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Every quarter, Walmart drops a delivery stat, and every quarter the press reaches for the drones. One million drone deliveries! Airdropped in minutes! Cute. Now let me decode what actually matters in this print, because it isn't the flying robots.

Here's the number I'd circle. Store-fulfilled delivery sales in the U.S. have more than doubled over the past two years. That's CEO John Furner on the May 21 call. Read that again. Walmart didn't build this on a wave of new fulfillment centers. It turned roughly 4,600 stores it had already paid for into delivery nodes. The asset was sitting on the balance sheet the whole time. That's the game.

The speed metrics back it up. More than 36% of store deliveries hit customers within 3 hours last quarter. CFO John David Rainey says the sub-hour tier is growing fastest, and that Walmart can now reach about 60% of the U.S. in 30 minutes or less. Fast-delivery category sales? Up more than 50% year over year, per Walmart U.S. chief David Guggina. On the marketplace side, same-day and next-day units jumped almost 150%.

Rainey's line to put on a sticky note is fast fuel frequency. Translation for the operators reading this: speed isn't a cost center, it's a frequency machine. Faster delivery means more orders per customer per month, which means a larger share of wallet, which is the metric that actually compounds. Walmart figured out that speed buys loyalty cheaper than coupons do.

So where's Amazon in all this? Playing defense, structurally. Amazon spent twenty years and tens of billions buying proximity to the customer. Walmart already had it. A store within ten miles of 90% of Americans is a last-mile network that's been fully depreciated. You cannot out-CapEx that. That's the moat, and it's why I keep telling clients the delivery race tilts toward Walmart, not away from it.

Now, the part nobody on the call wanted to dwell on. What does a 30-minute drop cost to fulfill, and is it profitable? Doubling volume is easy if you're eating the freight. Walmart gave us topline growth and a record of customer satisfaction. It did not provide us with the contribution margin for these orders. Until it does, I'm filing fastest-growing sub-hour delivery under impressive-but-unproven. Speed that loses money at scale is just Instacart with a bigger logo.

And the drones? 66 locations, 4 states, a path to 270 stores with Wing by 2027. Fine. It's a rounding error on a business doing hundreds of billions. Great earnings-call visual, worse P&L line. Watch it, don't weigh it.

The takeaway for executives and investors: Walmart's real innovation here isn't technology, it's accounting. It's monetizing infrastructure that the market had already written off. Whether the unit economics hold is the open question, and it's the one I'd be asking on the next call. The drones can keep the headlines. I'll take the store footprint.

Everybody's going to write the gas-pump story. That's the easy one. Volumes spiked, members showed up for cheap fuel during the price surge, and sales records fell in all four three-week periods. Fine.

The real story is the renewal rate: 89.7% worldwide, 92.2% in the US and Canada. That's the number that prints money. Membership income grew 10.7%, and 75% of sales now run through Executive members. Costco isn't a retailer that happens to sell fuel. It's a subscription business that happens to operate warehouses.

Watch the margin line, though. Gross margin slipped 21 basis points. Vachris and Millerchip are spending it down on purpose, cutting everyday prices on eggs, beef, and Kirkland crispy wings from $16.99 to $14.99. That's not a weakness. That's the flywheel working: lower prices pull traffic, traffic renews memberships, and memberships fund lower prices.

EPS landed at $4.93, up 15%, a few cents under the $4.98 Street estimate. Costco missed the bottom line, and nobody who actually understands this model lost sleep over it.

Here's the question I'd ask: how long can they keep widening the value gap before the math forces a membership-fee increase? That's the trade worth watching

Costco's headline-grabbing gas volumes are real but cyclical, while the 89.7% renewal rate and 10.7% membership-income growth are the durable engine that actually funds the business. By deliberately giving up 21 basis points of margin to cut prices on eggs, beef, and Kirkland staples, management is paying to keep that flywheel spinning: lower prices drive traffic, traffic renews memberships, and memberships subsidize lower prices.

Tuesday, June 2

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