US retail giant Walmart has exited its eight-year holding in China’s JD, one of the country’s largest e-commerce platforms, according to an SEC filing from Walmart on Tuesday.  The American firm sold its shares for around $3.7 billion in the deal. 

JD’s Hong Kong-listed shares fell nearly 12% at the Wednesday opening. To stabilize the stock price, the company soon responded with a stock buyback plan worth $3.9 billion.

Why it matters: The ending of the relationship comes as Chinese online retailers face sluggish consumer spending and stagnant retail revenue growth.

Details: “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. Its strategic relationship with JD started in 2016 and further deepened in 2018 when both sides invested in the on-demand delivery firm DaDa.

• In the past few years, Sam’s Club has become a major revenue stream for WalmartChina as Chinese customers flooded to embrace membership-based warehouse supermarket chains that offer free samples and cost-effective prices.
• At least ten Sam’s Club stores will be open in China before the end of this year, public information shows, with store locations moving to third-tier cities in a marked difference from the chain’s slow expansion in its early days in China.
• JD noted it is “confident in the future cooperation” between the two companies, while the US retailer said it would continue a “business relationship” with JD, without offering a detailed explanation. JD-affiliated DaDa is exclusively in charge of the delivery operation of Sam’s Club when shoppers place orders online.
• As one of the titans that once dominated the Chinese e-commerce market, JD is now dealing with budget-centered Pinduoduo’s momentum amid a downturn in China’s consumer market. Since its 2021 high, the company’s stock price has lost nearly 70% of its value.

Context: Last week, JD posted a 1.2% revenue year-to-year growth to RMB 291.4 billion ($40.8 billion) while hitting a record high in net profit in the second quarter. Its retail business saw a 1.5% earnings gain during the period that included China’s second-biggest shopping festival 618. The retail unit recorded a 6.8% rise in net revenues in the same period last year.

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