U.S. retail giant Walmart has sold its entire stake in Chinese e-commerce firm JD.com after an eight-year partnership, as it shifts its focus to bolstering its own operations in China. The sale, fully subscribed according to a source familiar with the matter, could be valued at up to $3.74 billion at the top end of the offered range.
Walmart initially entered the partnership in 2016 by exchanging its Chinese online grocery store Yihaodian for a 5% stake in JD.com, valued at approximately $1.5 billion at the time. As of March 31, Walmart's 5.19% stake in JD.com was worth about $2 billion, according to LSEG data. Following the sale, Walmart plans to concentrate on expanding its Sam's Club warehouse business in China.
"This decision allows us to focus on our strong China operations for Walmart China and Sam's Club, and deploy capital towards other priorities," Walmart stated, underscoring its commitment to maintaining a commercial relationship with JD.com despite the divestment.
The move highlights the challenges facing China's e-commerce sector, which is experiencing declining appeal among investors due to thin margins from fierce price competition and subdued consumer demand. JD.com’s shares have plummeted about 70% from their peak in early 2021, with current prices similar to those in 2016 when Walmart first became a major shareholder.
Jeffrey Towson, a Beijing-based partner at TechMoat Consulting, noted that the stake sale allows Walmart to raise capital and refocus JD.com on its core online business while preserving the potential for continued strategic collaboration, particularly in data sharing.
In its most recent quarter, Walmart reported a 17.7% year-on-year increase in revenue from its China operations, totaling $4.6 billion, driven by strong growth in its Sam's Club chain and digital offerings. Membership income from Sam's Club in China grew by 26% as member numbers continue to rise, with Walmart now operating about 48 clubs in the country.
"Walmart has really tried to refocus its attention on areas of strength and growth where they think that they can make a difference ... Their decision to sell relates to that and that it (JD.com) was a non-core asset," explained Joseph Feldman, an analyst at Telsey Advisory.
JD.com recently reported better-than-expected second-quarter profits, attributed to its low-price strategy. However, China’s retail market continues to struggle with a decline in consumer confidence, fueled by concerns over the property market and employment. The intense price competition among major e-commerce players, including JD.com, Alibaba, and Pinduoduo, has further pressured revenue growth and margins.
Following the announcement of the stake sale, JD.com's Hong Kong-listed shares closed nearly 9% lower on Wednesday, while its U.S.-listed shares fell more than 7% to $26.18. Meanwhile, Walmart's shares rose about 1% to a record high of $75.58.
JD.com also disclosed in a stock exchange filing that it repurchased $390 million worth of shares on Wednesday as part of a $3 billion buyback plan approved in March.
(Source:www.reuters.com)
Walmart initially entered the partnership in 2016 by exchanging its Chinese online grocery store Yihaodian for a 5% stake in JD.com, valued at approximately $1.5 billion at the time. As of March 31, Walmart's 5.19% stake in JD.com was worth about $2 billion, according to LSEG data. Following the sale, Walmart plans to concentrate on expanding its Sam's Club warehouse business in China.
"This decision allows us to focus on our strong China operations for Walmart China and Sam's Club, and deploy capital towards other priorities," Walmart stated, underscoring its commitment to maintaining a commercial relationship with JD.com despite the divestment.
The move highlights the challenges facing China's e-commerce sector, which is experiencing declining appeal among investors due to thin margins from fierce price competition and subdued consumer demand. JD.com’s shares have plummeted about 70% from their peak in early 2021, with current prices similar to those in 2016 when Walmart first became a major shareholder.
Jeffrey Towson, a Beijing-based partner at TechMoat Consulting, noted that the stake sale allows Walmart to raise capital and refocus JD.com on its core online business while preserving the potential for continued strategic collaboration, particularly in data sharing.
In its most recent quarter, Walmart reported a 17.7% year-on-year increase in revenue from its China operations, totaling $4.6 billion, driven by strong growth in its Sam's Club chain and digital offerings. Membership income from Sam's Club in China grew by 26% as member numbers continue to rise, with Walmart now operating about 48 clubs in the country.
"Walmart has really tried to refocus its attention on areas of strength and growth where they think that they can make a difference ... Their decision to sell relates to that and that it (JD.com) was a non-core asset," explained Joseph Feldman, an analyst at Telsey Advisory.
JD.com recently reported better-than-expected second-quarter profits, attributed to its low-price strategy. However, China’s retail market continues to struggle with a decline in consumer confidence, fueled by concerns over the property market and employment. The intense price competition among major e-commerce players, including JD.com, Alibaba, and Pinduoduo, has further pressured revenue growth and margins.
Following the announcement of the stake sale, JD.com's Hong Kong-listed shares closed nearly 9% lower on Wednesday, while its U.S.-listed shares fell more than 7% to $26.18. Meanwhile, Walmart's shares rose about 1% to a record high of $75.58.
JD.com also disclosed in a stock exchange filing that it repurchased $390 million worth of shares on Wednesday as part of a $3 billion buyback plan approved in March.
(Source:www.reuters.com)
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