LVMH, the renowned French luxury goods giant, has recently announced its plan to repurchase shares worth up to 1.5 billion euros, with the intention of canceling them in the future. This strategic move is a common practice among large corporations that have achieved substantial profits. As part of its share buyback program, LVMH has appointed an investment services provider to execute the acquisition of its own shares, and the buyback period is set to run until July 20.

Share buybacks are highly favored by shareholders for several reasons. Quincy Krosby, an expert from US asset manager LPL Financial, explains that one immediate effect of a share buyback is an increase in share prices. By reducing the number of shares available in the market, the cancellation of shares strengthens the position of existing shareholders. Currently, LVMH is 41% owned by Christian Dior SE, an intermediate holding company controlled by the influential Arnault family.

Upon the announcement of the share buyback plan, LVMH shares were trading at 802.70 euros, representing a 1.75% increase in a market that rose by 0.26%. The market has responded positively to LVMH’s decision, highlighting the confidence and trust investors have in the company. According to a report by BNP Paribas, share buybacks in 2022 have nearly doubled compared to the previous year, with the total value reaching approximately 161 billion euros across 11 European countries.

In 2022, LVMH achieved remarkable milestones in terms of financial performance. The company’s sales soared to nearly 80 billion euros, while profits reached an impressive 14 billion euros, marking a 17% increase. Additionally, LVMH paid a total of 5 billion euros in corporate taxes globally and plans to distribute 400 million euros in profit-sharing to its 39,000 employees in France. Furthermore, a dividend of 12 euros per share will be paid for the year 2022, totaling approximately 6 billion euros. The majority of this dividend, around 3 billion euros, will be allocated to the Arnault family, including CEO Bernard Arnault.

Janus Henderson, an asset manager, reported that LVMH has become the second-largest dividend payer in France in 2022, second only to TotalEnergies. The impressive financial performance and shareholder-friendly initiatives have solidified LVMH’s position as a leading player in the luxury goods industry. The decision to repurchase shares further emphasizes the company’s commitment to maximizing shareholder value and reinforcing shareholders’ interests.

In conclusion, LVMH’s decision to repurchase shares worth up to 1.5 billion euros showcases the company’s strong financial position and dedication to enhancing shareholder value. The share buyback program is expected to benefit existing shareholders by consolidating their position and potentially driving up share prices. LVMH’s outstanding financial performance in 2022, record-breaking sales and profits, as well as its significant contributions to taxes and employee profit-sharing, firmly establish the company as a major player in the luxury goods industry.

Useful links:

1. LVMH Share Buyback Program
2. What is a Stock Buyback and Why Do Companies Do It?