter.

As we allocate capital and we make those decisions, the first thing that we always want to do is invest in our business. And you’ve seen us do that, over time through capital expenditures through investments in associates through investors, in our through investments in customer experience. We’re very committed to our dividend we’ve had 47 years straight of increases in that dividend. So I think that demonstrates that fact.

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And then we have a long history as you know, as investors or share buybacks and there’s a number of things that we consider in making that decision over any period of time, but we feel very, very good about the value of the Company.

Kary Bruner

Thank you, Brett. The next question will go to Dacona Smith, who is our Executive Vice President, Chief Operating Officer Walmart U.S. I see some empty shells that are local Walmart. Are these related to disruptions in logistics for example? Chinese factories, ports being closed, How bad are these disruptions to supply chains? And as this improving, what can be done short and long term to prevent? Dacona?

Dacona Smith

Yes, Kary. We are seeing some improvements in big parts of our business. Clearly, there was some disruption, but we’re see in parts and proven as appropriate inside the stores is clearly improvement as well. I would really — to relay to Scott to touch on further on the supply chain disruption, but we can see improvements inside the stores.

Kary Bruner

Great, thank you Dacona. The next question is that appears as though Walmart’s paid COVID-19 related leave is only provided, if there is a mandate from health authorities to quarantine or a confirmed diagnosis. Otherwise, it appears that individuals who believe that they may be exposed must use valuable PTO time to take unpaid leave. Does this policy not result in false choice for Walmart associates, leading them to choose between coming into work while sick, which potentially could infect others or going unpaid, utilizing valuable PTO largely because mass testing is simply still not available? Donna Morris, our Chief People Officer will take that one.

Donna Morris

Thank you. Our first priority since the outbreak of the pandemic has been the overall support of our associates. The COVID policy applies to all of our frontline hourly associates whether they be regular part-time, full-time or temporary. And it has been in place since shortly after the pandemic outbreak in the U.S. I believe the exact date was March 13th.

So, we have in fact been very, very active in encouraging all of our frontline hourly associates, if they’re unwell, feeling unsafe or believe they should not be in the workplace to leverage the leave policy. And as Doug shared earlier, we feel somewhat relieved that our overall associate population has access to leave policy to assure that they can be away from work once again no implications in terms of their attendance or our time-off policies.

Doug McMillon

Just to repeat the cash bonuses that we provided so far went to everyone so that helped. And then having the quarterly bonus not be attached to attendance anymore also ensured that the associates got money through that tool as well.

Kary Bruner

Okay, thank you. The next question is for you, Doug. Is Walmart planning any further global expansion?

Doug McMillon

Our focus right now is on our existing markets. We’ve just got such a great opportunity where we are not only in the U.S., but we’ve got a tremendous business in Mexico and Central America, Canada, big opportunity in India. If you follow the Company closely, you know that we’ve made a large investment there and continue to be excited about our opportunities there. So, we’re positioned with large populations with other characteristics in these markets that cause us to be bullish on their future. So, that’s our focus and don’t have anything else add.

Kary Bruner

Okay, thank you, Doug. Kathleen McLaughlin will take the next question. She’s our Chief Sustainability Officer. As the shareholder proposal was denied, what is Walmart doing internally as a company to address the impact of single use plastic bags? Kathleen?

Kathleen McLaughlin

Thank you very much for the question. We agree that plastic waste is a critical priority to address and we have prioritized that through an initiative to tackle all forms of single use plastics, proper business that includes packaging that includes plastic bags. As it turns out plastic bags make up about 6% of our plastic footprint are considering other forms of packaging across the assortment. So we’re absolutely tackling that as well as everything else. We’re doing a few things.

One, we’re really focused on accelerating elimination of plastics, production of plastic and recyclability across our entire portable facility with suppliers for a core partner of the Ellen MacArthur Foundation, and we have a roadmap working with suppliers across all use cases of plastics, including bags but also clam shells, bottle, films, et cetera.

We’ve also worked closely with systemic that has created a global roadmap of different kinds of plastic and recommending approaches to eliminate waste across different use cases working very closely with us but also fellow members of the consumer goods forum.

We held a summit last fall and issued a plastic packaging playbook that’s now publicly available for all suppliers is up 700 people from something including suppliers as well as industry experts, to accelerate production substitution enhancements and packaging to make your fully recyclable. We’ve committed to recycled content as well as recyclability. And that’s available more information that are available online and our ESG report.

With respect to that specifically, we’ve undertaken two major initiatives. One is working to reduce the use of bags in stores. We’ve made reusable bags prominently available in carousels make them more affordable and promoting they’re used among our customers, and also offering opportunity to recycle bags in stores. We do take a fair number of packs that way. We also of course tie with any regulations and legislation about plastic bags and that actually helps us go faster. It helps to shift consumer behavior.

The second thing we’re doing is piloting approaches to eliminate the use of plastic in our grocery pickup operations, we’ve seen very positive uptake of that we’re excited about what we’re seeing there and encouraged to roll that out. COVID complicates the situation, as many people will know, in terms of the single use packaging and bags and so on, but it’s something we remain very committed to and we’re excited to make progress on it.

I would say stay tuned, we have additional things we’ll be announcing quite shortly around this that are more collaborative efforts, bringing in some other retailers. We think this really is a whole system challenge where we policymakers and retailers to unite in shifting behavior in this system, so stay tuned.

Kary Bruner

Thank you, Kathleen. Our next question is how have you been effective by recent unrest in Walmart’s main operating cities? Doug, you want to take that one?

Doug McMillon

Yes, sure. We have been impacted. As you would guess, in a minority of locations, we’ve had some stores where we’ve had inventory loss and some physical damage, but it’s not very many stores as a percent of total. And the team’s done a really good job of keeping our associates and customers safe. We’ve been pretty aggressive as it relates to closing stores closing stores early. And that’s what we’ll continue to do to the crisis. We’re just focus on associate and customer safety and then recover as needed beyond that.

Kary Bruner

Thank you, Doug. Dan Bartlett, our Executive Vice President of Corporate affairs will take the next question. Will there be any changes to the planning of the new home office based upon the likely change in future way of working with more of a distributed workforce versus a campus based traditional workforce. Dan?

Dan Bartlett

And I appreciate the question and the good thing is we’re at the phase in our planning and architectural design, in which we have plenty of opportunities to get the best practices and learning’s as everybody starts to adapt to the new normal as they say. But also these buildings have not even taken form or shape yet, or, and so we’ve already approached this with a mentality of having maximum flexibility for on the floors in which there will be office space. And so, there will certainly be learning’s that we’ll adapt and implement as a part of this and the design structure and implementation. So the good thing about it is that we’re at a period in this process where we can adopt best practices without disrupting the overall timeframe of the project.

Doug McMillon

As you’ve heard from other businesses, it’s been impressive to see how different parts of the organization can work in different ways. Our technology team, for example, has continued to have tremendous momentum with many of them working from home. And, we’ve announced some changes related to that part of our team, but big picture, I think in a post vaccine world, we’re going to need office space and people are going to collaborate and work together. And so I don’t anticipate significant changes.

As Dan said, we’ve got flexibility in time. Should we learn things that change our minds, but as this crisis has gone on, we’ve noticed things that we’re missing. Just one example would be, it’s hard to onboard a new associate in his environment. How do you get to know people? How do you get a sense of what culture is like? And culture inside a company is such an important aspect that I think being present with each other is going to matter over time. And does that influence the way we think about our new home office campus.

Kary Bruner

Thank you, Doug. You might take the next question as well. How is Walmart stepping up and competing against dollar stores that seem to be increasing share?

Doug McMillon

And we, we think about the customer first and competition is in the peripheral vision and our job is to have a value relative to all competition, price, leadership and EDLP are obviously really important to us because it relates to dollar stores, hard discounters and others like that. It’s really important that we get our sizing right or packaging, right? So that customers can compare price we’re competitive as it relates to pricing.

And then we offer more, you know, a super center has a broad assortment as opposed to those types of competitors. And lately we’ve been expanding our other capabilities to create ease of use, including the delivery capability. So again, we’d be basically built out an omni-channel business. Customers can get what they want, including strong opening price points, private brands that enable us to be competitive with all forms of competition.

Kary Bruner

Thank you, Doug. Dacona Smith will take the next question. With regards to how stores are reinforcing traffic flow during this time among customers, are these guidelines mandatory or suggested to customers? And is there a reporting capability for customers that they see others not following the guidelines?

Dacona Smith

Yes, good question, Kary. As you know, we have taken measures to ensure that customers understand the importance of social distancing. And then we’ve also used directional there. In addition to that, there’s miscommunication over our PA systems, encouraging customers to pay attention to those measures. And as well as extra period, there are several steps that stores can take to communicate any concerns so that we can help reinforce those guidelines. So stores we feel really good about the processes we have in place, and the actions that stores are taken to ensure that we keep customers and associates safe.

Kary Bruner

Thank you, Dacona. Doug, you can take the next one. How successful has the delivery service been? Has the virus had an impact on getting more stores used delivering? Or is this still work in progress?

Doug McMillon

It’s been really successful and we’re scaling it further. I think it’s here to stay in our customers are responding really positively. Our NPS score on delivery and pickup both high, and the encouraging thing is we’ve shared in several of our investor conferences over the last few years is that. When customers use pickup and delivery, they shop with us more often. Again, this omni-channel approach, one brand, multiple experiences for customers is a winning strategy, and I think delivery will be an important component of it.

Kary Bruner

Thanks, Doug. We have time for maybe one or two more questions. What is going on in India during this time more broadly?

Doug McMillon

It’s a big question. It’s a big country. There’s a lot going on in India. As it relates to our business, we’ve operated cash and carry source there for a long time and are pleased to have been in the market. We sourced some product out of India. But most recently, the big news is the investment we made in Flipkart and PhonePe. And that’s going really well. We’re pleased with the investment excited about the team there and the progress that they’re making.

In India and in many emerging markets, things can be volatile. There regulation changes and today, we’re dealing with COVID-19 in India just as we are in other markets. And so, the team’s doing a nice job of being flexible, responding to the environment that they’re operating in. In the last few weeks back up and operating, serving customers effectively and make it happen.

Kary Bruner

Thank you, Doug. And our last question, you can go ahead and take this one as well, how many COVID parking lot testing stations have been established to date in the U.S.?

Doug McMillon

I mentioned earlier, the number is 187. Currently, it’s a moving target. I mean, even this week, I was on the phone with one of our governors who would like to have more testing stations, there’ll be some that will close because of low demand. There’ll be others that will open, but it’s been great to see the team’s creativity and persistence. They were challenging to open in the beginning for a number of reasons, including a lack of PPE but as tests have changed, and other circumstances have changed, we’ve been able to scale it and please provide the service where it’s requested.

Kary Bruner

Thank you, Doug. That is all the time we have for questions, as I mentioned earlier for relevant questions that cannot be answered due to the time constraints. We will provide responses on the Investor Relations section of our corporate website as soon as possible. Similar questions will be grouped together and responded to collectively.

Thank you everyone for your attendance. This concludes our meeting.