US retail giant Walmart has exited its eight-year-old stake in China’s JD, one of the country’s largest e-commerce platforms, according to an SEC filing by Walmart on Tuesday. The American company sold its shares for around $3.7 billion as part of the deal.
JD’s Hong Kong-listed shares fell nearly 12% at the opening on Wednesday. To stabilize the share price, the company soon responded with a $3.9 billion share buyback plan.
Why it is important: The end of the business relationship came against a backdrop of Chinese online retailers struggling with sluggish consumer spending and stagnating retail sales growth.
Details: “This decision allows us to focus on our strong China operations for Walmart China and Sam’s Club and deploy capital to other priorities,” Walmart said in a statement. The strategic relationship with JD began in 2016 and deepened further in 2018 when both sides invested in on-demand delivery company DaDa.
- In recent years, Sam’s Club has become a major source of revenue for WalmartChina as Chinese customers flock to membership-based supermarket chains that offer free samples and low-cost prices.
- According to official information, at least ten Sam’s Club stores will open in China by the end of the year. The stores will be located in third-tier cities, which is a marked difference from the slow expansion of the chain in its early days in China.
- JD said it was “confident in future cooperation” between the two companies, while the US retailer said it would continue the “business relationship” with JD, without giving a detailed explanation. JD’s affiliated company DaDa is exclusively responsible for delivering to Sam’s Club when customers order online.
- One of the titans that once dominated China’s e-commerce market, JD is now battling with the momentum of budget-focused Pinduoduo amid a downturn in China’s consumer market. Since its 2021 peak, the company’s share price has lost nearly 70% of its value.
Context: Last week, JD reported a 1.2% year-on-year increase in revenue to RMB 291.4 billion (US$40.8 billion) and posted a record profit in the second quarter. The retail business posted a 1.5% increase in profit during the period that included China’s second-largest shopping festival, 618. During the same period last year, the retail unit posted a 6.8% increase in net sales.
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