What happened
Shares of Jumei International Holdings (JMEI +0.00%) were moving higher today after the online beauty products retailer announced a new share buyback program. As a result, the stock was up 10.9% as of 11:47 a.m. EDT.
So what
The news seemed to come as a welcome sign for long-suffering Jumei investors as the stock has lost 89% over the last five years and is now trading at less than $3 a share.
Image source: Getty Images.
This morning, the company unveiled a share buyback authorization of $100 million, allowing the company to repurchase about a third of its current shares outstanding.
Jumei has come under pressure over the years as the company has been accused multiple times of selling fake products on its website, and the business has seen both revenue and earnings decline since 2015. Last year, the company had an operating loss of $39.4 million.
Jumei finished 2018 with $341 million in cash and short-term investments, and no debt, giving it ample firepower to buy back shares and lift its per-share earnings.
Now what
Though share buybacks can lift a beaten-down stock, they aren't a replacement for growth or a smart strategy. Jumei seems to have lost ground over the years to larger Chinese e-commerce companies like Alibaba, which have strong relationships with global cosmetics companies and are known for their vigilance against counterfeits.
With trade tensions flaring and questions about Chinese economic growth abounding, there's further reason to doubt Jumei's turnaround potential. While investors surely appreciate the double-digit pop in Jumei's stock today, the news does little to change the company's long-term prospects.
