Suning.com stock prices rallied yesterday following news of the company acquisition of an 80 percent stake in the Chinese business of one of France's largest supermarket retailer.
The Chinese e-commerce giant and electronics retailer announced that it had agreed to buy the substantial stake in Carrefour's operations in China for $699 million in cash.
The purchase has been seen as a significant shift in the online and offline retail in China.
Investors confirmed this with the sudden influx of stock purchases that sent Suning stocks up by as much as 3.6 percent this week. Suning's stock prices have jumped by more than 14.2 percent so far this year.
Suning's filing to the Shenzhen Stock Exchange over the weekend revealed that Carrefour will still retain a 20 percent share of its business in China. The deal also stipulated that Carrefour would still have two out of the seven seats in Carrefour China's board. Alibaba Group Holdings currently has a 19.99 percent stake in Suning.
Suning will effectively take over Carrefour's 210 hypermarkets spread across China. The company mentioned that it will be significantly enhancing the operations of the existing stores through different digital technologies.
Suning is planning to use its expertise in big data and artificial intelligence to develop its newly acquired shopping outlets. The Chinese e-commerce giant will undoubtedly use its digital expertise to drastically increase Carrefour sales through a possible integration with its e-commerce platform.
Suning currently has the third largest online shopping platform in China. The company also has 8,881 physical stores spread across the country.
The company recently acquired 37 department stores owned by the Dalian Wanda Group. In its latest earnings call, Suning reported sales of around $9.04 billion for the first quarter of 2019. This was a 25.4 percent year-on-year increase.
According to market experts, Suning acquisition should result in a significant transformation in Carrefour's existing outlets. The partial acquisition should also result in a large shift in China's retail market. Suning had also announced that part of the reason why they went ahead with the purchase was to reduce its procurements and to greatly reduce logistics costs.
In 2018, Carrefour China reported net sales of around $4.14 billion, which was a 5.9 percent year-on-year drop. The French retailer has been operating in China since 1995.
Brick-and-motor retail stores in China have seen similar drops in revenues for the past couple of years. The decrease has mainly been due to the influx of new e-commerce websites, which has increasingly become a popular destination for younger consumers.