Gap Inc. Beats Q3 Expectations, Raises Annual Guidance for Third Time

LOCAL MARKET COMMENTARY

South Africa's Top 40 index rose 0.22% to close at 77,113 points on Thursday, while the All Share index gained 0.29%, finishing at 85,522 points. The central bank reduced its main interest rate by 25 basis points to 7.75%, meeting expectations. Despite inflation falling below the target range, Governor Lesetja Kganyago highlighted global risks and domestic price pressures, ruling out a larger 50 bps cut. On the corporate front, South African Airways reported its first net profit since 2012, posting R252 million for the 2022/23 financial year.

EUROPEAN MARKET COMMENTARY

Europe's main stock index rose on Thursday, breaking a two-month losing streak as energy and tech stocks led gains. Geopolitical tensions drove demand for safe-haven assets. Eurozone consumer confidence dropped by 1.2 points in November to -13.7 from October. German Chancellor Olaf Scholz announced plans to seek a second term, with Defence Minister Boris Pistorius ruling himself out as a contender. Meanwhile, Pope Francis warned of a "serious imbalance" in the Vatican's pension fund, prompting structural review measures and the appointment of a senior cardinal to oversee its administration.

US MARKET COMMENTARY

Wall Street's main indexes ended higher on Thursday, with the Dow and S&P 500 reaching one-week highs after a volatile session. A surprise drop in weekly jobless claims pointed to a potential rebound in November job growth. Investors are now focused on remarks from Federal Reserve officials ahead of the mid-December FOMC meeting. Richmond Fed President Tom Barkin warned of heightened vulnerability to inflation shocks, while Chicago Fed President Austan Goolsbee expressed support for further interest rate cuts, suggesting a cautious approach to their pace.

ASIA MARKET COMMENTARY

Asia-Pacific markets mostly advanced this morning as investors digested Japan's October inflation data and strong economic growth figures from Singapore. Japan's core inflation, excluding fresh food prices, rose 2.3% year-on-year, slightly above the 2.2% forecast but cooler than September's 2.4%, while the overall CPI also eased to 2.3% from 2.5%. Singapore's third-quarter GDP surged 5.4% year-on-year, accelerating from 3.0% in the previous quarter, with quarter-on-quarter growth jumping to 3.2%. In response, Singapore raised its 2023 economic growth forecast to "around 3.5%" from the earlier range of "2.0 to 3.0%."

CURRENCY MARKET COMMENTARY

South Africa's rand strengthened on Thursday following a modest interest rate cut by the central bank, falling short of expectations for a larger reduction. Meanwhile, the dollar index reached a year-high on Thursday before easing to 107.06 during Friday's Asian trading session. The Indian rupee hit a record low on Friday, pressured by a strong dollar, ongoing portfolio outflows, and heightened geopolitical risks, which weighed on investor sentiment.

COMMODITY MARKET COMMENTARY

Gold was on track for its largest weekly gain in nearly eight months this morning, driven by safe-haven demand amid heightened geopolitical tensions. Oil prices also climbed after Russia reported firing a ballistic missile at Ukraine and warned of escalating conflict, fuelling concerns about potential disruptions to crude supplies.

Mr Price Group Limited (MRP) +8.34%

For the 26 weeks ending 28 September 2024, Mr Price Group reported a 5.2% increase in total revenue to R17.6 billion, outperforming market sales growth and gaining 60 basis points in market share. Retail sales rose by 5.1% to R16.9 billion, with gross profit margins expanding by 110 basis points to 39.7%, supported by effective stock management and reduced markdowns. Basic earnings per share grew 7.3% to 481.5 cents, while diluted headline earnings per share rose 6.5% to 468 cents. Other income increased by 4.8% to R636 million, and finance income surged 59.4% due to a strong cash balance of R2.2 billion following the Studio 88 acquisition.

Investec Limited (INL) +1.28%

For the first half of 2025, revenue increased by 5.6% in pounds (5.2% in rands) to £1,102.6 million, with adjusted operating profit rising 7.6% to £474.7 million. Basic earnings per share (EPS) grew 2.1% to 39.5 pence, while adjusted EPS fell sharply by 47.4% to 36.6 pence. The cost-to-income ratio improved to 50.8%, and the credit loss ratio (CLR) rose to 42 basis points. Return on equity (ROE) was 13.9%, and return on tangible equity (ROTE) remained steady at 16.4%. Dividends per share increased by 6.5% to 16.5 pence, with net asset value (NAV) per share up 3.9% and tangible net asset value (TNAV) per share up 5.1%.

The Spar Group Limited (SPP) +3.75%

For the year ended 30 September 2024, headline earnings per share (HEPS) and diluted HEPS are expected to increase by 6% to 16%, ranging between 875.6 and 958.2 cents and 875.2 and 957.8 cents, respectively, compared to 826.0 cents and 825.7 cents in 2023. Earnings per share (EPS) and diluted EPS are projected to rise by 20% to 30%, reaching 824.6 to 893.4 cents and 824.3 to 893.0 cents, respectively, compared to 687.2 cents and 686.9 cents in the prior year.

Reunert Limited (RLO) -1.68%

For the year ended 30 September 2024, the group achieved a 5% increase in revenue to R14.4 billion and a 7% rise in operating profit to R1.53 billion. Attributable profit grew 13% to R1.04 billion, with earnings per share (EPS) up 13% to 652 cents and headline earnings per share (HEPS) increasing 10% to 665 cents. The final dividend per share rose 11% to 276 cents.

The Gap Inc (GAP) +6.89%

Gap Inc. reported better-than-expected fiscal third-quarter results despite challenges from hurricanes and unseasonably warm weather, prompting the company to raise its annual guidance for the third time this year. It now expects fiscal 2024 sales to grow between 1.5% and 2%, surpassing previous expectations of slight growth and the 0.4% growth forecast by analysts. For the quarter, earnings per share were 72 cents, beating the 58 cents anticipated, while revenue rose 2% to $3.83 billion, exceeding forecasts of $3.81 billion. Net income climbed to $274 million, up from $218 million a year earlier. Shares surged 13% in extended trading as the company also projected stronger gross margins and operating income, positioning it well for the holiday season.

Ross Stores Inc (ROST) +2.61%

Ross Stores raised its annual profit forecast on Thursday, crediting lower freight and supply-chain costs for offsetting the impact of slowing sales. The company now expects annual earnings per share (EPS) of $6.10 to $6.17, up from its previous range of $6.00 to $6.13. However, it trimmed its fourth-quarter EPS forecast to $1.57 to $1.64, below analyst expectations of $1.67, while maintaining its comparable sales growth target of 2% to 3%. The retailer, aiming to attract cautious consumers, also announced that James Conroy, a retail veteran and former CEO of Boot Barn, will take over as CEO on February 2. Shares rose nearly 8% in after-hours trading.

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