Walmart and JD.com "break up"

Author | Liu Baodan

Editor | Huang Yu

JD.com and Walmart have come to the day of parting ways.

After the U.S. stock market closed on August 21, insiders revealed that Walmart (WMT.N) is transferring its stake in JD.com in hopes of raising no more than $3.74 billion. According to Bloomberg, Walmart plans to sell 144.5 million shares of JD.com at a price ranging from $24.85 to $25.85 per share.

Wall Street News learned that Walmart will sell all of its JD.com shares this time, marking the end of the intimate relationship between the two parties that lasted for 8 years. However, this clearance sale does not affect their cooperation in business.

Liu Qiangdong highly admires Walmart. He believes that Walmart is like the Shaolin and Wudang of the retail world. To a large extent, JD.com's emphasis today on inventory turnover, product categories, costs, and efficiency are all inspired by Walmart.

In 2014, JD.com was officially listed in the United States. Two years later, Walmart began strategic investments in JD.com. In 2016, Walmart acquired 5% of JD.com's total shares by selling its stake in Yihaodian to JD.com, estimated at $1.5 billion.

In 2018, the cooperation between the two parties deepened further, jointly investing in Dada. With the integrated instant fulfillment services provided by Dada, Walmart and Sam's Club effectively solved pain points such as complex and numerous SKUs, significant weekend peaks, and high requirements for flexible capacity, overall improving fulfillment efficiency and average picking efficiency.

These series of actions have formed a close cooperative relationship between JD.com and Walmart.

Now, with Walmart selling its stake in JD.com, the alliance of the two retail giants has come to an end.

From the information disclosed by various parties so far, this seems to be a very dignified parting.

According to analysis from investors close to the transaction, this sale is likely due to Walmart's need to alleviate its own financial pressure.

Walmart's performance in the second quarter showed that despite a global revenue growth of 4.8%, Walmart China still maintained a double-digit sales growth of 17.7%, with net sales growth from e-commerce reaching 23%, and the e-commerce penetration rate reaching 49%, an increase of 200 basis points from the second quarter of last year.

At the same time, Walmart has been actively exploring incremental businesses in China, especially the expansion of Sam's Club. Sam's Club has become an important performance support for Walmart China, with e-commerce being the focus of Sam's Club's growth.

Statistics show that Sam's Club currently has 46 stores in China, with online sales of Sam's Club in the first half of 2024 showing a year-on-year growth rate of 29%, accounting for around 50% of total sales. Walmart International President and CEO McKenna previously stated that they will continue to expand operations in China and actively develop omni-channel retail business.

Walmart stated that JD.com has always been an important partner, and the company is committed to establishing a sustainable business relationship with JD.com. "The decision to reduce holdings allows us to focus on Walmart China and the strong business of Sam's Club in China, and allocate funds to other priority matters."According to sources close to JD.com, in the 8 years of cooperation, both sides have achieved significant results in their respective strategic goals. Walmart has completed its e-commerce layout in China, while JD.com has also expanded its global supply chain capabilities. The business cooperation between the two parties has always been very smooth.

To boost confidence in the capital market, JD.com announced that it will spend approximately $390 million to repurchase its stock on August 21, 2024, and has fully utilized the repurchase limit of the $3 billion stock repurchase plan approved in March 2024.

In recent years, with the rise of platforms such as Pinduoduo, Douyin e-commerce, and Kuaishou e-commerce, JD.com's market position has been threatened, prompting a counterattack.

JD.com is reshaping its low-price mindset, aiming to establish differentiation capabilities by strengthening its supply chain capabilities and user experience to regain market share. Based on the performance in the second quarter, JD.com's counterattack has shown initial results.

According to JD.com's second-quarter financial report, the company's quarterly active user count and user shopping frequency continued to grow at a double-digit rate in the second quarter, with a 46% increase in the number of third-party merchants compared to the first quarter. This also drove second-quarter revenue to reach 291.4 billion yuan, with non-GAAP net profit reaching 14.5 billion yuan, a year-on-year increase of 69.0%.

In particular, JD.com's supply chain advantage continues to be consolidated. In the second quarter, JD.com's inventory turnover days remained below 30 days, maintaining a globally leading level.

Although Walmart is no longer a shareholder of JD.com, it will still be a partner. From a practical business perspective, the impact is not significant.

According to sources close to JD.com, changes in equity investments will not affect any business cooperation between the two parties. They remain important strategic partners to each other and are willing to continue maintaining close business relationships to expand their domestic and international market operations.

The e-commerce market is in a constant covert battle, and this time, JD.com will have to fight alone