Target Warns of Tariff Impact on Q1 Profits, Shifts Sourcing to Guatemala as Avocado Prices May Rise

Local Market Commentary

The Top 40 index declined 0.93% to 79,453.5 points, while the All Share index dropped 0.95% to 86,730.8 points. South Africa’s economy grew just 0.6% in 2024, marking its slowest expansion in four years due to logistical bottlenecks, weak consumer demand, drought conditions, and subdued fixed investment. This was the worst performance since 2020, when pandemic-related restrictions severely disrupted economic activity. Meanwhile, Shoprite Holdings announced plans to extend its on-demand grocery delivery service to its discount stores, intensifying competition for low-income shoppers after reporting a 9.9% increase in half-year earnings.

European Market Commentary

European shares fell sharply on Tuesday as the STOXX 600 dropped 2.1%, its worst session since August 2024, amid global market concerns following the introduction of new U.S. tariffs on Canada, Mexico, and China. The German DAX declined 3.5% from record highs, while all regional indices closed lower. In the UK, grocery inflation remained steady, supported by supermarket promotions, though concerns persist over potential inflationary effects from tax hikes in the Labour government’s October budget and a rising minimum wage. Headline inflation reached 3% in January and is expected to rise to 3.7% later this year, with food inflation potentially nearing 5%, according to industry forecasts.

U.S. Market Commentary

U.S. stocks closed lower on Tuesday as escalating trade tensions, triggered by President Trump’s new tariffs on Canada, Mexico, and China, weighed on markets. The Nasdaq Composite briefly entered correction territory before paring losses, ending 9.3% below its December 16 record high. Target shares fell 3% after issuing a weaker-than-expected sales forecast, while Best Buy dropped 13.3% following a downbeat outlook. Walgreens, however, surged on reports of a potential take-private deal by Sycamore Partners. Market breadth was negative, with declining stocks outpacing advancers nearly 3-to-1 on the NYSE, where 86 new highs contrasted with 450 new lows.

Asia Market Commentary

Asia-Pacific markets traded mostly higher as investors analysed China’s economic targets amid ongoing trade tensions with the U.S. China set its 2025 GDP growth target at “around 5%” and raised its budget deficit goal to 4% of GDP, the highest level on record since 2010. In Japan, Bank of Japan Deputy Governor Shinichi Uchida signalled that interest rate hikes could align with market expectations, while the services sector saw its fastest expansion in six months, with the Business Activity Index rising to 53.7 in February. Meanwhile, South Korea’s economy grew 0.1% quarter-on-quarter in Q4 2024, with annual GDP expansion holding steady at 1.2%, matching prior estimates.

Currency Market Commentary

South Africa’s rand remained largely unchanged on Tuesday as markets absorbed the impact of U.S. tariffs on Canada, China, and Mexico. The euro rose to a near four-month high following an agreement between German political parties on a 500-billion-euro infrastructure fund, while sterling traded near a three-month peak. The U.S. dollar hovered near a three-month low against major currencies, weighed down by concerns over escalating trade tensions following the latest round of tariffs and countermeasures from Canada and China.

Commodity Market Commentary

Gold edged lower as a stronger U.S. dollar and rising Treasury yields weighed on prices, while markets assessed the potential impact of new U.S. tariffs. Oil prices declined for a third consecutive session as investor sentiment weakened amid concerns that tariffs on Canada, Mexico, and China could slow economic and fuel demand growth. OPEC+ announced its first output increase since 2022, planning a modest rise of 138,000 barrels per day from April as part of a gradual unwinding of its nearly 6 million bpd production cuts. Meanwhile, India restricted most platinum alloy imports, except for those with 99% purity, in a regulatory shift announced today.

Nedbank Group (NED) +2.06%
Nedbank Group posted an 8% increase in headline earnings to R16.9 billion for the year ending 31 December 2024, with a return on equity (ROE) of 15.8%, up from 15.1% the previous year. The group saw robust non-interest revenue growth, lower impairment charges, and effective cost management, despite challenging conditions. A final dividend of 1,104 cents per share was declared, marking an 8% rise. Additionally, the group completed its IT transformation, bolstering digital capabilities and gaining market share in key sectors like home loans and vehicle finance. It also made strides in sustainable development, increasing its renewable energy exposures by 32%. Looking forward, Nedbank is targeting further ROE improvements, with an optimistic outlook for 2025.

Shoprite Holdings (SHP) -3.60%
Shoprite Holdings achieved a 10.4% sales increase in the first half of 2024, driven by strong performance in its Supermarkets RSA segment, which includes Checkers, Shoprite, and Usave. The growth was supported by higher customer visits, greater basket spend, and significant volume increases, despite low price inflation. Shoprite’s customer base grew to 32 million loyalty members, and its digital advancements, including a new point of sale system and Checkers Sixty60 app improvements, contributed to the performance. The retailer expanded its product offerings, including a successful pet products segment, and returned R1.5 billion to shareholders while creating nearly 3,000 jobs. The company’s focus on market share growth continues to underpin its strategy. 

Discovery Limited (DSY) +0.39%
Discovery Limited reported a 27% increase in normalised profit from operations to R7.02 billion for the six months ended 31 December 2024. Normalised headline earnings rose by 34%, and basic earnings per share increased by 32%. The company’s Return on Equity (RoE) improved to 15.0%, and the Return on Embedded Value (RoEV) increased to 19.0%. A dividend of 87 cents per share was declared, up 34% from the previous year. Despite a 12% decline in new business Annual Premium Income (API), non-insurance business income grew by 14%. The group’s balance sheet strengthened, with net asset value up 25%, and embedded value rising by 17%.

Wilson Bayly Holmes-Ovcon Limited (WBO) -0.95%
Wilson Bayly Holmes-Ovcon Limited delivered a 10% increase in revenue to R14.7 billion for the period ending 31 December 2024. Operating profit grew by 15%, and earnings per share rose to 1,080 cents. The group’s net asset value improved to R4.9 billion, and its order book expanded by 7% to R32.6 billion. Despite challenges in the UK, the group saw positive activity levels in South Africa and across Africa. The interim dividend was increased by 30% to 300 cents per share.

Harmony Gold Mining (HAR) -1.97%
Harmony Gold reported a 19% increase in group gold revenue to R35.4 billion (US$1.98 billion) and a 33% rise in net profit to R7.93 billion (US$445 million) for the period. Operating free cash flow grew by 46% to R10.39 billion (US$579 million), supported by high gold prices. The company declared a record interim dividend of 227 SA cents per share, up from 147 SA cents in 2023, with a payout of R1.44 billion (US$78 million). Gold production declined by 4%, but underground recovered grades increased by 2%. All-in sustaining costs were within guidance, and the average gold price received grew by 23%. Guidance for FY25 remains unchanged.

Target (TGT) -3.00%

Target warned that tariff uncertainty could pressure first-quarter profits, prompting a shift towards sourcing from countries like Guatemala. The retailer highlighted potential price increases for seasonal produce, particularly avocados, due to new tariffs on imports from Mexico and Canada. While annual comparable sales are expected to remain flat through January 2026—below Wall Street’s 1.86% growth forecast—earnings projections of $8.80 to $9.80 per share aligned with estimates. Despite tariff concerns and consumer stress impacting February sales, holiday quarter comparable sales rose 1.5%, exceeding expectations, though earnings per share fell 19.3% to $2.41. Online sales grew 8.6%, driven by beauty, apparel, toys, and sporting goods, though increased demand for fast shipping added to costs.

Chocoladefabriken Lindt & Sprüngli AG (LISN) +7.07%

Lindt & Sprüngli reported a full-year operating profit of 884 million Swiss francs ($987 million) for 2024, slightly surpassing analyst expectations of 880 million francs, highlighting its pricing resilience amid record-high cocoa costs. The company, which previously projected 7% to 9% sales growth for 2025 and further price increases, announced a proposed dividend of 1,500 Swiss francs per share, aligning with market forecasts.

AutoZone (AZO) -0.12%

AutoZone reported second-quarter revenue below Wall Street estimates, with net sales declining 2% to $3.95 billion, missing the expected $3.98 billion as consumer spending softened and currency fluctuations posed challenges. However, domestic same-store sales rose 1.9% for the quarter ending 15 February, improving from the 0.3% increase a year earlier. Net income reached $515 million, or $28.29 per share, up from $487.9 million, or $28.89 per share, in the prior year.

Do you prefer a full in-depth report you can read offline? Click here to download the full report.