Weekly Earnings Outlook

Update 11 March


Get a quick snapshot of the latest financial results from Shoprite and Target. We’ll delve into impressive sales growth at Shoprite, Target’s strategic shift to navigate challenges, and how both companies are exceeding expectations.

Shoprite Holdings Ltd. (JSE: SHP)

Shoprite reported a successful half-year, achieving a significant sales increase of 13.9% to R121.1 billion. This growth was awe-inspiring as it comes on the heels of a strong performance in the previous year and surpasses overall market trends.

The positive results were driven by all of Shoprite’s supermarket brands. Their core South African supermarket segment saw a remarkable 14.6% rise, while Checkers and Checkers Hyper continued their momentum with a 13.7% increase.

Even more notable was the 63.1% surge in online sales through the Checkers Sixty60 app, showcasing the company’s successful shift towards e-commerce.

While trading profit increased by 10.7%, margins were slightly impacted by the cost of diesel for generators due to South Africa’s load-shedding challenges. However, Shoprite remained profitable, with EBITDA (earnings before interest, taxes, depreciation, and amortization) rising by 10.3% to R10.2 billion.

Expansion also played a crucial role in Shoprite’s success. They opened a significant number of new stores, bringing their total to 3,543. Additionally, the company generated a strong cash flow of R12.4 billion, solidifying its financial position.

Shoprite further rewarded shareholders with a 7.7% year-on-year increase in their interim dividend, demonstrating confidence in their future performance.

Target Corp (NYSE: TGT)

Target exceeded Wall Street’s earnings expectations, reporting a strong $2.98 per share profit compared to the anticipated $2.42. However, the news wasn’t all positive. Comparable sales fell for the third consecutive quarter, dipping 4.4%. Looking ahead, Target predicts flat to low single-digit sales growth (0% to 9.9%) for 2024.

This cautious outlook reflects a pullback in discretionary spending by customers. To navigate these challenges, Target is emphasizing value and focusing on frequently purchased essentials. They’ve launched new budget-friendly brands like Dealworthy, expanded their Up&Up essentials line, and even introduced a paid membership program (Target Circle 360) to incentivize delivery orders.

Despite the sales slump, there are positive signs. Target’s profit margins improved significantly, with a jump from 3.7% to 5.8% year-over-year. Additionally, their stock price has surged over 17% year-to-date, reflecting investor confidence in their cost-cutting efforts and strategic shift towards value. While sales growth may be slow in the near future, Target appears to be making strong progress in terms of profitability and efficiency.

Nedbank Ltd. (JSE: NED)

Despite a challenging economic climate, Nedbank Group delivered a robust financial performance in 2023. Headline earnings grew by 11% to R15.7 billion, driven by a 12% increase in revenue and associate income. This impressive result was achieved alongside prudent expense management, demonstrating the group’s commitment to financial efficiency.

Even more significant, Nedbank surpassed all its post-pandemic targets established in 2021. Notably, earnings per share (DHEPS) grew by 14% year-on-year, exceeding pre-pandemic levels. Furthermore, the group achieved a commendable cost-to-income ratio of 53.9%, indicating strong operational efficiency. Additionally, Nedbank maintained a robust capital and liquidity position, ensuring financial stability.

Looking forward, the economic outlook for 2024 remains challenging, although some improvement is anticipated. Despite these hurdles, Nedbank Group expresses confidence in its medium-term goals. This includes a target of reaching a 17% ROE by 2025, showcasing their commitment to sustained growth. With a strong foundation built under new leadership and a focus on sustainable development finance and social responsibility initiatives, Nedbank appears well-positioned for continued success in the years to come.

Sources: Daily Investor; Moneyweb; Bbrief; Target Corp; CNBC

Piece written by Trive Sales Trader, Kealeboga Molefe

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