What's Happening?
British American Tobacco (BAT) has announced a £1.3 billion share buyback for 2026, continuing its strategy of returning cash to shareholders. This move comes as the company faces challenges in the U.S.
vaping market, where illicit competition is impacting legal sales. BAT's management has indicated that growth in 2026 is expected to be at the lower end of its medium-term targets, primarily due to pressures in the U.S. vapour market. Despite these challenges, BAT has reported a mid-40% gain in its stock over the past year, driven by strong performance in its nicotine pouch segment and ongoing share repurchases.
Why It's Important?
The announcement of the buyback is significant as it highlights BAT's commitment to shareholder returns despite regulatory and market challenges. The U.S. vaping market, valued at approximately $22 billion, is crucial for BAT's growth strategy. However, the presence of illicit vaping products has been a major hurdle, affecting the profitability of legal market players. The company's focus on nicotine pouches, which have seen regulatory advancements, suggests a strategic pivot to more stable and regulated product lines. This development could influence investor sentiment and market dynamics in the tobacco industry, particularly in the U.S.
What's Next?
BAT's next major update will be its full-year 2025 results, expected in February 2026. Investors will be closely watching for any changes in the U.S. regulatory landscape regarding vaping products, as enforcement against illicit products could significantly impact BAT's market share and profitability. Additionally, the company's ongoing buyback program and potential further asset sales to reduce debt will be key areas of focus. The performance of BAT's nicotine pouch segment will also be critical as it seeks to offset challenges in the vaping market.
