Luxury groups: the trend towards share buy-backs continues

The Zegna family has just announced an increase in its stake in its own fashion group, and has stated its intention to increase it further in the near future. The Monterubello holding company, which is owned by members of the Zegna family and holds 60% of the 252,416,479 ordinary shares in issue, has purchased 913,000 shares in the company. The company, which was founded a century ago in Piedmont, has also just published figures for the first nine months of 2024, reporting sales of €1.36 billion, representing growth of +3% at constant exchange rates compared to the same period last year. In the third quarter, however, results were down by 7.8%.

CEO Ermenegildo Zegna welcomed the share buyback operation with these words: ‘Our family firmly believes that the purchase of additional shares in the Group represents an excellent investment opportunity’, he said, adding that the Group's share valuations did not currently reflect the company's full potential, penalised by the uncertainties and hazards of current market conditions.

Zegna is not the only major entrepreneur to consider the strategy of buying back his own group's shares. For the past two or three years, luxury giants and large companies in general have been resorting to this system, when moments marked by record results are followed by periods of geopolitical and economic uncertainty.

On 29 July, EssilorLuxottica announced a share buyback plan of up to 4 million shares.

By 2023, the CAC 40 groups will have acquired 30 billion euros worth of their own shares.

French luxury goods giant LVMH announced in March last year that it intended to buy back €1.5 billion of its own shares and then cancel them.

This financial strategy is primarily designed to improve the companies' stock market indicators. When a company buys back its own shares, it helps to boost their value and make them scarcer. At the same time, this system of share buy-backs helps to reassure major shareholders, who will see their dividends increase (fewer shares in circulation, fewer people to share them with): this will encourage them to become more attached to the company, loyalty being a vital element in unstable times.

While this strategy may have positive consequences in the short term, it could prove dangerous in the long term, by limiting the amounts invested in business development.