Welcome to the Walmart earnings call for the second quarter of fiscal year. [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. Please note that a cautionary statement regarding the forward-looking statements will be made following Charles Holley’s remarks in this call.

Hi, this is Carol Schumacher, vice president of investor relations for Wal-Mart Stores, Inc. Thanks for joining us today for our earnings call to review the second quarter of fiscal year 2014. Our press release and transcript of this call are available on our website; that’s www.stock.walmart.com. Here’s today’s agenda. Mike Duke, president and CEO of Wal-Mart Stores, Inc., will provide his thoughts about the quarter and the challenging retail environment we face in all of our markets. Jeff Davis, EVP of finance and treasurer, will cover the consolidated financial results. Then, we’ll cover the operating segments. First up, Bill Simon, president and CEO of Walmart U.S. Bill will be followed by Doug McMillon, president and CEO of Walmart International, and then we’ll complete our operating segment discussion with Rosalind Brewer, president and CEO of Sam’s Club. Given the level of e-commerce activity in many areas of the company, we’ve invited Neil Ashe, president and CEO of Global eCommerce, to join us today for a progress report on our strategies to integrate e-commerce sales within our stores. Neil will follow the operating segment reports. Then, 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. We continue to receive questions from you about our comp sales reporting calendar for this fiscal year for our U.S. operating segments. This fiscal year, we will report comp store sales on a 53-week basis, with 4-5-5 reporting in Q4. As a reminder, our comp week begins on Saturday and ends on Friday. Our Q4 reporting period begins Oct. 26 and runs through Jan. 31. Therefore, week 53 will be compared to week one of the current fiscal year 2014. Additional information regarding some of the terms we use at Walmart, including constant currency, gross profit and gross profit rate are available on our website. Please note that year to date, we no longer have discontinued operations. But, we do have one term we’d like to remind you about. We started with this term last quarter. “Corporate and support” is now what we call our corporate areas, including core corporate, such as finance and legal, as well as Global eCommerce support and global leverage services. Previously, we referred to this as “other unallocated.” Our annual analyst meeting is Tuesday, October 15 in Northwest Arkansas. Registration is open, and we invite you to join us for a full day of presentations and updates on our global business. The meeting also is available via webcast through our website, again, that’s www.stock.walmart.com, if you can’t join us in person. We have a lot to cover today. Mike will start us off with the highlights and a report card on our business at the halfway mark of the year. Mike?

Thanks, Carol, and good morning everyone. Today, we reported a 5.1 percent increase in diluted earnings per share to $1.24 for the second quarter, which is within our guidance. Sales for the quarter were below expectations, but improved from the first quarter. We are executing plans to strengthen our top line performance for the rest of the year and expect sequential improvement in the back half. We’re pleased that Walmart U.S. and Sam’s Club leveraged expenses for the first half of the year. But, we didn’t leverage expenses in the second quarter as a company. While it will be difficult, we believe the steps we’re taking to control costs, especially in International, will bring us closer to our full-year leverage goal. We will continue to invest in leverage initiatives, compliance and e-commerce as we focus on future growth. So, let’s take a closer look at how our businesses performed in the second quarter. Consolidated net sales and our Walmart U.S. comp were below expectations for the quarter. While the retail environment was challenging across all of our markets, the Walmart U.S. and Sam’s Club businesses improved comp sales from the first quarter, and reported sales in International remained consistent. We expect to see improvement in all of our segments in the back half of the year. Walmart U.S. comp sales declined 0.3 percent in the 13-week period ended July 26. Traffic improved from the first quarter, and we gained market share in key categories. We continue to invest in price and we are focused on delivering positive comps during the next two quarters. Sam’s Club comp sales, without fuel, increased 1.7 percent for the 13-week period. The improved merchandise assortment and Instant Savings program drove membership growth. Business member traffic also improved. I’m pleased that Sam’s new membership enhancements and…

Thank you Mike. For the second quarter of fiscal 14, Walmart reported diluted earnings per share of $1.24 versus $1.18 last year, a 5.1 percent increase. As we told you, we expect to invest an incremental $0.09 per share in ecommerce for the full year. This investment for Q2 was approximately $0.03 per share. In addition, EPS was impacted by approximately $0.01 due to a charge for a certain non-income tax matter recorded in operating expenses within Walmart International. Now, let’s turn our attention to the detailed financial results for the second quarter. Consolidated net sales increased 2.4 percent or $2.7 billion, to $116.2 billion. The quarter included $216 million from acquisitions, which was offset by a negative impact of approximately $680 million from currency exchange rate fluctuations. Therefore, on a constant currency basis, net sales would have increased 2.8 percent. With respect to our comp sales, total U.S. comps, without fuel, were flat for the 13-week period ended July 26. You will hear more details on our separate Walmart U.S. and Sam’s Club comps from Bill and Roz. While Sam’s Club delivered positive gains in membership, consolidated membership and other income decreased 4.3 percent, compared to the second quarter of last year due to Walmart U.S. and International. Total revenue was $116.9 billion, a 2.3 percent increase over last year. Our gross profit rate for Q2 was 24.8 percent, an increase of 19 basis points compared to last year. The increase was primarily driven by our Walmart U.S. and International segments. You’ll hear more from Bill and Doug on the specific drivers. Now turning to expenses, operating expenses as a percentage of sales were 19.5 percent, which represents a 20 basis point increase versus last year. As always, let’s take a closer look at Corporate and support expenses, which…

Thank you Jeff. I’m proud of the great work the team did, leading us to a solid quarter in profit in a disappointing sales environment. Net sales grew 2.1 percent to $68.7 billion, with about $1.4 billion added in sales year over year. For the quarter, we delivered a negative 0.3 percent sales comp. Traffic decreased 0.5 percent and ticket increased 0.2 percent. The lack of meaningful inflation and the 2 percent increase in payroll taxes impacted our results; however our performance reflects more than a 100 basis point improvement over Q1. Nevertheless, I was encouraged by the improvement we saw, as traffic and comp sales increased throughout the quarter. We also saw some slight increases in inflation towards the end of the quarter. In addition, there were some key parts of the business, like produce, home and apparel, that were very successful. We’ll talk about these in a bit. We also continued to gain market share across several categories. According to The Nielsen Company, we gained 14 basis points of market share in the measured category of “food, consumables and health & wellness/OTC” during the 13 weeks ending July 20th. Year to date, we’ve grown sales by $1.6 billion versus last year to $135.3 billion, leading to almost $570 million in operating income growth, and putting us at $10.9 billion in operating income for the first half of the year. Now, let’s cover additional financial details. During the quarter, we continued working with our suppliers to drive cost of goods savings. These initiatives, along with more favorable merchandise mix and logistics productivity, benefited gross profit rate. Overall, our gross profit rate was up 23 basis points, leading to an increase of 2.9 percent in gross profit dollars. We continue to monitor the pricing environment in each market to ensure…

Thanks Bill. Across our International markets, growth in consumer spending is under pressure. During the first half of the year, we saw consumers in both mature and emerging markets curb their spending, and we believe these trends will persist through the remainder of the year. While this creates a challenging sales environment, we are the best equipped retailer to address the needs of our customers and help them save money. We clearly have plenty of opportunities to drive further improvement going forward, though we have made improvements in some markets. We’re focused on three key areas: First, as we focus on growth, we are delivering price leadership. We track the savings we offer customers on a basket of goods across our markets and invest where necessary to ensure value for them. We continue to move toward more of an EDLP approach across the entire division, because this is the most effective way to deliver value to our customers. Delivering on our core merchandising and pricing strengths is foundational. In addition to that foundation, we are expanding our capabilities to serve customers through e-commerce, home delivery and relevant store formats. Driving sales growth, regardless of the market environment, is a top priority. Second, we’re focused on driving the productivity loop. The work we started over a year ago to transfer our best operational practices into several of our key markets is helping us. The softer than expected sales growth and wage inflation in some markets masked the improvements we’ve made operationally, but I’m thankful we’ve made them, or our expense position would be more difficult. We need to continue down this path and improve sales to show the benefits more clearly. As Mike mentioned earlier, our leadership teams in International are collaborating with our Global Business Process team to improve productivity…

Thanks Doug. Before I start, I’d like to compliment both our management teams and our Sam’s Club associates. They are so energized by the changes taking place in our clubs and remain aligned on driving member value through price leadership, differentiated merchandise and a compelling experience. We still have work to do, but I’m pleased to report that Q2 comp sales were within our guidance, and traffic improved. We are delivering solid membership income growth, and our recent membership enhancements, including the Instant Savings Book (ISB), continue to receive a favorable response. Let me take a moment to provide more background on our Instant Savings program, now a cornerstone of Sam’s Club membership. In fact, we have renamed our Advantage members to Savings members because of our mission to deliver savings made simple for all of our members. The second quarter marked the launch of our Instant Savings program. Members received two Instant Savings Books during the quarter. Each book runs for about three weeks and includes special savings from our top suppliers beyond our normal member-only prices. We were pleased to see over half of the members who shopped during the events purchased at least one Instant Savings Book item. The book not only drove traffic to our clubs, but also broader awareness of our extensive merchandise offering available at samsclub.com. For example, during the first few days of the May event, we sold more of the office chairs online included in the ISB than we had year-to-date! We believe that the investment we’re making in price, both through core reductions and programs like Instant Savings, are key to sales growth, and this strategy will continue throughout the year. Now back to the results. Sam’s Club generated a comp of 1.7 percent, without fuel, for the 13-week retail sales…

Thanks Roz. In eCommerce, we’ve continued to deliver key capabilities, and we are growing sales, including acquisitions, at over 30 percent globally. Bill, Roz and Doug touched on some of the accomplishments from around the world, and I’ll put those in the context of our overall eCommerce strategies. As a reminder, the four strategies we are executing are: Excelling in the fundamentals of e-commerce; innovating in new areas like big data, social and mobile; we’re growing in key markets, namely the U.S., U.K., Brazil and China; and we’re providing the tie to unite and expand the Walmart customer experience to do what no one else can do. We’re building best-in-class e-commerce capabilities, and only we can combine those with the assets of the world’s largest retailer. The result is a new approach to commerce that lets customers shop when, where and how they want across online, mobile and stores. To support the strategies, we’re investing in three key areas: further developing our global technology platform; growing services and capabilities in our four key markets; and developing our next-generation fulfillment network that integrates dedicated online assets with Walmart’s transportation fleet, distribution centers and stores. Before I jump into each of these, let me cover our progress in building talent density. We’ve continued to bring on great people organically and through acquisitions. During the second quarter, we had a hiring blitz which ramped up our visibility in the Bay area and added nearly 200 associates. We saw an offer acceptance rate well over 90 percent. People in Silicon Valley are excited to come to Walmart. We also closed four acquisitions -- Tasty Labs, OneOps, Inkiru and Torbit. They brought us some proven innovators in Silicon Valley, and technical capabilities and expertise to contribute to the development of our global technology platform. We…

Thanks Neil. Normally on our earnings call, I begin by talking about growth, leverage and returns and then conclude with our guidance. Today, I’d like to start by providing our expectations for sales and earnings for the third quarter and the full year. Economic conditions in many of our markets around the world remain difficult. The U.S. retail environment remains challenging, with virtually no inflation in food and the higher payroll tax instituted earlier in the year. High fuel prices can impact spending as well. Our expectations for the back half of the year are through a lens of cautious consumer spending. Our mission to save people money so they can live better remains critical to customers and to our ability to drive stronger sales. Our plans are aggressive. We are going after sales and investing in price. And, we continue to focus on leveraging expenses. As Mike said, we are taking steps to increase our leverage potential for the full year. We are revising our consolidated net sales growth to range between 2 and 3 percent for the full year, versus our previous range of 5 to 6 percent. This revision reflects softer sales performance in the first half and our view of current global business trends, including a challenging retail environment, and significant ongoing headwinds from anticipated currency rate fluctuations. In fact, approximately one-third of the net sales revision is due to currency impact. We believe expenses for FCPA matters and for the work on enhancing our compliance program will be higher than originally anticipated for the rest of the year. Year to date, we have spent approximately $155 million. We’re forecasting the run rate for the combined work on the compliance programs and the ongoing investigations to be between $75 and $80 million each in the third…

Similarly, descriptions of Walmart’s objectives, plans, goals, targets or expectations are forward-looking statements. The forward-looking statements in this call included statements relating to management’s forecasts and expectations for: diluted earnings per share attributable to Walmart for the third quarter of Walmart’s fiscal 2014 and all of fiscal 2014; the comparable store sales of the Walmart U.S. operating segment and the comparable club sales, excluding fuel, of the Sam’s Club operating segment for the 13-week period ending October 25, 2013; consolidated net sales growth in fiscal 2014; expenses for FCPA matters and compliance programs during the last six months of fiscal 2014; improvements in top line performance and improvement in all of Walmart’s operating segments’ performance in the second half of fiscal 2014; certain steps being taken to be effective to bring Walmart closer to its goal of leveraging expenses for the whole of fiscal 2014; continued investments in leverage initiatives, compliance and e-commerce; continuing leverage of operating expenses and strong operating income in the Walmart U.S. operating segment as a result of cost discipline; the impact of investments in Global eCommerce on Walmart’s earnings per share for the third quarter of fiscal 2014 and all of fiscal 2014; the impact of our Corporate and support expense growth related to global leverage services and Global eCommerce support; and the possible range for Walmart’s effective tax rate for fiscal 2014 and the possibility of quarterly fluctuations in such rate. Such forward-looking statements also include management’s expectations for: the effect of effective cost management actions on the Walmart International operating segment’s leverage goal; the effect of the recent migration of operations in certain Latin American countries to the Costa Rican Shared Services Center on back office costs and service levels; continued investments related to Global eCommerce, particularly in technology, talent and infrastructure, including…