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CNBC Transcript: CNBC Exclusive: Wal-Mart Stores President & CEO Doug McMillon Speaks with CNBC's Carl Quintanilla on "Squawk Alley" Today

WHEN: Today, Thursday, February 19th

WHERE: CNBC's "Squawk Alley"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with CNBC's Carl Quintanilla and Wal-Mart Stores President & CEO Doug McMillon today from Bentonville, Arkansas. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000355819.

All references must be sourced to CNBC.

CARL QUINTANILLA: WE ARE LIVE IN BENTONVILLE, ARKANSAS, AT A SUPER STORE BY WALMART'S HEADQUARTERS. THE DOW COMPONENT AS YOU MAY KNOW BY NOW BEATING ON ITS EARNINGS THIS MORNING BUT THE BIGGER NEWS, THE COMPANY ANNOUNCING A WAGE HIKE FOR HALF A MILLION OF ITS EMPLOYEES. JOINING US IN A CNBC EXCLUSIVE DOUG McMILLON PRESIDENT AND CEO OF WALMART STORES. DOUG THANKS SO MUCH FOR HAVING US.

DOUG McMILLON: THANKS FOR COMING TO ARKANSAS.

QUINTANILLA: A LITTLE COLD BUT VERY NICE.

McMILLON: YEAH.

QUINTANILLA: YOU ARE THE NATION'S BIGGEST PRIVATE EMPLOYER, MORE THAN A MILLION EMPLOYEES IN THIS COUNTRY AND YOU ARE RAISING YOUR MINIMUM STARTING WAGE, WHY NOW?

McMILLON: WE WANT TO PROVIDE A GREAT CUSTOMER EXPERIENCE AND WE WANT OUR ASSOCIATES TO KNOW HOW MUCH WE VALUE THEM. THE CHANGES THAT WE'RE MAKING INCLUDE STRUCTURAL CHANGES IN THE STORES WAGE INCREASES, TRAINING PROGRAMS AND THIS COMPANY AS YOU PROBABLY KNOW HAS ALWAYS BEEN A PEOPLE BUSINESS, IT'S A PEOPLE BUSINESS TODAY AND WILL BE TOMORROW. AND SO OUR ASSOCIATES, THEIR PRIDE IN THE COMPANY, THE OWNERSHIP THAT THEY TAKE, THOSE THINGS ARE VITAL TO RUNNING A GOOD RETAIL BUSINESS AND TODAY WE'RE INVESTING IN THEM AND WE WANT THEM TO KNOW HOW IMPORTANT THEY ARE.

QUINTANILLA: YOU'VE BEEN A TARGET FOR A LONG TIME, FROM CRITICS WHO ARGUE THAT YOU DIDN'T PAY EMPLOYEES ENOUGH. DO YOU WISH YOU HAD DONE THIS EARLIER AND IF SO WHY DIDN'T YOU?

McMILLON: WE MAKE WAGE ADJUSTMENTS ALL THE TIME. WE DECIDED THIS IS A GOOD MOMENT TO BE BOLD IN THE CHANGES WE'RE MAKING. AND AGAIN IT'S REALLY AIMED AT RUNNING A GOOD BUSINESS. ANNUALLY WE GO THROUGH WAGE AND BENEFIT REVIEWS AND MAKE ADJUSTMENTS. WE WANT TO MAKE SURE EVERYBODY IS CRYSTAL CLEAR, HOW VITAL OUR STORE EXPERIENCE IS TO OUR FUTURE. AND AS YOU KNOW WE'RE MAKING INVESTMENTS IN E-COMMERCE TOO, BUT WE CAN'T WIN IF WE DON'T CREATE A SITUATION WHERE DIGITAL AND PHYSICAL COME TOGETHER IN A WAY THAT CUSTOMERS ARE WELL SERVED. AT THE END OF THE DAY, EVEN THOUGH SOME OF THOSE INVESTMENTS IN MOBILE, FOR EXAMPLE, ARE REALLY IMPORTANT TO OUR FUTURE THIS WILL COME BACK TO BEING A PEOPLE BUSINESS. CUSTOMERS NEED TO BE SERVED. ASSOCIATES NEED TO BE HAPPY AND LOVE THEIR JOB. I'VE WORKED FOR WALMART A LONG TIME. IT'S CREATED A TREMENDOUS OPPORTUNITY FOR ME, IT HAS CREATED A TREMENDOUS OPPORTUNITY FOR MANY OTHER PEOPLE, AND WE WANT TO KEEP THAT GOING.

QUINTANILLA: YOU'VE BEEN QUOTED AS SAYING WHEN WE DON'T GET IT RIGHT, WE ADJUST. WHAT WAS THE PART YOU WEREN'T GETTING RIGHT? WERE YOU NOT ATTRACTING THE RIGHT PEOPLE? DID YOU HAVE THE RIGHT PEOPLE, BUT WERE SIMPLY NOT PAYING THEM ENOUGH?

McMILLON: IN RETAIL WE MAKE SO MANY DECISIONS. WE MAKE DECISIONS ABOUT HOURS THAT WE ALLOCATE, DECISIONS ABOUT THE FRONT END, THE BACK OF THE STORE, HOW MANY DEPARTMENT MANAGERS WE HAVE AND THERE'S SO MANY THAT SOMETIMES YOU CAN MAKE INDEPENDENT DECISIONS AND WHEN YOU ADD THEM ALL UP IT DOESN'T WORK AS WELL AS IT SHOULD. IT'S A SYSTEM. AND SO WHAT WE'RE TRYING TO DO IS TAKE THIS WHAT FEELS TO ME LIKE A LADDER OF OPPORTUNITY AND MAKE SURE THAT EACH RUNG ON THAT LADDER, WHETHER YOU'RE A NEW ASSOCIATE JOINING AS A CASHIER OR BEEN WITH US 15 OR 20 YEARS AND RUN A DEPARTMENT EVERYTHING FROM THE STARTING WAGE TO TRAINING PROGRAMS IN PLACE TO THE NUMBER OF DEPARTMENT MANAGERS WE HAVE FOR EXAMPLE, ALL THOSE THINGS ARE IN PLACE TO MAKE THE SYSTEM WORK. SO WE'RE ALWAYS FINE TUNING IT. TODAY WE'RE ANNOUNCING A WIDER RANGE OF CHANGES THAN WE NORMALLY WOULD DO AT ONCE.

QUINTANILLA: HAVE YOU HAD OTHER COMPANIES IN RECENT WEEKS AND MONTHS START TO RAISE WAGES A GAP, IKEA, AETNA, WERE YOU SENSING RETENTION WAS GOING TO GET TOUGHER AS THE JOB MARKET MOVED INTO THIS CYCLE OF IMPROVEMENT?

McMILLON: IT'S GREAT TO SEE THE JOB MARKET GETTING BETTER AND THE MARKET WORKS SO WE'RE ADJUSTING TO THAT MARKET, TRYING TO MAKE SURE WE'RE APPROPRIATELY AHEAD OF IT AND WE'LL CONTINUE TO MOVE IF WE NEED TO. AT THE END OF DAY WE HAVE TO HAVE GREAT TALENT. WE HAVE ABOUT 75% OF OUR STORE MANAGEMENT IN THE UNITED STATES THAT COMES FROM OUR HOURLY RANKS SO TODAY'S CASHIER IS TOMORROW'S STORE MANAGER. TOMORROW'S STORE MANAGER MAY HAVE MY JOB. WE WANT TO MAKE SURE THAT OPPORTUNITY IS THERE FOR PEOPLE AS IT HAS BEEN FOR SO MANY OF US IN THE PAST.

QUINTANILLA: I DON'T NEED TO TELL YOU, LOOKING AT A MAP OF MINIMUM WAGES IN THIS COUNTRY, 19 STATES NOW HAVE MADE A MOVE. ARKANSAS HAD A VOTE HERE NOT TOO LONG AGO.

McMILLON: I VOTED FOR THAT INCREASE BY THE WAY.

QUINTANILLA: YOU VOTED FOR THAT.

McMILLON: YEAH.

QUINTANILLA: PEOPLE WILL SAY LOOK THEY SAW IT COMING, THEY SAW IT WAS A POLITICAL INEVIDENTIBILITY THEY'RE TRYING TO GET IN FRONT OF IT AND LOOK LIKE THE GOOD GUY. WHAT DO YOU SAY TO THOSE FOLKS?

McMILLON: WE ACTUALLY ARE A GOOD GUY. IT'S NOT VERY COMPLICATED. WE LISTENED TO OUR ASSOCIATES IN LOTS OF WAYS AND WE ARE IN THE STORES, WE KNOW WHAT REALITY LOOKS LIKE AND WE ARE MAKING AN INVESTMENT TO IMPROVE THAT. WE WANT HAPPY CUSTOMERS THAT COME BACK AND MORE CUSTOMERS. THIS IS ABOUT RUNNING A GOOD BUSINESS.

QUINTANILLA: DO YOU BELIEVE THAT IT IS NO LONGER POSSIBLE TO GET BY IN THIS COUNTRY AT $7.25?

McMILLON: I THINK THE MARKET WILL WORK. THERE MAY BE SOME PEOPLE THAT NEED TO MOVE UP. WHAT WE'RE GOING TO DO IS WHAT'S BEST FOR OUR BUSINESS AND AGAIN, IT'S NOT JUST ABOUT THE STARTING WAGE RATE. IT'S ABOUT DEPARTMENT MANAGERS YOU KNOW, MOVING TO $13 IN THE SUMMER AND NEXT YEAR TO $15. IT'S ABOUT HOW ALL THE PIECES FIT TOGETHER.

QUINTANILLA: BUT I DON'T NEED TO TELL YOU, YOU WILL BE SEEN AS SOMEWHAT OF A POLITICAL TELL, RIGHT? I KNOW YOU'RE PROBABLY – ARE YOU GOING TO WEIGH IN ON WHAT THE FEDERAL MINIMUM WAGE SHOULD BE?

McMILLON: NO.

QUINTANILLA: OR ANYTHING LIKE THAT.

McMILLON: THAT'S FOR SOMEBODY ELSE TO SORT OUT. WE'RE ABOUT RUNNING A GOOD BUSINESS.

QUINTANILLA: MARISSA MAYER ON THE BOARD THIS MORNING, TWEETED GREAT DECISION, GREAT LEADERSHIP DECISION, BY YOU. WAS ANYONE IN PARTICULAR OTHER THAN YOURSELF AN INFLUENCE IN MAKING THIS MOVE?

McMILLON: OUR BOARD WAS IMPORTANT IN THIS DECISION AS WERE THE LEADERS IN THE COMPANY THAT I WORK WITH ON A DAILY BASIS. IT WAS A TEAM EFFORT, A TEAM DECISION, AND WIDELY SUPPORTED. WE'RE ALL VERY EXCITED ABOUT IT. I'VE BEEN LOOKING FORWARD TO TODAY FOR A WHILE TO HAVE AN OPPORTUNITY TO SAY THANK YOU TO OUR ASSOCIATES, TO LET THEM KNOW HOW IMPORTANT THEY ARE AND GIVE 500,000 PEOPLE A RAISE, THAT'S KIND OF A RARE DAY. WE'RE ENJOYING IT.

QUINTANILLA: YOU SAID ONE OF YOUR BEST DAYS AT WALMART.

McMILLON: I'M SURE IT WILL BE, YEAH.

QUINTANILLA: THE NUMBER, RIGHT, I KNOW, I DON'T WANT TO BELABOR THE NUMBER, HOW DID YOU SETTLE ON $9 AND THEN $10? BECAUSE BY SOME ESTIMATES IT'S RIGHT AROUND OR A LITTLE ABOVE THE INDUSTRY AVERAGE FOR A CASHIER, BUT THERE ARE SOME COMPETITORS WHO MIGHT PAY A LITTLE BIT MORE THAN YOU ARE PAYING.

McMILLON: WHEN YOU THINK ABOUT THE SYSTEM YOU TRY TO CREATE FOR YOUR ASSOCIATES TO BUILD THE OPPORTUNITY LADDER YOU THINK ABOUT A NUMBER OF COMPONENTS. WE DIDN'T WANT TO TAKE ALL THE INVESTMENT AND PUT IT IN A STARTING WAGE RATE. WE WANTED TO INVEST IN MOVING THEM ALONG THE PIPELINE. WHAT ASSISTANT MANAGERS MAKES MATTER, WHAT DEPARTMENT MANAGERS MAKE MATTERS, STORE MANAGERS, AND AVERAGE MANAGER IN THE U.S. IN A STORE IS GOING TO MAKE IF YOU'RE AN ASSISTANT $50,000 IF YOU'RE A STORE MANAGER, AS HIGH AS $170,000 AND WE THINK OF ALL THOSE LEVELS AS WE TRY TO CREATE THE SITUATION WHERE WE CAN FIND GREAT STORE MANAGERS FOR TOMORROW AND PEOPLE THAT WANT TO BE A CASHIER BECAUSE IT FITS INTO THEIR LIFESTYLE FOR A SUSTAINED PERIOD OF TIME, WE WANT THEM TO FEEL WELL REWARDED FOR WHAT THEY DO.

QUINTANILLA: WE SHOULD POINT OUT YOU'RE DOING -- IT'S NOT JUST ABOUT THE STARTING NUMBER, BUT IT'S ABOUT HAVING A MORE FIXED SCHEDULE, IT'S ABOUT --

McMILLON: THAT'S RIGHT.

QUINTANILLA: HAVING MORE SECURITY IN YOUR WAGE AS A DEPARTMENT CHIEF OR A DEPARTMENT HEAD, RIGHT HERE, SAY PHARMACY, WHERE YOU ARE IN CHARGE OF REALLY RETAINING AND HANDLING THE STARTING EMPLOYEES.

McMILLON: THE SCHEDULING CHANGE IS ALSO IMPORTANT AND WE WANT TO RUN STORES THAT ARE STAFFED IN A WAY THAT SERVE CUSTOMERS EFFECTIVELY. CUSTOMERS DON'T ALL SHOP IN THE MIDDLE OF THE WEEK. THEY SHOP ON WEEKENDS, SHOP AT NIGHT, AND IT TURNS OUT THAT SOME OF OUR ASSOCIATES WANT FIXED SCHEDULES, THEY WANT TO KNOW WHAT THEIR SCHEDULE IS GOING TO BE, THEY WANT TO KNOW WHAT THEIR HOURS ARE GOING TO BE. OTHERS WANT SOME FLEXIBILITY IN THEIR SCHEDULE AND THEY MAY WANT TO MOVE AROUND, GOING TO SCHOOL OR HAVE OTHER THINGS GOING ON. WE'VE BEEN PILOTING A NEW SCHEDULING SYSTEM, A FIXED AND FLEX APPROACH TO SETTING HOURS AND THAT'S GONE VERY WELL IN PILOT SO WE'LL BE EXPANDING THAT.

QUINTANILLA: HEARD ANY WORD FROM THE WHITE HOUSE, ANY REACTION?

McMILLON: NO. BEEN BUSY THIS MORNING.

QUINTANILLA: I CAN IMAGINE. WE'LL TALK ABOUT THE QUARTER IN A SECOND, BUT DOES IT SEEM TO YOU BROADLY, NOT JUST WITHIN WALMART, BUT BROADLY WAGES IN THIS COUNTRY, ESPECIALLY THE LOWER INCOME, ARE MAKING A TURN?

McMILLON: YEAH, I DO THINK THAT THEY'RE GOING UP. AND AS YOU KNOW WE OPERATE IN 27 COUNTRIES AROUND THE WORLD SO WE DEAL WITH INFLATIONARY ENVIRONMENTS RELATED TO WAGES IN OTHER PLACES. CHINESE WAGES HAVE BEEN GOING UP WAGES IN LATIN AMERICA HAVE BEEN GOING UP. I THINK THAT'S A GOOD THING. IN OUR CASE, AS THE ECONOMY HOPEFULLY GENERATES MORE JOBS, AND THE MIDDLE INCOME IN THIS COUNTRY AND OTHER COUNTRIES GETS STRONGER IT WILL BE GOOD FOR OUR BUSINESS.

QUINTANILLA: YOU EXPECT COMPETITORS TO MATCH? STOCKS LIKE TARGET AND KROEGER ARE DOWN TODAY SOME BELIEVE BECAUSE INVESTORS EXPECT THEY WILL HAVE TO MATCH.

McMILLON: I THINK THE COMPETITIVE MARKETPLACE WORKS AND THEY'LL DO WHAT'S BEST FOR THEIR BUSINESS.

QUINTANILLA: YOU MUST HAVE DONE SOME ANALYSIS IN ALL OF THIS THAT SAID ALL RIGHT WHAT HAPPENS IF WE DON'T DO THIS, RIGHT? WHAT WERE THE LIABILITIES OF STAYING AT THE WAGES YOU WERE AT?

McMILLON: WE DIDN'T THINK ABOUT THAT MUCH. AS WE LOOKED AT THE SITUATION THAT WE HAD IN STORES AND DECIDED THAT WE WANTED TO CHANGE STRUCTURE AND THAT WE WANTED TO MAKE OTHER CHANGES IT WAS PRETTY CLEAR TO US THAT WE WANTED TO MOVE UP. IT WAS JUST A MATTER OF HOW MUCH. AND SO IN RECENT WEEKS AND MONTHS WE'VE BEEN DEBATING THAT PARTICULAR ISSUE. WE STARTED PATHWAYS WORK WELL OVER A YEAR AGO AND THAT WORK AS IT TESTED OUT PERFORMED REALLY WELL AND GAVE US A PIECE OF TRAINING TO IMPROVE AND THEN WE MADE THE WAGE CHANGE AND THE STRUCTURAL CHANGE AND IT'S HOW IT ALL COMES TOGETHER THAT I THINK IS GOING TO RESULT IN A STRONGER BUSINESS.

QUINTANILLA: IT'S ALWAYS A BALANCE FOR BIG COMPANIES INVESTING IN LABOR, CAPEX, VERSUS MAKING A BUYBACK, HIKING A DIVIDEND. YOU'VE BEEN ABLE TO DO BOTH BUT IS THIS MORE SATISFYING THAN DOING A BUYBACK OR DIVIDEND HIKE?

McMILLON: YES IT IS. BUT THERE'S A BALANCE TO IT ALL. WE HAVE LOTS OF STAKEHOLDERS, SHAREHOLDERS MATTER, CUSTOMERS MATTER AND ASSOCIATES. PRINCIPALLY THE WAY WE THINK ABOUT IS THAT IF WE SERVE CUSTOMERS WELL BY TAKING CARE OF OUR ASSOCIATES AND HAVING A GREAT WORK ENVIRONMENT OTHER THINGS WORK OUT. SHAREHOLDERS BENEFIT IN TIME AND WE CERTAINLY HAVE SEEN THAT IN THE HISTORY OF THE COMPANY AND THAT'S WHAT I EXPECT GOING FORWARD.

QUINTANILLA: LET'S TALK ABOUT THE QUARTER. U.S. COMPS PRETTY NICE AT 1.5. AFTER THE THIRD QUARTER SEEMED LIKE IT IS MAKING A TURN. ARE YOU COMFORTABLE SAYING U.S. COMPS HAVE TURNED?

McMILLON: WE GOT HELP FROM LOW FUEL PRICES, NO DOUBT. WE GOT TAILWINDS IN OTHER AREAS AS WELL. THE QUALITY OF OUR STORE EXPERIENCE HAS IMPROVED SOME. BUT WE WOULD TELL YOU WE STILL HAVE A LOT OF WORK TO DO. IT DOESN'T TURN OVERNIGHT. SO I THINK AS THE MONTHS AND THE QUARTERS GO ON, WE CAN BUILD A BETTER STORE EXPERIENCE THAT WILL CREATE SUSTAINABLE AND POSITIVE COMP NUMBERS. BUT I DON'T WANT TO UNDERESTIMATE HOW MUCH HELP WE GOT IN THE FOURTH QUARTER EXTERNALLY.

QUINTANILLA: PREVIOUSLY YOU'D SAID PEOPLE WERE SAVING MONEY ON GAS, BUT THEY WERE SAVING IT. WEREN'T NECESSARILY SPENDING IT ON DISCRETIONARY ITEMS. HAS THAT CHANGED?

McMILLON: WHAT WE SAW IN THE FOURTH QUARTER WE WOULD ESTIMATE THE AVERAGE HOUSEHOLD IN THE U.S. SAVED ABOUT $176 ON GASOLINE AND A BIG CHUNK OF THAT, WELL OVER HALF OF IT, WAS SPENT ON FOOD AND PRIMARILY FOOD INFLATION PLAYED A ROLE IN THAT PROCESS. BEEF PRICES ARE UP AND OTHER THINGS HAVE GONE UP. WE HAVE -- WE HOPE WE'RE SEEING SOME CONSUMER DEBT LEVELS COME DOWN IN SOME AREAS, MORTGAGE RATES BEING LOW IS HELPFUL. THE WEATHER WAS BETTER IN THE FOURTH QUARTER TOO. ANOTHER TAILWIND. AS COLD AS IT IS HERE IN THE LAST FEW WEEKS, BUT LAST YEAR IN DECEMBER AND JANUARY WERE TOUGHER FROM A WEATHER POINT OF VIEW THAT WHAT WE SAW THIS YEAR.

QUINTANILLA: INTERESTING. I SAW SOME STATS OUT OF GOLDMAN THAT ARGUED THERE'S ZERO – ALMOST ZERO CORRELATION BETWEEN GAS PRICES AND WALMART'S U.S. COMPS, WHICH DIDN'T SEEM TO MAKES SENSE.

McMILLON:I HAVEN'T SEEN THAT.

QUINTANILLA:ON A TWO MONTH LAG I THINK IT SHOWS UP A LITTLE BIT MORE, BUT WERE YOU SURPRISED AT HOW LONG IT TOOK GAS PRICE OR GAS DEFLATION TO FEED INTO COMPS?

McMILLON: THERE WAS A LAG. WE SAW MORE IMPACT AS WE WENT INTO DECEMBER FOR EXAMPLE THAN WE DID IN NOVEMBER. I WISH WE COULD PRECISELY QUANTIFY WHAT FUEL PRICES MEAN TO WALMART. I DON'T THINK THAT'S REALLY POSSIBLE. BUT AS FUEL GOES UP, YOU KNOW, WHEN IT WAS $4 A GALLON, WE DEFINITELY FELT THAT HEADWIND AND AS IT DROPPED TO $2 AND CHANGE WE DEFINITELY FELT THAT TAILWIND.

QUINTANILLA: ARE YOU SEEING ANY LESS LUMPINESS IN TERMS OF PEOPLE BUYING AROUND A PAYCHECK CYCLE?

McMILLON: PAYCHECKS ARE STILL AN ISSUE. THERE MIGHT HAVE BEEN A LITTLE BIT OF RELIEF IN THAT AND ONE OTHER STAT THAT'S INTERESTING THAT MAY BE RELATED TO IT IS HOW RURAL STORES HAVE PERFORMED RELATIVE TO MORE SUBURBAN AND URBAN STORES. WITH FUEL PRICES GOING DOWN, PEOPLE ARE MORE COMFORTABLE DRIVING AND WE'VE SEEN A LIFT IN TRAFFIC IN OUR RURAL MARKETS.

QUINTANILLA: LOOKING BACK AT THE HOLIDAYS, HAS BLACK FRIDAY OUTLIVED ITS USEFULNESS AS A TELL FOR THE RETAIL SEASON? BECAUSE SOME OF THOSE NUMBERS CAME OUT THAT WEEKEND AND PEOPLE FREAKED OUT.

McMILLON: YEAH. NO DOUBT E-COMMERCE AND MOBILE COMMERCE HAVE CHANGED THE PROFILE OF THE HOLIDAY SALES PERIOD. PEOPLE HAVE ACCESS NOW TO AN ITEM ANY TIME THEY WANT TO SHOP, YOU KNOW. I THINK THANKSGIVING MORNING I WAS WATCHING THE PARADE AND ORDERING ON WALMART.COM, BUT LATER THAT AFTERNOON AND EVENING I WAS IN A STORE. AND I THINK CUSTOMER BEHAVIOR HAS DEFINITELY CHANGED FOREVER. MOBILE IS A BIG FORCE. WE SAW 70% OF OUR TRAFFIC MOVE TO MOBILE AS OPPOSED TO OUR WEBSITE OVER THE HOLIDAY PERIOD. THE GOOD NEWS FOR US IS THAT CUSTOMERS USE THEIR MOBILE DEVICES IN STORES. THEY DON'T REALLY THINK ABOUT THE SEPARATION AS IT RELATES TO SHOPPING. LIKE WE SOMETIMES DO. IT'S QUITE SEAMLESS. AND I THINK THAT WILL HAVE AN IMPACT NEXT HOLIDAY AS WELL. AS WE THINK ABOUT OUR PLANNING FOR NOVEMBER AND DECEMBER AND JANUARY, WE HAVE AN APPROACH THAT INCLUDES OUR E-COMMERCE BUSINESS AS WELL AS OUR STORE'S BUSINESS. THE KEY FOR US IS HOW WE PUT THEM TOGETHER. SO WE ARE DEFINITELY THINKING A LOT ABOUT THAT.

QUINTANILLA: SPEAKING OF TECHNOLOGY, APPLE PAY. YOU'VE ALWAYS SAID YOU WOULD GO WHERE THE CUSTOMERS WANT TO GO. YOU'RE ON PINTEREST. BUT APPLE PAY HAS NOT BEEN UP TO DATE IN YOUR HEART ANYWAY. IS THAT GOING TO CHANGE?

McMILLON: YEAH. WE'RE STILL LOOKING AT IT AND WE HAVE ONGOING DISCUSSIONS RELATED TO IT. THERE WERE SOME OF THE THINGS IN THE FIRST WAVE THAT MADE IT MORE DIFFICULT FOR US, BUT I WOULDN'T RULE IT OUT. WOULDN'T SURPRISE ME AT SOME POINT IN THE NOT TOO DISTANT FUTURE IF THESE CASH REGISTERS GO AWAY OR CHANGE DRAMATICALLY. I THINK MOBILE PAYMENT IS DEFINITELY A FACT AND WE'RE EXCITED ABOUT THAT ACTUALLY, AND FIGURING OUT WAYS TO USE OUR OWN APP, WAYS TO PARTNER WITH OTHER PEOPLE SO THAT CUSTOMERS CAN SAVE TIME AS THEY CHECK OUT AND BE MORE EFFICIENT IS A PRIORITY FOR US.

QUINTANILLA: WERE YOU SURPRISED BY THE BREAKDOWN BETWEEN AMEX AND COSTCO?

McMILLON: I'M NOT INVOLVED IN THAT AND DON'T KNOW – WASN'T THINKING ABOUT IT. IT'S INTERESTING.

QUINTANILLA: YEAH. IT IS INTERESTING. IT'S BEEN INTERESTING TO SHAREHOLDERS OF AMEX. THE SALES GUIDANCE FOR THE YEAR, HOW MUCH OF THAT IS THE DOLLAR AND DO YOU SEE ANY SIGNS THE DOLLAR IS PEAKING?

McMILLON: CAN'T CALL THAT ONE. BUT CURRENCY HAS BEEN A BIG HEADWIND FOR US. IT'S DEFINITELY IN OUR FORECAST IN A BIG WAY NEXT YEAR. WE DON'T TRY TO FORECAST IT. WE JUST USE THE CURRENT PEG RATES AS WE LOOK AT OUR FORECAST. SO OUR EARNINGS ESTIMATE FOR THE YEAR AS WE LOOK FORWARD IS IMPACTED NOT ONLY BY THAT, BUT BY THIS INVESTMENT IN ASSOCIATES AND ALSO OUR LARGE INVESTMENT IN E-COMMERCE.

QUINTANILLA: THE STORY OF WALMART IS TO A LARGE DEGREE AT LEAST ON THE STREET HAS BEEN, YOU'VE BEEN INVESTING FOR YEARS, RIGHT? E-COMMERCE, NOW TRAINING AND RETENTION – ALL THESE THINGS HAVE BEEN GOING ON FOR A LONG TIME. AT WHAT POINT IS THERE LIGHT AT THE END OF THAT TUNNEL, WHERE THE INVESTMENT FADES AND YOU START TO LEVERAGE ALL THOSE CAPABILITIES? IT DOESN'T SOUND LIKE FISCAL '16 IS THAT YEAR.

McMILLON: WELL, RETAIL IS DIFFERENT THAN IT USED TO BE. WHEN WE WERE MODELING SUPER CENTERS AND SAM'S CLUBS IN THIS COUNTRY, FOR EXAMPLE – AND AGAIN, DON'T FORGET WE HAVE A GLOBAL BUSINESS AND MAKE THESE DECISIONS ACROSS A LOT OF MARKETS THESE DAYS. BUT IF I USE THE U.S. AS AN EXAMPLE, WHEN WE WERE WORKING ON THE SUPER CENTER AND IT BECAME FAIRLY CLEAR TO US THAT THIS WOULD WORK, IT BECAME MORE PREDICTABLE. BUT WITH THE INTERNET, WITH MOBILE AND WITH INNOVATION, THE WORLD HAS CHANGED AND THE CYCLE TIMES ARE DIFFERENT. IN SOME WAYS IT MOVES FASTER, BUT IN THE INVESTMENT PHASE IT CAN TAKE LONGER. AND WE WORK FOR A COMPANY THAT IS PATIENT, CUSTOMER ORIENTED, THINKS ABOUT THE LONG TERM IN A WAY THAT ENABLES US TO MAKE INVESTMENTS IN TECHNOLOGY, IN PEOPLE, SUCH THAT WE KNOW OVER TIME WE WILL WIN AND GENERATE A GOOD RETURN FOR SHAREHOLDERS. SO WE'RE NOT JUST WORRIED ABOUT THIS QUARTER OR THIS YEAR, BUT HOW DO WE TAKE ADVANTAGE OF THE THINGS THAT CAN BE INVENTED FOR CUSTOMERS, PUT THEM IN PLACE, MAKE THE NECESSARY INVESTMENTS TO DO SO, SO THAT ACROSS THE DIMENSIONS OF SAVING MONEY, SAVING TIME, CUSTOMERS ARE WANTING TO COME TO WALMART AND SAM'S CLUB.

QUINTANILLA: QUICK QUESTION ON PORTS. GOT THREE DOZEN SHIPS, CAN'T DOCK, NRF HAS ASKED FOR THE FEDS TO GET INVOLVED. I KNOW IT WAS MENTIONED ON THE MEDIA CALL THIS MORNING, BUT IT'S BEGINNING TO SHOW UP ON SOME SHELVES, RIGHT?

McMILLON: YEAH. WE HOPE THAT GETS RESOLVED EARLY. IT'S BEGINNING TO SHOW UP. YOU WON'T SEE MUCH OF AN IMPACT TO FOOD AND CONSUMABLES. WE BUY THE VAST MAJORITY OF THE MERCHANDISE WE SELL IN THE U.S. IN THE U.S. BUT IT WILL SHOW UP IN PATIO FURNITURE, EASTER SEASONAL GOODS. NOW WE MOVE FREIGHT NOT ONLY THROUGH THE WEST COAST PORTS, BUT ALSO UP THROUGH HOUSTON AND THROUGH THE EAST COAST, SO WE HAVE SOME DIVERSIFICATION THERE. BUT IT WOULD BE GREAT TO SEE THIS RESOLVED QUICKLY. I THINK CUSTOMERS ARE GOING TO PAY A PRICE FOR IT AT SOME POINT AS WILL THE ECONOMY.

QUINTANILLA: DOES THE FEDERAL GOVERNMENT NEED TO HAVE A STRONGER HAND IN THIS?

McMILLON: WE'RE HAPPY TO SEE SECRETARY PEREZ INVOLVED IN THIS PROCESS AND HOPE THAT IT CAN GET RESOLVED REALLY SOON.

QUINTANILLA: HOW MUCH LONGER CAN YOU TOLERATE THAT KIND OF INACTION AND HAVE YOU GUIDED THE STREET AS TO WHAT IT MIGHT COST YOU DOWN THE LINE?

McMILLON: IT'S IMPOSSIBLE TO FORECAST. THERE'S SOME LEVEL OF COST ASSOCIATED WITH IT – STEPS WE'VE ALREADY TAKEN AND THOSE ARE IN OUR FORECAST. BUT WE'RE NOT TRYING TO PREDICT THE PORT RESOLUTION IN OUR NUMBERS.

QUINTANILLA: YOU HAVE TALKED A LOT ABOUT THE EXPERIENCE OF SHOPPING AT WALMART. THERE WAS A SURVEY JUST THIS PAST WEEK, 8700 AMERICANS. THE RETAIL EXPERIENCE SATISFACTION IS DOWN ACROSS THE BOARD, RIGHT? AMERICANS ARE LESS HAPPY SHOPPING AT STORES IN GENERAL. BUT ON THE RANKING, WALMART COMES IN LAST. IT COMES IN BEHIND SEARS, IT COMES IN BEHIND FAMILY DOLLAR. IS THAT BEING FIXED? DO YOU BELIEVE THOSE TYPES OF SURVEYS?

McMILLON: YEAH. WE, AS YOU KNOW, HAVE A LOT OF STORES AND SOME ARE BETTER THAN OTHERS. THAT BREAKS MY HEART. THAT IS NOT WHAT WE WANT. WE WANT EVERY CUSTOMER TO HAVE A GREAT EXPERIENCE AND WITH OUR ANNOUNCEMENT TODAY, I THINK WHAT YOU CAN SEE IS THAT WE'RE SERIOUS ABOUT GETTING THAT RIGHT. AND SUPPORTING OUR ASSOCIATES SO THAT THEY CAN WIN. AND ALL OF THESE PIECES, WHETHER IT'S THE DEPARTMENT MANAGER INCREASE OR THE STRUCTURAL ISSUE, OR THE WAGE CHANGE, THOSE ARE ALL AIMED AT CREATING A GREAT CUSTOMER EXPERIENCE.

QUINTANILLA: HOW ARE YOU GOING TO KNOW IF THIS BILLION DOLLAR INVESTMENT WAS WORTH IT? WHAT'S THE METRIC THAT IS GOING TO LEAD YOU TO THAT?

McMILLON: COMP STORE SALES.

QUINTANILLA: REALLY? NOT RETENTION NECESSARILY?

McMILLON: WELL, IT WILL PLAY THROUGH RETENTION, THE ABILITY TO HIRE, THE TALENT THAT WE NEED TO HIRE. I'M CONFIDENT THOSE THINGS WILL WORK THEIR WAY THROUGH BECAUSE WE'RE INVESTING TO MAKE THEM HAPPEN. BUT ULTIMATELY, WE WANT ASSOCIATES WHO ARE SO EXCITED ABOUT TAKING CARE OF CUSTOMERS, THANKING THEM FOR SHOPPING WITH US, THINGS LIKE THAT, THAT THAT'S GOT TO SHOW UP IN SALES. IT WON'T HAPPEN IMMEDIATELY, BUT IT WILL HAPPEN.

QUINTANILLA: HAVE YOU HAD A CHANCE TO TALK DIRECTLY TO AN ASSOCIATE ON THE FLOOR ABOUT THIS TODAY?

McMILLON: JUST A LITTLE BIT. YOU KNOW, WE WERE OVER DOING THE MEDIA CALL EARLIER AND I SAW MY E-MAIL INBOX FILLING UP. IT'S GOING TO BE FUN TO READ THROUGH THOSE TODAY AND I KNOW A LOT OF OTHER WALMART LEADERS ARE GETTING THAT SAME KIND OF FEEDBACK. OUR STORES DIDN'T KNOW ABOUT THIS UNTIL THIS MORNING. SO OUR STORE MANAGERS WERE BRIEFED EARLY TODAY AND THEY'VE BEEN TALKING WITH OUR ASSOCIATES AND I LOOK FORWARD AFTER I'M THROUGH TALKING WITH YOU TO GO HEAR MORE ABOUT THAT.

QUINTANILLA: IT'S BIG NEWS. IT'S A BIG PART OF THE NARRATIVE IN A BUNCH OF DIFFERENT WAYS IN THIS COUNTRY. WE THANK YOU FOR YOUR TIME, DOUG.

McMILLON: THANK YOU, CARL. APPRECIATE YOU COMING DOWN.

QUINTANILLA: THANK YOU SO MUCH. PRESIDENT AND CEO OF WALMART STORES. JON, WE'LL SEND IT BACK TO YOU.

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With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, CNBC World and CNBC HD , CNBC is the recognized world leader in business news and provides real-time financial market coverage and business information to approximately 371 million homes worldwide, including more than 100 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 15 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 7:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. CNBC at night features a mix of new reality programming, CNBC's highly successful series produced exclusively for CNBC and a number of distinctive in-house documentaries.

CNBC also has a vast portfolio of digital products which deliver real-time financial market news and information across a variety of platforms. These include CNBC.com, the online destination for global business; CNBC PRO, the premium, integrated desktop/mobile service that provides real-time global market data and live access to CNBC global programming; and a suite of CNBC Mobile products including the CNBC Real-Time iPhone and iPad Apps.

Members of the media can receive more information about CNBC and its programming on the NBC Universal Media Village Web site at http://www.nbcumv.com/mediavillage/networks/cnbc/.