Walmart Sells $3.6bn Stake in JD.com to Focus on Warehouses

Walmart has sold its major shareholding in Chinese e-commerce firm JD.com, to focus on its own operations in China.

The US retail giant was the biggest shareholder of JD.com, but sold its entire stake, which it held for eight years, according to a source who spoke to Reuters.

A placement of the Walmart shares was fully subscribed, the person said. At the top end of the offered range it would have been worth $3.74 billion, but the price negotiated was believed to be closer to $3.6 billion.

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Walmart plans to double down on its warehouse business, Sam’s Club, in China after the stake sale.

Brutal competition hitting e-commerce sector

The sale underscores how the country’s e-commerce sector, once an investor darling, is losing its appeal as it grapples with poor margins due to brutal price competition and weak consumer demand.

Shares of JD.com have fallen around 70% from their peak in early 2021 and prices are little changed from the levels in 2016 when Walmart became its major shareholder.

“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, adding it was committed to a continued commercial relationship with the Chinese company.

JD.com said in a statement that it was “full of confidence in the future cooperation between the two sides.”

Walmart offered 144.5 million American depositary shares of JD.com in the price range of $24.85 to $25.85, according to a term sheet seen by Reuters. Morgan Stanley was the broker-dealer of the offering.

The shares were offered at a discount of up to 11.8% to Tuesday’s closing price of $28.19. Morgan Stanley did not respond to a request for comment.

JD.com’s Hong Kong-listed shares fell nearly 9% on Wednesday. Its US-listed shares dropped more than 7% in Wednesday’s premarket trading to $26.09.

JD.com said in a stock exchange filing that it repurchased shares worth $390 million on Wednesday, part of a $3 billion buyback plan approved in March.

The company reported a better-than-expected second-quarter profit last week on its low-price policy, but China’s retail market has been hit by a persistent downturn in consumer confidence, sparked by a property market slowdown and concerns about employment and incomes.

Strong growth by Sam’s Club warehouse chain

Major e-commerce firms, including JD.com and rivals Alibaba and PDD Holdings’ Pinduoduo have engaged in a brutal price war in order to entice consumers to buy, pressuring revenue growth and margins.

The stake sale allows Walmart to raise capital and refocuses JD.com on its core online business, but a strategic partnership between the pair can continue, especially in data sharing, Jeffrey Towson, a Beijing-based partner at TechMoat Consulting, said.

In the latest quarter, Walmart reported a 17.7% year-on-year rise in revenue from its China business to $4.6 billion on the back of strong growth in its Sam’s Club warehouse chain and its digital offering.

Walmart added that membership income in China from its Sam’s Club business grew 26% as member count continues to increase. The company has about 48 clubs in China.

The US retailer owned a 5.19% stake in JD.com worth about $2 billion as of March 31, per LSEG data.

The partnership between the companies began in 2016 when Walmart sold its Chinese online grocery store, Yihaodian, in return for a 5% stake in JD.com worth about $1.5 billion based of the firm’s market value at the time.