Microsoft Word defaults to saving in its own file format .docx, instead of the ISO standard for word processing (.odt)
To allow others to collaborate, Microsoft publishes documentation on how Word builds and opens .docx files.
So LibreOffice would have no trouble opening .docx files with all formatting perfectly intact.
If Microsoft actually followed their own documentation when building Word. Which they don't.

The other issue is that people use Word files to share documents with extensive formatting and embedded images in the first place, instead of converting them to PDF or using typesetting software.