Walmart's JD exit displays derisking smarts
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Chan Ka Sing
HONG KONG, Aug 21 (Reuters Breakingviews) -It may be tempting to scream "decoupling" after a quick glance at Walmart's WMT.N decision to offload its entire stake in JD.com 9618.HK, JD.Ofor $3.6 billion, per IFR. The $600 billion U.S. retail behemoth has, after all, been a shareholder in the Chinese e-commerce group since 2016. It's also selling after its strategic partner's stock has dropped 70% from a 2021 peak - and for not much more than the shares were worth when it first got them. But the move is actually a good example of derisking.
Unlike other global retailers such as Tesco TSCO.L and Carrefour CARR.PA, Walmart is not leaving China's ultra-competitive consumer market. It owns, for example, almost 400 stores in the People's Republic, including its membership-only warehouse chain, Sam's Club, and these are performing well: net sales grew 18% in the most recent quarter, while JD.com's top line barely budged.
That's a marked change from when the pair's relationship began eight years ago. Walmart was under pressure: back home, Amazon AMZN.O had surpassed its market value for the first time in July 2015; meanwhile, in the People's Republic a fast-growing JD.com was performing better than the Arkansas-headquartered company's China-focused online operation, Yihaodian. So as part of a broader alliance Walmart CEO Doug McMillon handed control of the unit to JD.com in return for a 5% stake in its new partner, which it doubled later that year.
The People’s Republic has since become a very different proposition. Consumer confidence has faltered as the $17 trillion economy stutters on the brink of deflation, while major e-commerce firms engage in brutal price wars to entice online shoppers. Escalating U.S.-China tension also makes it more complicated for American giants such as Walmart and Starbucks SBUX.O to continue their expansion in China.
McMillon's decision to focus on its own operations in China at least gives it more control over investment and growth there. It also sends a stark message about JD.com's prospects. Its stock had jumped 38% after hitting an almost six-year low in March. Deep-pocketed Walmart, though, sees more upside in cashing out now and investing the proceeds elsewhere. That makes it much harder for JD.com Chair Richard Liu to convince shareholders there's a rosier future around the corner.
CONTEXT NEWS
Walmart has sold its entire stake in Chinese e-commerce firm JD.com, according to a filing with the U.S. Securities and Exchange Commission on Aug. 20. The U.S. retailer was the largest shareholder and raised some $3.6 billion from the sale, according to IFR, or some $24.95 a share - a discount of 11.5% to the closing price of JD.com's Nasdaq-listed stock on Aug. 20.
In 2016 Walmart receiveda 5% stake in JD.com in a deal that also involved the Chinese retailer taking over Walmart’s China-focused online marketplace. In the same year, Walmart raised its holdings in JD.com to more than10%.
Graphic: JD.com is trading close to its all-time low https://reut.rs/3WMjx9C
Editing by Antony Currie and Aditya Srivastav
Actifs liés
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.
