JD.com Shares Fall as Walmart Plans Up to $3.7 Billion Stake Sale

By Tracy Qu and Jiahui Huang

Hong Kong-listed shares in JD.com fell by the most in nearly two years after U.S. retailer Walmart moved to sell its stake in the e-commerce giant worth up to US$3.7 billion.

Walmart confirmed it is seeking to sell its entire holding in the Beijing-based company, which has surprised the market recently with the strength of its earnings even as China's economic outlook stays subdued. The deal also signals Walmart's confidence that its own operations in China are big enough now to compete in a hotly contested retail market.

"This decision allows us to focus on our strong China operations for Walmart China and Sam's Club, and deploy capital toward other priorities," Walmart said.

Walmart owns a 10.35% stake in JD.com, according to Factset. A person familiar with the process said Walmart's stake is worth between US$3.6 billion and US$3.7 billion.

Walmart's decision appeared to catch investors by surprise. JD.com shares fell 10% in Hong Kong, while its American Depository Receipts, which are traded on the Nasdaq, were recently 9.5% lower in after-hours trading.

JD.com didn't immediately respond to requests for comment.

JD.com reported a strong profit beat in three months through June, leading Citi analysts to raise their full-year adjusted net profit estimate by 9.6%. Daiwa analysts led by John Choi see potential for the company's net margin to expand this year, helped in part by supermarket sales.

Still, Citi said Walmart can focus more on expanding its stores in China once it no longer owns JD.com stock. "Given the similarities of product categories and strong global supply chain capability of Walmart, it is likely that all e-commerce players in China could face more intense competition in general merchandise and supermarket categories," Citi analysts led by Alicia Yap said in a research note.

In a separate filing to the Hong Kong Stock Exchange, JD.com said it had repurchased shares worth US$390 million on Wednesday. That means the company has now reached a target set in March to buy back US$3.0 billion of stock.

Write to Tracy Qu at tracy.qu@wsj.com and Jiahui Huang at jiahui.huang@wsj.com

Corrections & Amplifications

This story was corrected at 0725 GMT. The original version incorrectly said that JD.com repurchsed shares worth US$390 billion. The shares worth US$390 million.

(END) Dow Jones Newswires

August 21, 2024 02:50 ET (06:50 GMT)

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