To our shareholders, associates and customers:

I’m deeply honored to lead Walmart at such an exciting time. Walmart has a rich history and is well-positioned for the future. We have an authentic and important purpose. We’re grounded with strong values and have millions of associates who share a culture and belief in doing what is right for our customers, our communities and each other. The future will bring a lot of change as the rapid growth of digital commerce enables us to serve customers in new and exciting ways. Our customers continue to search for value, a broad assortment and a shopping experience that saves them time and money. With greater convergence of digital and physical retail, we’re investing in capabilities to provide customers even more choice and convenience. When I think about all these capabilities, I’m confident in Walmart’s continued growth and enthusiastic about our future.

Positioning to serve our customers. Around the world, we deliver value for customers in different ways. We operate supercenters, Sam’s Clubs, e-commerce sites and many other formats that enable us to serve our customers. As we develop the combination of digital and physical interaction with customers, we’ll remain well positioned to grow. We’re laser-focused on delivering improved comparable store sales by sharpening our merchandising efforts, price leadership and enhancing service. We’re also intent on creating transformative growth by adding capabilities in e-commerce and mobile commerce. When we view our business through the eyes of our customers, we don’t think about our stores, clubs or websites independently. Instead, our goal is to have customers see these channels converge as one unified relationship with us. We want to deliver a relevant, personalized and seamless experience across all channels. So, our approach to investments will continue to evolve to support the singular goal of enhancing the customer experience to further grow sales.

Change is nothing new for Walmart – it’s embedded in our DNA. After all, our company founder, Sam Walton, was the premier innovator in retail. He made Walmart better by questioning everything, every day – frequently asking customers and our store associates how we could do better. He was always in the market looking for new ideas. For Sam, the customer was always the boss, and the improvements he made to Walmart were customer-driven. I intend to lead Walmart with this same customer-centric focus. Today, in addition to listening to our customers, we apply data and technology to this task. The millions of customer interactions that take place each week give us some of the world’s most robust data to analyze and leverage to improve our service. For example, customer insights led the Walmart U.S. team to expand our Black Friday 1-Hour Guarantee program this past year, and innovative systems enabled successful execution and on-time product delivery. The tools today may be different than the ones Sam employed, but the imperative that will guide our transformational initiatives is the same – to connect more effectively with customers.

Walmart is well-positioned for the future partially due to our unique assets. We have more than 10,900 physical points of distribution globally. No other retailer possesses such an extensive footprint. And, with our retail websites around the world, we’re doing more to leverage these physical assets to expand the intersection with digital retail. Last year, we grew e-commerce sales in Brazil and China at nearly twice the market rate. Asda’s Click and Collect program has been very successful, and Mexico is expanding grocery delivery beyond our Superama grocery stores to supercenters this year. We’re leveraging best practices to further test grocery delivery and customer pickup in the U.S. We’ve also broadened our e-commerce merchandise assortment. Last year, for example, we more than doubled walmart.com’s merchandise offerings in the U.S. to over 5 million SKUs, and our sites in Brazil and China greatly expanded their assortments as well.

We invest in price to bring everyday low prices (EDLP) to more customers around the world. EDLP earns trust with customers because we’re driven to keep our cost structure low. That commitment to price is central to our brand – regardless of the format. We’re also giving customers greater access to the value we offer through different formats. In the U.S., our Neighborhood Markets offer fresh foods, pharmacy and fuel, and delivered healthy comp sales growth in fiscal 2014. This year, we’ll significantly accelerate their rollout to complement our core supercenter fleet. And, in Mexico and the U.K., we’ll open more small stores to deliver convenience, assortment and low prices.

Expanding opportunities for associates. One of the most exciting things about serving more customers in new ways is the opportunity to create good jobs, attract new talent and expand current associates’ possibilities to build careers. Last year, we hired 776,000 new associates to jobs across our operations. The path of my own career attests to the exceptional opportunity at Walmart to advance professionally. In fact, we promoted about 190,000 U.S. store and club associates last year to jobs with more responsibility and higher pay. And, we’ll continue to invest in training and development because building the best team in retail is central to our strategy.

Driving operational excellence. We remain focused on driving the productivity loop to leverage operating expenses. The most important way to deliver against this objective is to increase sales. By operating and buying for less, we’re able to lower prices that, in turn, prompt customers to make more purchases. We also foster an environment that leverages best practices across the enterprise to drive process improvements. Operational excellence requires capital discipline and efficiency, and our real estate and construction teams have made great progress in lowering the cost of new stores and remodels. Our focus on capital efficiency also is top of mind with our e-commerce capabilities. We’re more disciplined now in allocating capital to the right markets, the right formats and the right digital capabilities.

Earning trust in communities. I’m proud of the value we add in the communities we serve and I know we will find new ways to contribute. We are deeply committed to compliance and social, environmental and local responsibility. Operating with integrity is a cornerstone for building trust. We have made tremendous progress toward our goal of developing a world-class compliance organization and this will continue to be a top priority going forward. Our training and leadership development programs reinforce the mission of upholding the highest standards of integrity, not just in retail, but in all of business. We’ll also continue to lead on key issues like women’s economic empowerment, healthier foods and renewable energy. Walmart’s initiatives, in partnership with many suppliers, have significantly increased sustainability throughout the global supply chain, and we will do even more.

Solid performance in a challenging environment. In fiscal 2014, consolidated net sales increased $7.5 billion to more than $473 billion and diluted earnings per share from continuing operations were $4.85. While we certainly see areas where we can improve, it’s also a reality that we faced some challenging consumer environments around the world. Both developed and developing markets grew slower than most people would have hoped for. The value we offer enabled us to grow share almost everywhere, and we’re optimistic that conditions will moderately improve this year.

Walmart U.S. delivered solid profit growth. Operating income grew 4 percent on a net sales increase of $5 billion. The U.S. team did a great job controlling costs and successfully leveraged expenses. Walmart International’s net sales increased 1.3 percent to more than $136 billion. We took important steps to hone our international portfolio and focus investments on the most profitable opportunities to position the business for future growth. Sam’s Club continued to expand its footprint, opening 12 new clubs, and enhanced its merchandise offerings with a sharpened focus around value, quality and exciting merchandise. Our members saw the value of membership, and with the fee increase in May, Sam’s Club membership income continued to grow.

Each operating segment strengthened its e-commerce platforms, and customers responded, driving annual Global eCommerce sales, including acquisitions, above the $10-billion mark, a 30 percent increase. A strong focus on e-commerce is now fully embedded within each of our businesses and we’ll increase our investment as e-commerce opportunities present themselves.

Embracing the challenge to change. After just a few months into my new role, I have an even deeper appreciation for Mike Duke’s extraordinary contributions as CEO over the past 5 years. His work positioned Walmart for long-term success, and I am one of the many associates who benefitted from his guidance and leadership. His passion for our business and drive for continuous improvement greatly benefitted Walmart’s associates, customers and shareholders.

I look to the future confident that Walmart has all the ingredients necessary to prosper in the new retail world that is unfolding. Our purpose remains clear – to save people money so they can live better – and the actions we’re taking will expand the opportunities to fulfill that purpose. We’ll analyze and review everything Walmart is today, and we’ll be willing to change whatever is necessary to serve customers better than ever.

I first started working for Walmart 30 years ago when I was a teenager. I’ve fallen in love with our company, its people, our purpose and culture. We have a unique culture grounded on four basic beliefs: service to our customers, respect for the individual, striving for excellence and acting with integrity. As CEO, I want to continue to nourish and strengthen these foundational beliefs. And, I’m excited to increase the pace of change to ensure we’re serving the customers the way they want to be served in the future.

Sincerely,

Doug McMillon
President and Chief Executive Officer
Wal-Mart Stores, Inc.