Traffic Gains + Walmart Plus = Strategy Working

Research evidence excerpt

Traffic Gains + Walmart Plus = Strategy Working

nmodeled $3bn+ upside lever if/when resolution flows through (we

had modeled $3-4bn – see our note from last week for more), with strong leverage to operating income. Sam's Club membership

fee increase effective May 1st. A discrete forward earnings lever with ~$280-300M annualized gross uplift at the current paid base

of ~28-30M members, flowing ratably through Membership & Other Income via deferred-revenue accounting and lapping into

FY28. Walmart Plus members likely growing 1mn+/qtr with a 4x spend lift (higher HH income) compares to our recent estimate of

750k/qtr with a 2x lift as noted in our Agentic AI survey.

What to Watch: The bear case remains macro-driven and cost-side. Energy Costs Matter, and LFL inflation across the box could

pick up from 1Q’s 1.2%. Drug deflation pressures likely to persist. Inventory is a key line item to track. Real wages roughly flat,

savings rate below LT average, and gas pump prices at ~$4.50/gal continue to pressure the low-to-middle income cohort — WMT

skews to traffic-led share gain but is not immune to basket compression if the consumer softens further. Our RSLI continues to

languish around 3%. Diesel breached $5/gal during the quarter and drove the $175M fuel headwind that WMT absorbed; if energy

stays elevated into 2Q-3Q, mgmt's choice to absorb EVR Est 15bps of headwind – i..e $250mn/qtr or pass through and risk slowing

share gain see our Energy Matters note for more. Healthcare cost creep / broad-based cost inflation. Mgmt explicitly flagged higher

healthcare expenses from increased associate enrollment and medical-cost inflation as a key SG&A deleverage driver — combined

with higher depreciation, this is a multi-quarter SG&A pressure not just a 1Q event.