Weekly Earnings Outlook

Investors can anticipate upcoming earnings reports from companies such as Investec, Dis-Chem pharmacies, and Walmart as earnings season remains in full swing.

Update 22 May 2023

South African Labor Market Resilience and Revenue Surprises

Discover the latest figures on South Africa’s employment landscape, Vodacom’s impressive growth trajectory, and the obstacles faced by Home Depot in a dynamic market.

The most recent Quarterly Labour Force Survey (QLFS) data from Statistics South Africa reveals increased employment figures. Based on the report findings, there was a notable rise in the number of individuals who found employment. The data shows an increase of 258,000 individuals, bringing the total to 16.2 million during the first quarter of 2023, in comparison to the fourth quarter of 2022. Simultaneously, the number of unemployed individuals rose by 179,000, reaching 7.9 million during the same quarter. Nevertheless, there was a decline in the count of individuals who were not economically active for reasons other than discouragement. The decrease amounted to 209,000, bringing the total to 13.2 million. Furthermore, the number of discouraged work-seekers experienced a reduction of 87,000 in the first quarter of 2023 compared to the previous quarter. As a result, the population classified as not economically active witnessed a net decrease of 296,000.

These changes in employment and unemployment led to an increase of 0.2% official unemployment rate, rising from 32.7% in the fourth quarter of 2022 to 32.9% in the first quarter of 2023. However, according to the expanded definition, the unemployment rate decreased by 0.2 percentage points to 42.4% in Q1:2023 compared to Q4:2022.

Premier Alan Winde remarked on the data saying, “Despite the good news for the province, the overall picture for South Africa is still very sobering and is worsening. The escalation in rolling blackouts and the poor economic climate will hamper any attempts to change the current jobs’ trajectory.”

Vodacom Group Ltd (JSE: VOD)

The earnings per share (EPS) headline figure declined by 6.4% to R9.48 cents, which fell short of Bloomberg expectations. However, the revenue showed positive growth of 16% to R119.2 billion, surpassing Bloomberg expectations of 14.5%, primarily attributed to acquiring a 55% stake in Vodafone Egypt and the depreciation of the local currency.

CEO Shameel Joosub expressed concerns about the adverse effects of ongoing load shedding on the South African economy and the industry. Vodacom South Africa has incurred significant costs, exceeding R4.0 billion, in implementing backup power solutions and addressing the power crisis.

Vodacom Group observed favorable growth in its international operations. A substantial increase in M-Pesa and data revenue drove this growth. Financial services played a pivotal role, contributing to a 29.2% growth in group financial services revenue, totaling R9.9 billion.

Home Depot Inc (NYSE: HD)

In its first-quarter report, Home Depot disclosed lower net income and revenue than last year. Net income was $3.87 billion, or $3.82 per share, an 8.5% decrease from $4.23 billion, or $4.09 per share. Revenue fell 4.2% to $37.26 billion from $38.91 billion.

Comparable sales for the first quarter declined by 4.5%, with a 4.6% drop in the U.S. Lumber deflation was identified as a significant factor contributing to the decrease. Although sales to do-it-yourself customers performed better than sales to home professionals, both groups experienced a year-over-year decline.

Home Depot and its competitors now face an unpredictable outlook as rising interest rates may dampen prospective homebuyers’ enthusiasm and impact home values. Additionally, household budgets are allocated to groceries and essentials, while travel, dining out, and other experiences are considered alternative spending options. Customer transactions in the quarter dropped by nearly 5% compared to last year’s period, although the average ticket size remained relatively stable at $91.92.

While lumber prices have decreased, inflation continues to affect the prices of other items. Home Depot reported lower sales of higher-priced discretionary items, such as appliances, reduced flooring, and kitchen and bath product demand.

Home Depot’s stock has seen a decline of approximately 9% this year, closing at $288.54 per share on Monday, down 17% from its 52-week high.

Sources: Bloomberg, Statistics SA, iOL, CNBC

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