Walmart released its annual report on Tuesday. It showed that the retailer's total revenue grew 3% to $514.4 billion in worldwide sales in the latest fiscal year.

Alongside the letter was CEO Doug McMillon's annual shareholder letter, in which he shared Walmart's full-throated embrace of change, five leadership lessons he has learned in the five years he has been CEO, and a general road map for the company's future:

Sam Walton showed us the way. He gave us a clear purpose and four timeless values. At Walmart, we save people money and help them live better — and we do it by serving others, striving for excellence, respecting everyone and acting with integrity.

Clear and constant.

You know what else is constant at Walmart? Change. As I visit with our associates all over the world and ask, "Other than our purpose and values, the only thing that's constant at Walmart is ..." and they respond: "Change!" It's a powerful mindset, and our people have it.

These past five years in this role have passed quickly, and it has been an exciting time to be at Walmart. Looking back, I'm not sure I could have imagined some of the things we're doing in our business today but, at the same time, it feels like we're just getting started.

Our customers and Sam's Club members are being served by associates who are better equipped to create new ways of shopping and put today's technology to work. Our goal is to make it easy, fast, friendly and fun to shop with us.

Consider:

• A busy mom can shop on our app or get through the store faster by finding the items on her list, thanks to the map feature on her Walmart app. She can make purchases with Walmart Pay and go digital to skip the pharmacy line and pick up a prescription.



• Outside our stores, customers can pull into a pickup spot, have their personal shoppers put their order in their trunk and off they go. eCommerce has finally come to the food business and in a big way.

• We're putting technology to work with an autonomous scanner that checks our sidecounters to help us improve in-stock levels, and an autonomous floor cleaner that carries a camera to gather data on our product features to share with a FAST Unloader system in the back room that prioritizes items for restocking.

• Our Sam's Clubs are becoming more digital. With our Scan & Go app, customers bypass the checkout line and pay for items on their mobile device, and now we're testing computer vision instead of barcodes to make the process even faster. Our new Membership Express can cut the time it takes to sign up from eight minutes to fewer than 60 seconds.

The ways we can use technology today and in the future are exciting, but our business is still a people business. We are people-led and tech-empowered, and that makes investing in our associates a strategic priority. On any given day, our associates may be attending one of our new training academies in the U.S. or entering our new fast-track leadership program for Walmart International.

They may be benefitting from our expanded parental-leave policies or beginning their careers at Walmart with a starting wage 50 percent higher than it was four years ago. And they may be extending their education with a $1-a-day college degree through our Live Better U program. We've made a lot of changes with respect to opportunities for our associates, and there's more to come.

No doubt the pace of change continues to increase.

Recently, I was visiting with a group of students, many of whom are joining our company, and one of them asked me what I had learned during my five years in this position. Surprises? Revelations?

It's a good question, and I've been giving it some thought. These five lessons came to the top of the list:

1. Leadership — You can't push a rope, but you can pull it. In other words, sometimes you just can't lead from behind. You can't muscle or push things along. As a leader during transformation, you have to be out in front — show that you want to learn, be curious, introduce new ideas, ask questions. Our people are talented, competitive and have a sense of urgency. When they hear about a better way of doing things, they engage, learn and act.

2. Risk — There is no growth without change, and there is no meaningful change without risk. So, get comfortable with an intelligent level of risk. Otherwise, the law of diminishing returns sets in as always doing the same things the same way takes over. We invested substantially in wages, associate education, pricing and eCommerce. We acquired Flipkart, Jet and others, and we partnered with global technology companies in places like China and Japan. We don't know what Sam would have done in these moments, but we know he would have been adapting — and he would have been aggressive. We're drawing on that legacy today and tapping into that DNA.

3. Time Horizon — We're playing the long game. Our priority is to position our company for long-term success. History has shown us that companies that focused too much on the short term were doomed to fail. Managing our business on a daily basis is important, but our most important strategic decisions are made in light of what we want our company to become for the next generation.

4. Our Associates — People will surprise you. Several times a week I see or hear about something creative our associates have done. It's inspiring to see their ingenuity and pace. Around the world, Walmart associates feel more comfortable taking risk. They're launching minimum viable products to test and learn from. These have enough function to satisfy early adopters, whose feedback informs future design. Result: We go from Product 1.0 to Product 2.0 a lot faster. This is a powerful unlock. We've always said that our people make the difference. We're certainly seeing that today.

5. Trust — It's a challenge to have the broader world know the Walmart we know. As we strive to make our company better, we will also look for ways to build trust by communicating the good work our people are doing and its impact. Included is the work we are doing to strengthen our culture of integrity and improve our compliance talent, processes and systems. In our supply chain, we are eliminating waste, using more renewable energy, reducing carbon emissions and making our items and the packages they come in healthier and more sustainable. Of course we aren't perfect. We make mistakes. But, if the world could see all of the hard-working, well-intentioned people inside our company who are making things better in their communities and in the world, I'm convinced they would be moved by it all. I am.



The progress we're making is reflected in our results. Last fiscal year, we increased total revenue by 3 percent to $514.4 billion, and we generated $27.8 billion in operating cash flow.

Breaking it down, Walmart U.S. grew comp sales 3.6 percent, excluding fuel — the highest annual growth rate in a decade — and eCommerce sales increased 40 percent, nearly doubling the sales of that business over the past two years. And momentum continued at Sam's Club with comp sales growth of 3.8 percent, excluding fuel.

Walmart International posted positive comps in eight of our markets, including the four major markets, as we also see our digital transformation and innovations taking hold outside the U.S.

In Mexico, many of our customers don't have bank accounts, so the team there launched a new app called Cashi that acts as a digital bank account. At our stores, customers exchange cash for an electronic deposit onto their mobile device then use the app to shop in the store, online, and even to pay their other bills.

In many parts of China, same-day delivery really means same-hour delivery. To meet that demand, we invested in a crowd-sourced delivery platform, and now customers in some locations can receive their merchandise within an hour of placing the order.

We are also making good progress on omnichannel initiatives in places like Canada and in Japan where we are partnering with eCommerce leader Rakuten to offer grocery delivery.

India has 1.3 billion people and an economy approaching $3 trillion, yet its eCommerce business is less than 3 percent. With our acquisition of Flipkart, we have positioned ourselves for growth in one of the top three markets in the world.

We are deliberate about where and how we operate. For example, we finalized the majority sale of the business in Brazil, and we continue to explore ways to best serve our customers around the world. This is a period of significant change at Walmart. I think the pace and magnitude of our changes are critical to the company's future as we adapt to an environment that is changing more quickly all the time.

We are changing how we work and what we do without changing our purpose and our values. To our customers, thank you. We'll continue to work hard every day to earn your trust and business. To our associates, we are proud of you. Keep it going. To our shareholders, thank you for your interest in our company and your continued support.

Doug McMillon, President and Chief Executive Officer, Walmart Inc.