Walmart Inc.
Q2 2013 Earnings Call Transcript

Published: 16 Aug 2012

[Operator:]

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, 2012. The forward-looking statements include statements discussing management's expectations regarding Walmart's consolidated capital expenditures during fiscal year 2013; Walmart's forecast for its effective income tax rate for the fiscal year 2013; the possible fluctuation of such rate from period to period and a description of the factors that may affect that rate; Walmart's forecast for its consolidated net sales growth in fiscal year 2013 over fiscal year 2012; consolidated net sales; Walmart's forecast for the increase in consolidated square footage in fiscal year 2013; Walmart's goal for reducing consolidated SG&A expenses as a percentage of consolidated net sales over 5 years; and Walmart's goals of its Walmart U.S. operating segment continuing its momentum, of its Sam's Club operating segment to continue its success for the last several quarters, for its Walmart International operating segment improve profits and returns in its Brazilian and Chinese operations and for Walmart to expand its capabilities and increase sales in its global eCommerce business. Such forward-looking statements also include statements regarding management's goals of achieving profitability and returns that are more balanced and of having a deeper relationship with Walmart's customers to drive greater loyalty in eCommerce being a part of that strategy; the corporate goal of growing inventory at or less than the rate of net sales growth; and management's expectations that strengthening the company's capital efficiency model will increase the success rate of new stores and provide stronger comparable store sales; regarding the addition of a significant number of units in the United States during the remainder of fiscal year 2013; that gross margins will continue to decline slightly as Walmart invests in price; regarding continuing the incurrence of expenses for third-party advisors reviewing certain matters relating to the Foreign Corrupt Practices Act during the third and fourth quarters of fiscal year 2013 and the expected amount of those expenses; and that the company will continue to deliver solid financial performance and value to Walmart shareholders for years to come. The forward-looking statements discuss management's plans and expectations that the Walmart U.S. operating segment will continue to lead on price throughout the back-to-school season and into the second half of fiscal year 2013; the segment's gross margin rate will continue to decrease from its fiscal year 2012 gross margin rate as the segment executes its strategic price investment; the segment's inventory position will help drive sales in the second half of fiscal 2013; the segment will continue to actively manage through transitions of brand drugs to generic drugs and deliver additional value to customers; the segment will continue to expand the Walmart Express test format, begin defining its distribution and operation strategy for that format and open multiple Express stores in a single market; the segment will open a projected number of new stores of various formats in the third quarter of fiscal 2013 within a particular range; the segment will open a certain number of small format stores in fiscal year 2013; and the segment will continue to leverage expenses and invest the money saved in price to fuel the productivity loop. The forward-looking statements discuss management's plans and expectations with respect to Walmart's Walmart International operating segment, including the segment's priority of driving the EDLP-EDLC business philosophy into the segment's markets and its goals of driving growth and improving returns; and management's expectations for the earnings growth of Walmart's Massmart subsidiary for the 12 months ended June 2012; for the segment's United Kingdom, Mexican and Canadian markets continuing to provide a solid foundation for the growth of revenue and profit for the remainder of fiscal year 2013; for improvements in service and productivity in Mexico resulting from implementation of associate scheduling processes; regarding Walmart de Mexico's addition of certain amounts, certain square footage and capital expenditures for fiscal 2013; that as a result of the delay of Walmex store openings, the segment's annual square footage growth will decrease, but the capital expenditures will be made ahead of store openings; the segment's Brazilian operations will continue to demonstrate price leadership on a broad basket of goods; that the growth of square footage in the Brazilian operations will decrease from the original plan; that the segment will open fewer stores, and will grow square footage by certain amounts in China in fiscal year 2013; and for the total growth in square footage for the segment and for the capital expenditures of the segment in fiscal year 2013. The forward-looking statements also discuss management's expectations for Walmart's Sam's Club operating segment; that the trend of increased certain prescription drug sales will continue for the segment; that inflation will have a lesser effect on revenues in future periods; and regarding the number of new clubs that the segment will open in the third quarter of fiscal year 2013. The forward-looking statements also discuss other goals and objectives of Walmart and the anticipation and expectations of Walmart and its management as to other future occurrences, trends and results. All of these forward-looking statements are subject to risks, uncertainties and other factors, domestically and internationally, including

[Carol Schumacher:]

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 rates throughout this call. As you know, for financial reporting purposes, each period, we convert the balance sheets and operating results from the local country currency to the U.S. dollar. The increase or decrease in the company's results as a result of changes in these currency exchange rates from one year to the next is what we refer to as the impact of currency exchange rates. We calculate the effect of such changes as the difference between current period activities translated using the current period's currency exchange rates and translated using the comparable prior year period's rates. We also exclude the impact of acquisitions until those acquisitions are included in both comparable periods. This methodology is what we use to calculate measures on a "constant currency" basis. There is additional disclosure in today's press release on the impact of currency exchange rate fluctuations to our business. When we use the term gross profit, we're referring to actual dollars. Gross profit as a percentage of net sales, or gross profit rate refers to the percentage obtained by dividing gross profit by sales dollars. All comparisons are calculated as the change between the current quarter and the prior year quarter unless stated otherwise. Consistent with our forward-looking statement at the beginning of today's call, we discuss our existing Foreign Corrupt Practices Act investigation and related matters in the filed portion of our May 17, 2012, Form 8-K as well as in our Form 10-Q that was filed on June 1, 2012. Please refer to that disclosure on our website for information concerning these FCPA matters. The investigation remains ongoing, and it would be inappropriate to comment further on specific allegations and for us or others to come to specific conclusions until the investigation is finished. As a reminder, our annual meeting for the investment community is Wednesday, October 10 in Bentonville, Arkansas. The meeting will begin early in the morning that day. And as always, we will video webcast the presentations, and they'll be archived on the Investor portion of our website. During the past year, we've been working very hard to enhance our corporate website, and the new site will be live next week. You'll find the Investors tab at the new site located at www.corporate.walmart.com, and you'll be redirected if you go to our current website to the new location. One last item. We launched the Walmart Investor Relations app in April, which has a great deal of information for our shareholders. The latest update of the app will be available the last week of August. You can download it really easily for both iOS and Android devices. That's it for the announcements. So let's get started, Mike, with our results.

[Michael Terry Duke:]

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% from last year. We achieved our goal of growing profits faster than sales. I'm really pleased with the continued momentum we see in our Walmart U.S. stores, and this now marks 3 consecutive quarters of positive comp traffic and 4 quarters of positive comp sales. There's such a clear focus among the leadership team to drive the strategy of broad assortment and price leadership. We continue to win back customers and attract new ones. We will not let up on our passion to reduce operating expenses so that we can invest in lower prices. This is the promise our customers expect from Walmart and what drives greater loyalty. We are also pleased with the sales and profitability for Walmart International. Our goal is to achieve profitability and returns that are more balanced, and to do that, we must improve operational and sales productivity in some of our emerging markets. EDLP drives customer loyalty and helps reduce cost. Our full transition to EDLP is underway, and this remains central to long-term growth for International. We are moderating our strategic investment in new stores in 3 emerging markets as we focus our leadership teams on improving comp sales in existing stores. International remains our growth engine but at a slightly slower pace, and you will hear more from Doug on the details. We are strengthening our capital efficiency model to improve site approval, design and the review process for new stores in all operating segments. We believe this will increase the success rate of our new stores and provide for stronger comp sales in the future. Across all operating segments, we also are reducing construction cost to deliver more productive stores. Now I love visiting Sam's Club. The quality and innovation in merchandising and services are contributing to strong comp sales with increases in traffic and ticket. On a 2-year stacked basis, Sam's continues to drive fantastic comp sales while improving quality. The result of Sam's initiatives is greater value, which helps attract new members and strong renewals. We've been focused on stepping up the intensity of our Global eCommerce opportunity. Recruiting talent is easier now that we're gaining more respect in Silicon Valley for the innovative work that we're doing. The technology community sees our potential for the next generation of eCommerce, and there is a great deal of excitement about working for Walmart. Our goal is to have a deeper relationship with our customers to drive greater loyalty, and eCommerce is key to that strategy. We're also constantly driving innovation. We're building a new global platform to take our assortment and services to every one of our markets simultaneously. As you know, we previously took a minority position in Yihaodian, a fast-growing eCommerce business in China. We're pleased that this week, our potential increased investment in Yihaodian received conditional approval by the antitrust regulatory authority in China. We still have a few important steps before the agreement is completed, but we're encouraged by the progress and pleased with the response from the government. On July 2, we marked the 50th anniversary of our company, and we're pleased that our mission to save people money so that they can live better continues to drive us. The Walmart Every Day Low Price model is as relevant today as it was in 1962. For today's customers, the paycheck cycle remains pronounced in the United States and in our international markets. Given the continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across income levels. Before I close, I'm going to share some comments about our associates and the strength of the morale around the Walmart world. During the second quarter, I visited stores in Chicago, Texas, the Pacific Northwest, also the U.K. I am inspired by our associates and the conditions of our stores. They are happy to work for Walmart and to serve our customers. As we continue to deliver greater results, we appreciate that Walmart customers and shareholders recognize the consistency of our results, the strategic steps we're taking to improve our business and the value of the investments we're making for the future. I believe that Walmart remains the healthiest and the best-positioned retailer for delivering growth, leverage and returns. Now I'll turn it over to Jeff for the financial details. Jeff?

[Jeffery Davis:]

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 a percentage of sales decreased approximately 20 basis points to 19.3% from 19.5% last year. Not only did the company leverage on a reported basis, we also leveraged expenses without the $115 million of pretax expenses realized last year. Other unallocated expenses grew 14.4%. As a reminder, the components of other unallocated includes 3 areas

[William S. Simon:]

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 categories like food, significantly exceeded our expectations. As you know, price leadership is at the center of our strategy. Our marketing team is focused on ensuring the price message resonates with our customers and sets us apart from the competition. You've likely seen a few of our market basket challenge commercials. These ads are tailored for individual markets, but the message is always the same

[C. Douglas McMillon:]

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

[Rosalind Gates Brewer:]

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 experience in our clubs. Gross profit rate increased by 17 basis points compared to the second quarter last year, driven by changes in merchandising mix, while gross profit increased 5.9%. Strategic initiatives to deliver greater value, as I mentioned earlier, led to consistent strong comp performance across the merchandise portfolio. We ran an extended eValues Savings Celebration this quarter in anticipation of the midweek July 4 celebration, which drove traffic into the clubs for the week. As multiple retailers across various retail segments, including the club channel, invest in price, there has been greater pricing pressure in the marketplace. While this is good for members and customers, it does pressure margin. However, as members have noticed exciting merchandise offerings in higher margin categories, mix has favorably impacted our margin rate. We have worked hard to balance our price investment with the impact of inflation. For the second quarter, Sam's retail inflation was between 175 and 225 basis points, primarily in food, versus 200 and 250 basis points in last year's second quarter. Cost inflation was slightly higher than retail inflation, putting pressure on margin. At the same time, deflation continued in certain categories, like dairy and electronics. Like Bill, we're monitoring the potential impact of the drought in the Midwest and the pressure it is expected to have on both corn and soybeans. We will continue to evaluate how this will affect food prices as we go through the year. Grocery, including fresh and consumables, remains key to driving traffic and attracting new members. It is a key differentiator for us in the marketplace, and as we continue to invest in price, it will remain so. We delivered high single-digit comps in grocery and mid-single-digit comps in both beverages and fresh freezer cooler despite deflation in dairy. Members continue to enjoy new products, including hybrids like pluots, a plum-apricot mix and new wine labels. In our consumables business, where we continue to focus on price, we had solid increases in unit sales. Tabletop and personal paper categories had mid-single-digit increases. Our recent launch of the new Member's Mark paper plate is outselling comparable branded items and is creating additional margin that allows us to price more aggressively. Tobacco sales, which remain important for our convenience store owners, were a drag on overall comp sales for the quarter, but that reduction helped drive a merchandising mix that was a positive to profit. Technology, entertainment and office achieved low single-digit comps. Performance was strong in portable electronics, including tablets but challenged by continued softness in video games, movies and books. Focus on product quality and ensuring that we have the right brands at a great value have driven results in discretionary categories. We achieved high single-digit comps in both apparel and home, with brands like Carter for infants, Nautica for men and Lucky Brand Jeans among our new product offerings. Health and wellness continues to be a key traffic driver as well and overall, delivered a mid-single-digit comp increase. Hearing Aid Centers achieved double-digit comps for the quarter. We had mid-single-digit comps in OTC and low single-digit comps in prescriptions. Like Walmart U.S., the recent availability of popular prescriptions that have moved from branded to generic status negatively impacted overall sales but drove profitability in unit volume. Rx script count was up mid-single digits, and we expect this trend to continue. With an eye toward driving growth in eCommerce, we upgraded our checkout processes and enhanced the Click 'n' Pull experience. Our members continue to accelerate their adoption of mobile and tablet technologies as a means of accessing the Sam's Club brand anytime, anywhere. During the second quarter, we had triple-digit increases in daily uses of our mobile applications versus last year. Membership and other income was up 4.6% versus last year. In other income, similar to the first quarter, we realized a financial benefit that is part of a profit sharing arrangement with our credit card provider. Last year, we recognized this benefit in full at year end. This year, however, we are recognizing this benefit each quarter. Membership income for the second quarter increased 1.6% versus last year. Remember, for reporting purposes, membership income is recognized over the membership period rather than when it is collected. Renewal performance from primary members remained steady. However, primary new member sign-ups were lower as we anniversaried a special promotional offer from Q2 last year. Plus membership continues to grow versus last year, and we were pleased with the number of members who upgraded to the Plus membership level during our July eValues Savings Celebration. Business add-on memberships remained soft as we continue to see small businesses manage their budgets tightly. While our paid primary membership base is increasing year-over-year, we have an opportunity to accelerate that rate of growth. Operating expenses as a percentage of net sales decreased by 5 basis points in the second quarter. Our clubs continued to manage expenses and leverage wages. Productivity initiatives are well underway to continue to improve leverage. Through our upgraded scheduling system, we are focused on ensuring more associates are serving members during peak shopping periods. Our member engagement surveys continue to show that members are pleased with the manner in which associates are delivering value in the clubs, validating that we can be efficient without sacrificing service. Units per labor hour were up 2.5% versus last year. The wage gains were partially offset by investments in other areas. One of those areas was marketing. Compared to last year, we have stepped up our marketing activities, and expenses are higher in this area. During the quarter, we began testing new ways to better engage prospective and existing members. For example, we're testing a new communication campaign that includes television, radio, billboard and digital media in certain metro markets. As you know, Sam's has not historically used TV advertising, so this is a more integrated and aggressive approach. Our tagline is

[Charles M. Holley:]

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 leadership teams in place, along with our focus on Every Day Low Prices, we believe we're on the right path. Last goal, we must expand our capabilities and increase sales in our Global eCommerce business as we integrate multichannel offerings for customers across markets. We're making progress on these eCommerce efforts, and you will continue to hear more about these activities throughout the year. You heard some specific examples earlier in the operating segment discussions, and you will hear more at the annual investor meeting in October. On the corporate side, we continue to implement process improvements, like our SAP initiative, which allows us to manage our global business more efficiently. Like the operating segments, our corporate and shared service areas are just as focused on reducing cost and improving efficiencies. Overall, we've delivered solid comp growth in our U.S. businesses this quarter, having built on the success of the first quarter. All markets within International had positive comp sales. We grew earnings per share in the second quarter 8.3% despite significant currency impact to the top line and profits, and we leveraged operating expenses. We added 120 net new stores for 6 million new square feet of selling space. We were able to deliver these results because of our commitment to the productivity loop. It's not just about Every Day Low Price. Yes, we need that, but we can only drive EDLP because of our relentless focus on reducing costs. Recall that beginning this year, our goal is to reduce SG&A as a percentage of sales by at least 100 basis points over 5 years. We are off to a good start this year. We're taking pure cost out of the business, empowering our associates and investing savings back into price reductions or profitability. The result is we are more productive for customers across our markets and for shareholder value. A few examples would include