Global Companies Withdrawing from China... Selling Shares and Restructuring Workforce

Sephora Plans 10% Staff Reduction in China
Walmart Sells Stake in JD.com

Global companies are accelerating efforts to withdraw investments or scale down operations in the Chinese market. This move is interpreted as a restructuring response to underwhelming market performance caused by sluggish consumer demand in China.

On the 21st (local time), Bloomberg News reported, citing sources, that Sephora, the cosmetics retailer operated by French luxury conglomerate LVMH (Louis Vuitton Mo?t Hennessy), plans to lay off hundreds of employees in China. Sephora China is reportedly dismissing both office and store staff, with some employees being encouraged to resign voluntarily. According to sources, the restructuring will affect about 10% of the 4,000 employees in China. Not only local staff but also a significant number of senior executives, including those responsible for retail and e-commerce, have left the company.

[Image source=Reuters Yonhap News]

Previously, Sephora appointed Ding Sha, a former Nike Asia e-commerce executive, as regional head and undertook a major overhaul to improve performance in the Chinese market. However, the company has continued to face difficulties expanding its business in China.

Since its first entry in 2005, Sephora expanded to 300 stores, but due to the economic downturn, consumers have gravitated towards low-priced products, resulting in sluggish sales for Sephora, a relatively premium retailer. Local cosmetics manufacturers focusing on mid- to low-priced products captured a 50% market share for the first time last year. Sephora's losses in China over 2022 and 2023 are estimated to total approximately 330 million yuan (about 61.7 billion KRW).

A company representative explained, "Sephora China is responding to a challenging market environment by streamlining the organizational structure at headquarters and securing capabilities for long-term sustainable growth to ensure future growth in China."

Earlier, reports emerged that Walmart plans to raise up to $3.74 billion by selling its stake in JD.com. According to Bloomberg, Walmart intends to sell 144.5 million American Depositary Receipts (ADRs) of JD.com at $24.85 to $25.85 per share. Walmart formed a partnership with JD.com in 2016 by acquiring a 5% stake, which it increased to 9.4% by the end of last year.

Regarding the stake sale, Walmart stated, "Reducing our stake allows us to focus on our business in China and allocate funds to other priorities." This is seen as a move to recover investments amid a prolonged economic downturn in China delaying consumer market recovery.

This content was produced with the assistance of AI translation services.