The US retail giant Walmart has sold its entire $3.7 billion stake in Chinese e-commerce company JD.com, marking the end of an eight-year investment with diminishing returns. The decision comes as Walmart seeks to intensify its focus on its operations in China, particularly through its Walmart China and Sam’s Club businesses.
The sale was fully subscribed, with Walmart offering 144.5 million American depositary shares of JD.com at a price range of $24.85 to $25.85 per share. This move allows Walmart to raise capital and reallocate resources towards strengthening its retail presence in China, where competition in the e-commerce sector has become increasingly fierce.
“The decision allows us to focus on our strong China operations and deploy capital towards other priorities,” Walmart stated, emphasizing its commitment to continuing its commercial relationship with JD.com. Despite divesting its stake, Walmart’s products will continue to be available on JD.com’s platform, maintaining a collaborative partnership.
Walmart initially invested in JD.com in 2016, trading its Chinese online grocery store Yihaodian for a 5% stake in the e-commerce firm. The investment was intended to gain insights into China’s retail landscape. By the same year, Walmart increased its stake to over 10%, betting on JD.com’s potential in the rapidly growing e-commerce market.
However, JD.com’s stock has plummeted nearly 70% from its peak in early 2021, with sales growth slowing after the pandemic. Rival e-commerce platforms like Pinduoduo have captured a significant share of the market by offering low-cost options, further pressuring JD.com’s margins. This shift in the competitive landscape has led Walmart to reconsider its regional investment strategy.
Thomas Hayes, chairman of Great Hill Capital, noted, “Walmart wanted to get exposure in China and learned the retail business there. Now they have their own strong operations in China and no longer need a minority position in JD.com.”
In its latest quarter, Walmart reported a 17.7% year-on-year increase in revenue from its China business, driven by strong performance in Sam’s Club and its digital offerings. Membership income from Sam’s Club in China grew by 26%, with the company operating around 48 clubs across the country. While JD.com’s Hong Kong-listed shares dropped nearly 9% following the news, Walmart’s shares saw a slight uptick, reflecting investor confidence in the retailer’s strategic shift. This divestment enables Walmart to concentrate on expanding its footprint in China, leveraging its retail experience and resources to capture a larger share of the market.
