👉 Background: Harvey Norman is the white goods and home retailer that started back in 1982. Since then, they've become one of the go-to places for electronics and furniture in Australia with 192 stores across Australia, and almost 80 other stores across seven other countries.

👉 What happened: But now, Harvey Norman has warned investors of some pretty dark results; its sales dropped by 9.1% across its chains and their pre-tax profits fell by 49% over the same period. So now, Harvey Norman has flagged a buyback of 10% of their shares.

👉 What else: Despite these poor results, Harvey Norman's stock rose by over 4% on the same day directly in response to their buyback announcement.

What's the key learning?

💡A share buyback isn't always a signal of confidence in a business. Sometimes, it's a life vest for sinking profits.

💡A share buyback is when a company uses cash to buy their own shares back from public market investors. Buying back shares helps increase the price per share and generally instills confidence in the company’s future.

💡But Harvey Norman's nearly 50% drop in profits isn't exactly inspiring confidence in the value of the company. In fact, with their grim earnings, it's more likely that Harvey Norman's doing a buyback to keep their share price stable.

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