After the market closed on August 20 local time in the United States, Wal Mart disclosed in its latest regulatory document submitted to the Securities and Exchange Commission (SEC) that it had reduced all its holdings of JD shares, with a total value of about 3.7 billion dollars. Before this reduction, Wal Mart was the third largest shareholder of JD, with a shareholding ratio of 9.4%.
Affected by this news, JD's US stock price fell nearly 10% after hours, and JD Group's Hong Kong stock price fell 10.25% this morning.
At noon today, JD.com announced on the Hong Kong Stock Exchange that it had spent approximately $390 million on August 21 to repurchase its stocks and had fully utilized the repurchase limit of the $3 billion stock repurchase plan approved in March 2024.
Close to JD people: does not affect business cooperation between both parties
According to the analysis of investors close to the transaction, this transaction should be Wal Mart's need to ease its own financial pressure. As Wal Mart's income growth slowed in the second quarter and its cash flow decreased, it also needed to make a diversification strategy in response to the changes in the current market environment. In order to release resources and optimize capital allocation, the withdrawal of equity investment from JD was completely a normal capital operation and did not involve the strategic cooperation between the two sides.
Public data shows that Wal Mart made strategic investment in JD in 2016, and the two sides jointly invested in Dada in 2018 to further deepen cooperation. With the help of the all-in-one real-time performance service of warehouse, picking and distribution provided by Dada, Wal Mart and Sam's Club have effectively solved the pain points of many and complicated SKUs, obvious weekend peaks, and high requirements for capacity flexibility, and improved the performance efficiency and average picking efficiency as a whole.
According to people close to JD, the two sides have achieved remarkable results in their respective set strategic goals over the past eight years of cooperation, which can be regarded as a model of mutually beneficial cooperation. Wal Mart has completed its e-commerce layout in China, and JD has also expanded its global supply chain capabilities. The business cooperation between the two sides has always been very smooth, and changes in equity investment will not affect the cooperation between the two sides at any business level. The two sides are still important strategic partners of each other. The two sides are also willing to continue to maintain close business cooperation and expand business in domestic and international markets.
Wal Mart also said in an interview with the media that JD has always been an important partner, and Wal Mart is committed to establishing a continuous business relationship with JD; The reduction decision enables Wal Mart to focus on Wal Mart China and Sam's Club and other Chinese businesses, and allocate funds to other priorities.
Both parties' financial reports are impressive
The results just released by Wal Mart show that Wal Mart's total revenue in the second quarter of fiscal year 2025 (the three months ended July 31) was $169.3 billion, up 4.8% year on year; The adjusted operating profit for the second quarter was $7.9 billion, a year-on-year increase of 7.2%. Among them, the net sales of Wal Mart China in the second quarter was 4.6 billion US dollars, up 17.7% year on year, and the comparable sales increased 13.8%. It can be seen that compared with the global revenue growth rate of 4.8%, Wal Mart's sales in China still maintained a double-digit growth rate of 17.7%, of which the growth rate of net sales from e-commerce business reached 23%, and the penetration rate of e-commerce reached 49%, an increase of 200 basis points over the same period last year.
Based on the growth potential of the Chinese market, Wal Mart China has also been actively promoting the exploration of domestic incremental business, especially the expansion of Sam's Club, which has become an important performance support for Wal Mart China, and e-commerce business is the growth focus of Sam's Club. According to statistics, Sam's currently has 46 stores in China, and the year-on-year growth rate of Sam's China online sales in the first half of 2024 reached 29%, accounting for about 50% of the total sales. Mike Lai, president and CEO of Wal Mart International, said earlier that Wal Mart is confident in China's economic development and market, will continue to expand its business in China and actively develop omni channel retail business.
JD.com also released its impressive second quarter financial report on August 15th. The company's revenue for the second quarter of 2024 was 291.4 billion yuan, an increase of 1.2% year-on-year. The net profit attributable to the common shareholders of the company increased by 92.1% from 6.6 billion yuan in the second quarter of 2023 to 12.6 billion yuan in the second quarter of 2024. The net profit margin attributable to the common shareholders of the company was 4.3% in the second quarter of 2024 and 2.3% in the second quarter of 2023. During the big promotion season, we continued to enhance our price competitiveness through supply chain capabilities and disciplined investment, rather than relying on subsidies. As a result, JD's gross profit margin in the second quarter increased significantly by 137 basis points year-on-year to 15.8%, helping to reach historic highs in operating profit and net profit under non GAAP accounting standards this quarter, "said Dan Su, Chief Financial Officer of JD.com
However, the competition in China's e-commerce industry is evident, and JD.com has also joined the "price war", constantly moving around the "low price strategy". JD.com CEO Xu Ran stated during the conference call that while pursuing the ultimate user experience and price competitiveness, JD.com also attaches great importance to the healthy and sustainable growth of its business. When it comes to the competitive situation in the e-commerce industry, Xu Ran said that China has the world's largest e-commerce market and mature infrastructure suitable for e-commerce development. The scale of China's e-commerce market will continue to grow in the long term. Xu Ran revealed that the number of users on JD.com maintained double-digit growth in the second quarter, with both returning users and old users over two years driving the overall market growth. The frequency of shopping also maintained double-digit growth, showing confidence in the long-term development of the e-commerce industry.
