WEBVTT - Sam's Club President and CEO Chris Nicholas Talks Consumers & Tariffs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio.

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<v Speaker 2>News, Carol Master, Tim Stenevik live here at the Bloomberg

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<v Speaker 2>Global Business Forum at the Plaza in New York City. Well,

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<v Speaker 2>if you want to know about global consumers are up to,

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<v Speaker 2>or what massive global companies are really thinking about when

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<v Speaker 2>it comes to the macro environment, what are their priorities,

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<v Speaker 2>then keeping an eye on Walmart is definitely a must do.

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<v Speaker 2>It is the world's largest retailer. It was among the

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<v Speaker 2>retailers that recently raised their forecast that happened over the summer,

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<v Speaker 2>and a member of the company c suite is joining us,

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<v Speaker 2>Tim right here at the forum.

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<v Speaker 3>Yeah, here at the Bloomberg Global Business Forum. Please to

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<v Speaker 3>have Chris Nicholas with US President and CEO of Sam's Club.

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<v Speaker 3>It is Walmart's membership only retail warehouse club, mostly with

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<v Speaker 3>clubs here in the US, but also overseas clubs in Mexico, China,

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<v Speaker 3>and Brazil. Former COO of Walmart US, previously CFO across

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<v Speaker 3>Walmart US and Walmart International.

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<v Speaker 2>Which means you've seen everything I've tried.

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<v Speaker 3>How are you?

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<v Speaker 1>I'm doing great, really excited to be here.

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<v Speaker 3>How are we doing? By we, I mean the American consumer.

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<v Speaker 3>You've got such a great view on what happens across

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<v Speaker 3>the country.

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<v Speaker 1>How are we doing? Yeah, I mean we what we're

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<v Speaker 1>seeing at Sam's Club is consumers that are consistent and rational.

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<v Speaker 1>You know, I've been in retail for more than thirty

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<v Speaker 1>years now, and I've never known a time when people

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<v Speaker 1>don't love great items at great prices. And as long

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<v Speaker 1>as you're giving people that, we're finding consumers really you know,

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<v Speaker 1>rational and consistent.

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<v Speaker 3>What is their behavior though right now? Because that's something

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<v Speaker 3>Carol and I were talking a lot about today, and

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<v Speaker 3>you know, the whole idea of are they buying what

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<v Speaker 3>they typically buy? Are they buying what they buy at

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<v Speaker 3>a certain point in economic cycle? Are they trading up,

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<v Speaker 3>are they trading down? What are they doing in your stores?

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<v Speaker 1>Yeah, it's interesting with I mean, consistent would be the

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<v Speaker 1>word i'd use. People are still buying general merchandise from US.

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<v Speaker 1>I mean, we talked in our last quarter at the

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<v Speaker 1>results about general merchandise sales having another quarter of positive

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<v Speaker 1>comp But what's really interesting within that is that the

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<v Speaker 1>units are moving faster than the items, which means that

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<v Speaker 1>you know, we're still giving them great value, and I

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<v Speaker 1>think people are really moving to appreciate when they're getting

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<v Speaker 1>good value. You know, the club warehouse model is made

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<v Speaker 1>for times like these. I would say it's a good

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<v Speaker 1>time to be in the club model. We've got in

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<v Speaker 1>our clubs. We've only got four thousand items. And the

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<v Speaker 1>way that the club model works, just to level set

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<v Speaker 1>us is our job is to make almost nothing on

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<v Speaker 1>what we sell. We're just about break even, and we

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<v Speaker 1>make all our money from membership. So the lower you

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<v Speaker 1>can operate in terms of costs, the lower you can

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<v Speaker 1>keep prices. And when that happens, people are more loyal,

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<v Speaker 1>they renew more often, and you get more members. So

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<v Speaker 1>we're in this like really special moment right now where

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<v Speaker 1>people are love the great value that we've got and

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<v Speaker 1>they love the great items that we've got to you.

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<v Speaker 2>Know, I want to cross that with what we just

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<v Speaker 2>heard from Fadsherman J. Powell Chris last week in terms

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<v Speaker 2>of the decision and kind of basically saying the f

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<v Speaker 2>that's not in a great place, like either way, there

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<v Speaker 2>are some risks to the employment picture. Their concerns still

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<v Speaker 2>about inflation. So this is there's kind of risks to

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<v Speaker 2>both sides of the equation and concerned about monetary policy

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<v Speaker 2>that it's hard to do right now in this environment.

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<v Speaker 2>So that to me sounds uncertain, unsure, but it doesn't

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<v Speaker 2>sound like you're saying any of that.

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<v Speaker 1>Look, the club here's the thing. We have this position

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<v Speaker 1>where there's only i mean between us and our main

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<v Speaker 1>competitors in the club model. In particular, we're only like

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<v Speaker 1>six and a half percent of the of the of

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<v Speaker 1>the total retail market, and we would definitely from a

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<v Speaker 1>club point of view, our consumers definitely skew sort of

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<v Speaker 1>more wealthy, you know, bigger basket sizes, but we do

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<v Speaker 1>serve everybody, and we don't see a great delta between

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<v Speaker 1>different income cohorts. You don't know, all right, that's more generations.

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<v Speaker 2>Well what about I mean, when you think about kind

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<v Speaker 2>of the environment, whichally when it comes into tariffs in

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<v Speaker 2>terms of pricing, how do you kind of figure out

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<v Speaker 2>where you can maybe raise price is where you can.

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<v Speaker 1>Well, it's such a great it's such a great question.

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<v Speaker 1>We and again not to sort of pivot, but one

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<v Speaker 1>of the powers of the club model is because you've

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<v Speaker 1>only got four thousand items in the club, those items

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<v Speaker 1>are curated. Yeah, and our merchants they are true professionals that,

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<v Speaker 1>like many of them, have been in their jobs decades

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<v Speaker 1>and they understand the value chain from end to end

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<v Speaker 1>better than anybody, and so they get the ability to

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<v Speaker 1>choose what's in the club, but they also get the

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<v Speaker 1>ability to work through where the inefficiencies are in the

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<v Speaker 1>supply chain. They've got deep relationship with the suppliers, so

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<v Speaker 1>you work through where the opportunities are between the suppliers too.

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<v Speaker 1>So I'll give you an example. Our roses that we

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<v Speaker 1>buy from Ecuador. The costs went up because you know,

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<v Speaker 1>the tariff environment changed, and so our merchants worked through

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<v Speaker 1>with the supplier, like what could we do? So we

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<v Speaker 1>move them in different ways so we have less packaging.

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<v Speaker 1>We we wrap them in the US now instead of

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<v Speaker 1>where we used to wrap them, And so you do

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<v Speaker 1>things like that that help you to manage the input costs.

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<v Speaker 1>That means you don't have to pass it on to

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<v Speaker 1>the consumer. And our job is to work through how

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<v Speaker 1>little you pass through, and you work through how late

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<v Speaker 1>you do it. So we'd always like to be last

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<v Speaker 1>last up. But we have the ultimate opportunity in the

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<v Speaker 1>club channel, and that is that we have choice because

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<v Speaker 1>we don't have to sell everything, so we the curation

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<v Speaker 1>actually is a superpower for us.

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<v Speaker 2>Does that mean you haven't raised prices on anything?

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<v Speaker 1>No, No, we see. I mean, look, here's the thing

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<v Speaker 1>there there are certain things that where prices move all

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<v Speaker 1>of the time. No, anyway, So produce would be a

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<v Speaker 1>good example of that, and there are some strictly teriff

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<v Speaker 1>for later. Yeah. What I would say to you is

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<v Speaker 1>that if I think about general merchandise would be there,

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<v Speaker 1>which is like all of the electronics and apparel and

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<v Speaker 1>all of those things.

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<v Speaker 2>The stuff that I have way too much in my home.

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<v Speaker 1>There's never enough, Please buy more.

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<v Speaker 2>But in terms of tariffs particularly pretty pressure on pricing.

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<v Speaker 1>Yeah, So what we see is in terms of what

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<v Speaker 1>people are buying. I think I mentioned this, but the

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<v Speaker 1>growth in the units that we've had is outpacing our

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<v Speaker 1>comps in general merchandise. So if you think about like

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<v Speaker 1>over the last few years, you had like packaged goods

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<v Speaker 1>through COVID became more expensive and they never really came down,

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<v Speaker 1>whereas general merchandise, we had the supply chain disruption, you

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<v Speaker 1>remember that, and the general merchandise inflated and then it

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<v Speaker 1>deflated rapidly, as was after all of the supply chain

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<v Speaker 1>disruptions disappeared, and at the end of last quarter, we

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<v Speaker 1>were still in a period of slight deflation in general merchandise,

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<v Speaker 1>so prices move all of the time. Our job and

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<v Speaker 1>our merchant's job, is to make sure that we give

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<v Speaker 1>people access to the price points they want and the

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<v Speaker 1>value that they want. Maybe it's worth mentioning, but in

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<v Speaker 1>Sam's Club, like, we're twenty five percent cheaper than retail

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<v Speaker 1>in general, so as we resist putting prices up because

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<v Speaker 1>that's in our DNA, were always going to be more

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<v Speaker 1>price competitive than everybody else.

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<v Speaker 2>So then you haven't raised any prices related to terrorst

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<v Speaker 2>We will.

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<v Speaker 1>We will be the last people to put prices up,

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<v Speaker 1>And some prices have gone up, but in the mix

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<v Speaker 1>I'm telling it so for sure. I mean we have

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<v Speaker 1>input price changes in some items and some come through

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<v Speaker 1>already and some is still to come through. But I

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<v Speaker 1>would tell you that, like, our job is not to

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<v Speaker 1>lead with putting prices up, and all of our sales

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<v Speaker 1>growth in Sam's Club is through unit growth, not inflation.

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<v Speaker 3>Okay, cool, I'm wondering what you're hearing from from your

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<v Speaker 3>team who's out there talking to the producers the American

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<v Speaker 3>producers of things we grow produce beef as well. We

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<v Speaker 3>had a Bloomberg News story last week about farmers and

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<v Speaker 3>as all that the Trump administration policies are taking on

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<v Speaker 3>farmers right now. Immigration just one of them. Tariffs on

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<v Speaker 3>soybeans are another one, as a result of fewer less

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<v Speaker 3>interest from China and Chinese buyers. What are you hearing

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<v Speaker 3>though on the immigration front, Because in some cases forty

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<v Speaker 3>percent of migrant workers are from outside forty percent of

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<v Speaker 3>farm workers rather are migrant workers, so they're coming from

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<v Speaker 3>outside the US, and that's a challenge for farmers to

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<v Speaker 3>actually find those employees right now. What are you hearing

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<v Speaker 3>from them?

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<v Speaker 1>Yeah, I'm not hearing. I don't have anything to add

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<v Speaker 1>or to offer on that topic. I would tell you

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<v Speaker 1>that we have brilliant farmer partners. We understand the value

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<v Speaker 1>change really well, and we have no in stock issues

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<v Speaker 1>or cost price issues.

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<v Speaker 3>So have they raised prices at all on American produce?

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<v Speaker 1>I you'd have to ask somebody else about the through

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<v Speaker 1>line on like employment and pricing prises. I think you

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<v Speaker 1>probably speak to lots of people are better informant.

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<v Speaker 3>What about from produce that comes outside of the United States.

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<v Speaker 3>I mean, we can't do everything here. We can't grow bananas,

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<v Speaker 3>we can't.

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<v Speaker 1>Grow a card. Avocados.

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<v Speaker 3>Yeah, tomatoes when they're out of season come from outside

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<v Speaker 3>of the US. What does that look like?

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<v Speaker 1>Yeah, I mean what it is, well, like the increasing.

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<v Speaker 3>Costs associated with terriffs because those will be or those

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<v Speaker 3>are tariff already. I mean beef that comes from Brazil present.

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<v Speaker 1>Erraors for example. Yeah, I mean, we we are we

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<v Speaker 1>definitely over index on US beef. The vast majority of

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<v Speaker 1>what we buy is US, the vast majority, and and

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<v Speaker 1>so you know, but we have choices about where we

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<v Speaker 1>buy from. This is the benefit of being this curated,

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<v Speaker 1>limited assortment retailer is that we get the choices to

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<v Speaker 1>buy from the places that where you give the consumers

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<v Speaker 1>great value and and great quality, which we're never going

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<v Speaker 1>to relent on. But you know, yeah, we buy items,

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<v Speaker 1>you know, we buy avocados as you said, from abroad,

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<v Speaker 1>and many other items, tomatoes when it's out of season,

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<v Speaker 1>and you know, the quality and the value. That will

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<v Speaker 1>never relent on the quality. But if the input costs increase,

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<v Speaker 1>then the input's costs will increase. But there's meant, there's

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<v Speaker 1>produce there are so many variables produce and beef. I

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<v Speaker 1>mean that there are so many variables that pushes the

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<v Speaker 1>costs down as well as up. So I think it's

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<v Speaker 1>a super complex situation. And I think that our farmers

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<v Speaker 1>are some of the best in the world, and I

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<v Speaker 1>think that our merchants know how to work with the farmers.

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<v Speaker 1>The thing, the best thing you can do for those

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<v Speaker 1>farmers is to give them great forecasts, allow them to

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<v Speaker 1>grow to those forecasts, and give them good prices that

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<v Speaker 1>allow them to run sustainable business models. And we do

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<v Speaker 1>a really good job of that.

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<v Speaker 2>Chris. You guys in retail, I'm sure we're even late

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<v Speaker 2>to talk about the holiday season and the upcoming holiday season.

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<v Speaker 2>When you think about assortment and what you want to

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<v Speaker 2>have inventory for consumers, how's it looking for this year?

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<v Speaker 2>Is it going to be a lot different from last year?

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<v Speaker 2>Are the supply channel there to get what you need

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<v Speaker 2>and what you want for your consumers?

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<v Speaker 1>Yeah, that's not an issue. We don't see any issues

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<v Speaker 1>with supply chain management in that way. A Sam's Club

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<v Speaker 1>in particular, we get really early. So you guys are

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<v Speaker 1>a Sam's Club now, which hopefully you know, please do

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<v Speaker 1>You'll see it's full of Christmas.

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<v Speaker 2>I know it tries it a little crazy.

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<v Speaker 1>Yeah, I mean, if I understand, is it so?

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<v Speaker 2>I mean Halloween hasn't even happened.

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<v Speaker 1>Yeah, Well, in the club channel, people like to be prepared,

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<v Speaker 1>so we get into a season early and then we

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<v Speaker 1>exit early. And that's kind of scarcity is part of

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<v Speaker 1>the value that we create and so so we're not

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<v Speaker 1>worried about it from a Sam's Club point of view.

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<v Speaker 1>But the thing I would say is that people just

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<v Speaker 1>love to celebrate, They love to buy, they love the seasons,

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<v Speaker 1>and so I think you'll find that certainly at Sam's Club.

0:11:24.160 --> 0:11:28.559
<v Speaker 1>People whether it's the general merchandise they buy pre Thanksgiving

0:11:28.600 --> 0:11:30.920
<v Speaker 1>and Christmas or the food that they buy for the season,

0:11:31.440 --> 0:11:33.240
<v Speaker 1>as long as you're giving them great value, they're going

0:11:33.280 --> 0:11:35.640
<v Speaker 1>to come to you and people will find a way

0:11:35.640 --> 0:11:36.280
<v Speaker 1>to celebrate.

0:11:36.840 --> 0:11:38.360
<v Speaker 2>One of the things we love about the Global Business

0:11:38.400 --> 0:11:44.880
<v Speaker 2>Form is we tackle everything climate change, you know, workforce, employment, economics, politics.

0:11:45.760 --> 0:11:47.720
<v Speaker 2>As a leader who's been at a company for a

0:11:47.720 --> 0:11:49.760
<v Speaker 2>long time, and I'm sure looking at everything that's going on,

0:11:49.960 --> 0:11:53.200
<v Speaker 2>what's top of mind for you, and an environment where

0:11:53.480 --> 0:11:56.400
<v Speaker 2>this pushback against certain initiatives, there's a lot of political

0:11:56.480 --> 0:12:00.480
<v Speaker 2>things going on, geopolitics. I'm just curious, you know, in

0:12:00.559 --> 0:12:02.520
<v Speaker 2>running what you guys do. And I know you're kind

0:12:02.559 --> 0:12:05.120
<v Speaker 2>of a well oiled machine in many ways, but I'm

0:12:05.160 --> 0:12:06.040
<v Speaker 2>just curious.

0:12:06.440 --> 0:12:09.880
<v Speaker 1>Yeah, I think, you know, in the in an environment

0:12:10.000 --> 0:12:13.760
<v Speaker 1>of change, and by the way, I like, changes are

0:12:13.800 --> 0:12:17.160
<v Speaker 1>constant and you've got to you've got to love it. Then.

0:12:17.360 --> 0:12:19.959
<v Speaker 1>I've always found that the best thing to do is

0:12:20.000 --> 0:12:23.440
<v Speaker 1>to focus on what you can control. And what you

0:12:23.440 --> 0:12:26.960
<v Speaker 1>can control is the culture you create as a business,

0:12:28.080 --> 0:12:31.280
<v Speaker 1>how you work with and treat your customers and your members,

0:12:31.320 --> 0:12:34.520
<v Speaker 1>the experiences that you create. You know, A great example

0:12:34.640 --> 0:12:38.480
<v Speaker 1>is is the e commerce business. We've just launched express

0:12:38.520 --> 0:12:41.000
<v Speaker 1>delivery from our clubs and people love it and they're

0:12:41.000 --> 0:12:41.559
<v Speaker 1>opting in.

0:12:42.520 --> 0:12:44.080
<v Speaker 3>Does the price change with delivery?

0:12:44.520 --> 0:12:47.839
<v Speaker 1>No, we have price parity. We have price so others don't.

0:12:47.960 --> 0:12:50.440
<v Speaker 1>We do. So we have price parity between clubs and

0:12:50.720 --> 0:12:53.920
<v Speaker 1>an online that's really important from a trust point of view.

0:12:54.880 --> 0:12:57.440
<v Speaker 1>And people are thanking us for our delivery from club

0:12:57.800 --> 0:13:00.600
<v Speaker 1>food and non food is growing at triple digits right now.

0:13:01.280 --> 0:13:04.240
<v Speaker 1>So I think, like, focus on what you can control.

0:13:04.440 --> 0:13:07.520
<v Speaker 1>Start with being great people, Start with being a great business.

0:13:07.559 --> 0:13:09.440
<v Speaker 1>Look after your associates so they can look after our

0:13:09.480 --> 0:13:13.839
<v Speaker 1>members and then you know that that generally will lead

0:13:13.880 --> 0:13:15.880
<v Speaker 1>to the right outcomes. So on that.

0:13:16.040 --> 0:13:18.720
<v Speaker 3>We'll hear from one of your big competitors tomorrow. Costco

0:13:18.800 --> 0:13:22.200
<v Speaker 3>reports earnings tomorrow. How do you make sure that people

0:13:22.480 --> 0:13:24.439
<v Speaker 3>join Sam's Club and not Costco?

0:13:25.120 --> 0:13:28.880
<v Speaker 1>Yeah? Look, Costco is a great competitor. We think that

0:13:28.920 --> 0:13:31.440
<v Speaker 1>we're great too, and we're doing a lot of good things.

0:13:31.880 --> 0:13:33.160
<v Speaker 1>What I would tell you is this.

0:13:34.000 --> 0:13:36.400
<v Speaker 2>Because you have an aggressive plan in terms of expansion.

0:13:36.480 --> 0:13:37.840
<v Speaker 1>Yeah, I remember about it.

0:13:37.920 --> 0:13:38.120
<v Speaker 2>I know.

0:13:38.240 --> 0:13:41.120
<v Speaker 1>Yeah, we're really excited about that plan. Actually, the club

0:13:41.160 --> 0:13:43.480
<v Speaker 1>channel in general is a relatively small channel. There's a

0:13:43.520 --> 0:13:45.680
<v Speaker 1>huge there's huge upside for the whole of the club channel.

0:13:45.720 --> 0:13:48.520
<v Speaker 1>And I would tell you this, good competition makes you better.

0:13:49.480 --> 0:13:52.679
<v Speaker 1>And I've never been afraid of good competition.

0:13:53.320 --> 0:13:56.199
<v Speaker 2>What about AI and how you guys are working?

0:13:56.280 --> 0:13:59.959
<v Speaker 3>Are you afraid of AI?

0:13:59.640 --> 0:14:03.000
<v Speaker 1>AI? We're trying to AI is a big topic everywhere now,

0:14:03.040 --> 0:14:07.120
<v Speaker 1>isn't it. You know, here's the thing we are. We're

0:14:07.160 --> 0:14:10.520
<v Speaker 1>excited about AI as a company, and I am personally too.

0:14:10.760 --> 0:14:11.960
<v Speaker 1>I think this idea of.

0:14:12.080 --> 0:14:13.680
<v Speaker 2>Are you guys using it a lot? A lot?

0:14:13.720 --> 0:14:15.400
<v Speaker 1>We've been using it for a long time, honestly. But

0:14:15.440 --> 0:14:18.160
<v Speaker 1>the generative AI and then the agentic AI that's coming

0:14:18.240 --> 0:14:22.520
<v Speaker 1>through too is really exciting. It's exciting for our members

0:14:22.560 --> 0:14:26.520
<v Speaker 1>and for our associates. What we do we pivot to growth.

0:14:26.640 --> 0:14:28.440
<v Speaker 1>How does this help us move faster, do more for

0:14:28.520 --> 0:14:32.160
<v Speaker 1>our associates and our members. How do we find different

0:14:32.200 --> 0:14:35.080
<v Speaker 1>routes to market? So that's exciting. Of course, we also

0:14:35.120 --> 0:14:38.600
<v Speaker 1>look at how do you find opportunities to take time

0:14:38.600 --> 0:14:40.480
<v Speaker 1>out of product launches and all of those kind of

0:14:40.480 --> 0:14:43.000
<v Speaker 1>things so that you're a better business. The one thing

0:14:43.040 --> 0:14:45.720
<v Speaker 1>that you may have seen is we also believe that

0:14:45.800 --> 0:14:49.120
<v Speaker 1>the opportunity to give people to empower people with the

0:14:49.240 --> 0:14:53.240
<v Speaker 1>use of AI but with an enterprise but with enterprise

0:14:53.360 --> 0:14:56.360
<v Speaker 1>data is really exciting. So whether it's in the office

0:14:56.480 --> 0:14:58.560
<v Speaker 1>or recently, we made an announcement a couple of weeks

0:14:58.600 --> 0:15:01.480
<v Speaker 1>ago at our holiday meeting where we gave our frontline

0:15:01.520 --> 0:15:06.720
<v Speaker 1>management access to open AI, to chat GBT and which

0:15:06.760 --> 0:15:09.200
<v Speaker 1>they can use to just go faster and do more.

0:15:09.200 --> 0:15:10.240
<v Speaker 1>And that's really exciting.

0:15:10.480 --> 0:15:12.320
<v Speaker 2>Yeah, it's kind of amazing. We're all kind of finding

0:15:12.320 --> 0:15:14.080
<v Speaker 2>our way through it. Chris, thank you so much.

0:15:14.160 --> 0:15:16.720
<v Speaker 1>Thank you for having me. I appreciate it, and yeah,

0:15:16.760 --> 0:15:17.960
<v Speaker 1>good luck, good luck.

0:15:17.800 --> 0:15:20.000
<v Speaker 2>Thank you as well. Chris Nicholas. He's the presidentcy of

0:15:20.040 --> 0:15:20.600
<v Speaker 2>Sam's Club.