US retail giant Walmart has exited its eight-year holding in China’s JD, one of the country’s largest e-commerce platforms, according to an SEC filing from Walmart on Tuesday. The American firm sold its shares for around $3.7 billion in the deal.
JD’s Hong Kong-listed shares fell nearly 12% at the Wednesday opening. To stabilize the stock price, the company soon responded with a stock buyback plan worth $3.9 billion.
Why it matters: The ending of the relationship comes as Chinese online retailers face sluggish consumer spending and stagnant retail revenue growth.
Details: “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 said in a statement. Its strategic relationship with JD started in 2016 and further deepened in 2018 when both sides invested in the on-demand delivery firm DaDa.
In the past few years, Sam’s Club has become a major revenue stream for WalmartChina as Chinese customers flooded to embrace membership-based warehouse supermarket chains that offer free samples and cost-effective prices.
At least ten Sam’s Club stores will be open in China before the end of this year, public information shows, with store locations moving to third-tier cities in a marked difference from the chain’s slow expansion in its early days in China.
JD noted it is “confident in the future cooperation” between the two companies, while the US retailer said it would continue a “business relationship” with JD, without offering a detailed explanation. JD-affiliated DaDa is exclusively in charge of the delivery operation of Sam’s Club when shoppers place orders online.
As one of the titans that once dominated the Chinese e-commerce market, JD is now dealing with budget-centered Pinduoduo’s momentum amid a downturn in China’s consumer market. Since its 2021 high, the company’s stock price has lost nearly 70% of its value.
Context: Last week, JD posted a 1.2% revenue year-to-year growth to RMB 291.4 billion ($40.8 billion) while hitting a record high in net profit in the second quarter. Its retail business saw a 1.5% earnings gain during the period that included China’s second-biggest shopping festival 618. The retail unit recorded a 6.8% rise in net revenues in the same period last year.