What happened
Shareholders of 1847 Goedeker (GOED) trounced the market on Tuesday, with shares rising 16% by 1:15 p.m. ET, compared to a 0.7% increase in the wider market. Investors applauded the company's newly announced stock buyback program.
So what
Goedeker, which specializes in e-commerce sales of home appliances, announced a stock repurchase program of $25 million, which is significant given the company's small market capitalization of below $300 million. Those buybacks reflect management's growing confidence in its business, and a shift in strategy to begin rewarding shareholders with direct cash.
"We want to be able to buy back shares when our own financial position and market conditions permit," CEO Albert Fouerti said in a press release .
Image source: Getty Images.
Now what
Goedeker held $27 million of cash on its balance sheet as of late September, meaning it could aggressively move toward that buyback spending goal. But the repurchases will still likely be spread out over several quarters. Management said in mid-November that it is still prioritizing growth following a 39% year-over-year sales increase .
Today's announcement suggests that executives see room to tackle expansion strategies like an upcoming corporate rebranding, while still delivering cash to shareholders through stock buybacks. That's good news for investors, but the stock's returns will ultimately depend on how well Goedeker succeeds in its goal of becoming a leading home appliances retailer over the next few years.