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Local Market Update

On the local stock market, both the broader All-Share index and the blue-chip Top-40 index ended the day with a 0.65% increase (ALSI at 78,176 index points). This week, the South African Reserve Bank is expected to announce an interest rate decision, with analysts predicting another hike. In company news, Dis-Chem, a retail pharmacy group listed on the JSE, declared a final dividend of 18.45 cents per share for the full-year ending February 2023. This represents an 8.7% decline compared to the previous period, attributed to higher retail costs and increased spending on diesel. Dis-Chem reported a 15.8% rise in retail expenses for the 2023 period compared to 2022.

European Market Update

European markets closed higher on Friday, driven by positive investor sentiment resulting from U.S. debt ceiling discussions. The pan-European Stoxx 600 index recorded a 0.77% increase, with all sectors in the green except for retail, which experienced a slight dip of 0.8%. Financial services stocks led the gains, rising by 2.2%, followed by construction stocks with a 1.56% increase. Tesco shares, however, traded 0.5% lower as the supermarket chain announced that Chairman John Allan would step down following allegations of inappropriate behaviour.

US Market Update

U.S. stocks declined on Friday as ongoing debt ceiling negotiations faced a setback, raising doubts about a swift resolution. Nonetheless, the S&P 500 index posted its best week since March. GOP negotiators walked out of a debt ceiling meeting, with Representative Garret Graves stating that the White House team was being "unreasonable." Despite these concerns, losses were limited after Federal Reserve Chairman Jerome Powell suggested that interest rates may not need to rise as much as previously anticipated to combat inflation.

Asia Market Update

Most Asia-Pacific markets experienced gains on Monday, with Tokyo's stocks extending their rally. Chinese chipmakers saw their shares rise after China's Cyberspace Administration announced restrictions on operators of key infrastructure from purchasing products from U.S. memory producer Micron. The People's Bank of China maintained its benchmark lending rates for the ninth consecutive month, leaving the 1-year loan prime rate at 3.65% and the 5-year loan prime rate at 4.30%, in line with economists' expectations.

Commodity Market Update

Gold prices saw a slight increase as prolonged discussions on the U.S. debt ceiling and Jerome Powell's less-hawkish comments on interest rates bolstered the appeal of the safe-haven asset. Oil prices, on the other hand, slipped due to caution surrounding the U.S. debt ceiling talks and concerns about demand recovery in China, despite support from reduced supplies from Canada and OPEC+ producers. JP Morgan reported a 1.7 million barrels per day (bpd) decline in crude and oil product exports from the group by May 16, and it is expected that Russian oil exports will also decrease by late May.

Currency Market Update

The rand weakened ahead of the highly anticipated sovereign credit review by rating agency S&P Global on Friday. However, by the end of the session, the rand had strengthened by 0.35% and was trading around R19.30 to the dollar. The dollar remained under pressure against the yen and euro this morning following the unexpected breakdown in U.S. debt ceiling negotiations and comments from Federal Reserve Chair Jerome Powell indicating a preference for a slower pace of rate hikes. Investors are now awaiting a crucial meeting between U.S. President Joe Biden and House Republican Speaker Kevin McCarthy to discuss the debt ceiling later today.



During the period, the group's projected ranges indicate that the headline loss per share (HLPS) is expected to be between 53.0 cents and 58.0 cents, contrasting with the 35.6 cents headline earnings per share (HEPS) recorded in 1H22. Similarly, the loss per share (LPS) is anticipated to fall within the range of 380.0 cents and 420.0 cents, in contrast to the earnings per share (EPS) of 34.9 cents in 1H22. The shift from positive earnings to a negative HLPS and LPS can be attributed to several key factors. These include significantly higher net impairment losses (impacting only LPS), net devaluation losses resulting from fluctuations in the Angolan and Nigerian exchange rates, and the impact of increased net finance costs. The group is currently in negotiations to finalize credit-approved term sheets for a refinancing package that will span the next five years, with a targeted conclusion date of June 15, 2023. The outcome of these negotiations, along with the progress made in implementing the restructuring plan, will determine the extent of the necessary rights offer, which will be disclosed in due course as part of Nampak's regular updates to shareholders.


During the period from March 1, 2022, to February 28, 2023, Dis-Chem experienced a 7.4% growth in Group revenue, amounting to R32.7 billion. Retail revenue saw a 6.5% increase, reaching R28.9 billion, with comparable store revenue at 3.3%. The growth of retail revenue was influenced by the impact of COVID-19 vaccine and testing in the previous period compared to the current period. If we exclude the contribution of COVID-19 vaccines and testing from both periods, retail revenue grew by 8.4%. Over this period, thirteen retail pharmacy stores were opened, while eight retail pharmacy stores (former Medicare stores) were closed. Additionally, eight retail baby stores were opened, and a net of 12 Baby Boom stores were acquired, expanding the company's presence in the baby retail sector. As of February 2023, Dis-Chem operated 258 retail pharmacy stores and 54 retail baby stores. Wholesale revenue experienced a significant growth of 10.4%, amounting to R24.2 billion. The contribution of wholesale revenue to Dis-Chem's own retail stores, which remains the largest contributor, increased by 9.6%. External revenue to independent pharmacies and The Local Choice (TLC) franchises also grew, with increases of 7.7% and 23.9%, respectively, compared to the corresponding period. If we exclude wholesale revenue to Medicare and Baby Boom stores from the previous period (internalized since October 1, 2021, and March 1, 2022, respectively), external revenue showed substantial growth of 20.7%. This growth was driven by an 18.2% increase in independent pharmacy revenue and a 23.9% increase in TLC revenue. The growth in TLC revenue can be attributed to an expansion in the number of TLC franchise stores from 147 to 171, along with enhanced support from existing TLC franchisees. The increase in independent pharmacy revenue is a result of both acquiring new customers and improved support from the existing customer base.


FOOT LOCKER  (FL) -28.1%

Foot Locker experienced a significant decline in its stock, plunging more than 27% on Friday. This steep drop was a result of a consumer slowdown that exceeded expectations, leading to a double-digit decrease in sales. As a consequence, the company revised its outlook just two months after its initial introduction. Adjusted earnings per share stood at 70 cents, falling short of the expected 81 cents. Additionally, reported revenue amounted to $1.93 billion, below the anticipated $1.99 billion. In comparison to the previous year, the company's net income for the three-month period ending April 29 plummeted to $36 million, or 38 cents per share, from approximately $132 million, or $1.37 per share. Sales also experienced a sharp decline, reaching $1.93 billion, down 11.4% from $2.18 billion in the previous year. As a result, Foot Locker adjusted its sales outlook for the year, anticipating a decline of 6.5% to 8% instead of the previous range of 3.5% to 5.5%. Comparable sales are expected to fall by 7.5% to 9%, compared to the previous range of 3.5% to 5.5%. The company also adjusted its non-GAAP earnings per share outlook to be between $2 and $2.25, a significant decrease from the previous range of $3.35 to $3.65. Foot Locker foresees gross margins ranging from 28.6% to 28.8%, as opposed to the previous range of 30.8% to 31%. CEO Mary Dillon acknowledged the softened consumer demand and expressed the belief that this pressure would persist. She also highlighted the impact of lower tax refunds and the disappointment in the expected post-refund recovery that did not materialize as forecasted.

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Research Team
Media, Sasfin Wealth