Walmart’s $3.6B JD.com Sales Fuel China’s Tech Slump

(Bloomberg) — Walmart Inc. raised about $3.6 billion by selling its stake in Chinese e-commerce company JD.com Inc., ending an eight-year partnership that appeared to be yielding diminishing returns amid a challenging landscape for Chinese technology giants.

Most Read from Bloomberg

The U.S. retailer sold 144.5 million shares at $24.95 each, said people familiar with the matter, who asked not to be identified because the information is private. That represents an 11% discount to Tuesday’s U.S. close, according to Bloomberg calculations, and is near the bottom of its $24.85 to $25.85 guidance range.

Hong Kong-listed shares of JD.com plunged 11% at the open on Wednesday, leading a broad selloff in Chinese e-commerce and technology stocks. Walmart is refining its strategy in the world’s second-largest economy, where its longtime e-commerce partner is struggling alongside traditional rivals Alibaba Group Holding Ltd. and PDD Holdings, which owns Timo.

The U.S. company has built a mature e-commerce and delivery ecosystem in China for both Sam’s Club and its department store businesses, and is focusing on its own offerings, said a person familiar with the matter, who spoke on condition of anonymity. The deal also comes as a property crunch, market volatility and uncertain business outlook weigh on Chinese consumption.

“I expect Walmart to be disappointed with the horse it bet on,” said Mark Tanner, managing director of marketing agency China Skinny. “The original ambitions don’t seem to have panned out as planned at the time of the acquisition.”

Morgan Stanley is the broker managing the offering, according to people familiar with the situation. JD.com also bought back $390 million of its own shares today.

Representatives for Walmart, JD.com and Morgan Stanley did not immediately respond to Bloomberg’s requests for comment. Walmart said the decision to reduce its stake would allow it to focus on its own business in China and allocate funds to other priorities, Cailian reported Wednesday.

Walmart’s Sam’s Club department store chain has been a shining light for the company, making it the only department store chain to post sales growth last year among the top five players, according to the China Chain Stores and Franchise Association. In China, the unit offers luxury goods with a membership model that is now being copied by rivals, while the company’s other core department stores have struggled alongside rivals.

The story continues

Meanwhile, China’s biggest internet companies are trying to reverse the downturn as economic uncertainty and changing consumer shopping habits weigh on profits. Alibaba, long a barometer for the industry, surprised investors last week when it revealed that its core e-commerce business contracted in the June quarter.

JD.com’s second-quarter results beat expectations — even though revenue grew just 1.2%. That extended a string of single-digit quarters dating back to 2022, a period of stagnation that has halved its market value since the start of last year.

The Walmart-JD split also follows a pattern of online and offline retailers dissolving their partnerships, as previous ambitions to seamlessly integrate physical and online consumer experiences have failed. Earlier this year, Bloomberg reported that Alibaba was considering selling its InTime department store arm.

The sale of shares will mark the end of a partnership between the two companies that began when Walmart acquired a 5% stake in the Chinese company in 2016.

The deal also included JD.com’s acquisition of Walmart’s online marketplace Yihaodian, which focused on selling groceries to high-income female shoppers in major Chinese cities, the companies said at the time. Later that year, Walmart increased its stake in JD.com to 10.8%.

–With assistance from Edwin Chan.

(Updates to stock selling price in second paragraph)

Most Read from Bloomberg Businessweek

©2024 Bloomberg LP