Kroger lifts sales outlook after strong Q1, plans price cuts and store closures amid inflation pressure

Local Market Commentary

South African equities edged lower on Friday, with the Top 40 declining 0.27% to 87,134.1 points and the All Share index down 0.22% to 94,710.5. Investors are eyeing upcoming producer inflation and leading indicator data for insights into the economic trajectory. Meanwhile, structural reforms gained attention as the World Bank Group signalled potential $500 million financing to support South Africa’s ambitious $25 billion transmission grid expansion. The plan, aimed at alleviating the decade-long energy crisis, proposes 14,500 km of new lines and enhanced transformer capacity. In corporate news, WeBuyCars is in preliminary talks with OEMs about potentially adding new car sales to its platform, signalling a possible evolution of its business model, though no formal agreements have been reached.

European Market Commentary

European stocks ended slightly higher on Friday, breaking a three-day losing streak as geopolitical tensions eased, with the STOXX 600 closing 0.1% firmer. In the UK, May retail sales volumes slumped 2.7%, the largest drop since December 2023, following a sharp uptick in April. German producer prices declined in line with expectations, falling 1.2% year-on-year, reinforcing the disinflationary trend across the eurozone. At Russia’s Saint Petersburg Economic Forum, President Putin dismissed claims of economic deterioration from the war in Ukraine, citing low public debt and diversification. However, business leaders highlighted underlying weaknesses, suggesting that domestic sentiment remains cautious despite official optimism.

U.S. Market Commentary

U.S. equities closed mixed on Friday, with the S&P 500 and Nasdaq retreating amid geopolitical risks linked to the Iran-Israel conflict. Trading was volatile, exacerbated by a "triple-witching" session involving the simultaneous expiry of equity derivatives. Despite the S&P 500 ending the week lower, the Nasdaq posted modest weekly gains. Fed commentary added further complexity to market sentiment: while Fed Chair Powell noted potential inflationary risks from tariffs, Governor Waller suggested rate cuts could be justified soon, and Richmond Fed’s Barkin urged caution. The fragile diplomatic efforts in Geneva collapsed over the weekend, as President Trump authorised direct U.S. strikes on Iranian nuclear sites, significantly escalating tensions and clouding the near-term outlook.

Asia Market Commentary

Asian markets opened the week under pressure, reacting to rising geopolitical instability following U.S.-led airstrikes on Iranian nuclear facilities. The move spurred a flight to safety and pushed oil prices higher. In Japan, policymakers revised the annual bond issuance plan, reducing super-long bond sales amid market stress, while the Bank of Japan indicated it would slow its tapering programme to help stabilise yields. Meanwhile, China’s property market continues to struggle with a multi-year downturn. Goldman Sachs highlighted that structural demographic trends – particularly a shrinking population and slower urbanisation – could limit new home demand to under 5 million units annually, well below the 2017 peak of 20 million. These headwinds may pose a drag on broader economic recovery.

Currency Market Commentary

The South African rand strengthened on Friday, tracking gains across emerging market currencies as immediate fears of a broader U.S. military engagement in the Middle East receded. Global investors rotated cautiously into risk assets, though volatility remains elevated. Sterling managed a mild gain against the dollar but is set to close the week lower amid broader demand for safe-haven currencies. The U.S. dollar advanced modestly on Monday as geopolitical uncertainty drove defensive positioning. Market participants remain watchful for Iran’s reaction to the weekend airstrikes, which could further shift currency flows and risk sentiment in the near term.

Commodity Market Commentary

Oil markets rallied sharply on Monday, with prices hitting their highest level since January, as military escalation between the U.S. and Iran reignited supply concerns. The strikes on Iranian nuclear facilities, reportedly supported by the U.S. in coordination with Israel, represent a major escalation, raising fears of disruption from OPEC’s third-largest crude producer. Despite the heightened tension, Russian President Vladimir Putin suggested that oil price movements remain within manageable bounds and stated there was no current need for OPEC+ intervention. The coming days will be closely watched for Iran’s response and its potential implications for global energy markets.

Crookes Brothers Limited (CKS) +9.09%

Crookes Brothers anticipates an 11% increase in EPS to 446.4 cents and a 27% rise in HEPS to 425.1 cents for the year ended 31 March 2025, driven by strong contributions from its banana and property segments. This trading update reflects a materially positive variance from the prior period and meets JSE disclosure thresholds. The financials remain unaudited.

Vunani Limited (VUN) 0.00%

Despite a 4% uplift in revenue to R692.9 million, Vunani reported a sharp decline in operating profit to R20.7 million (–66%), with a loss per share of 7.1 cents and headline loss per share of 2.8 cents. Notwithstanding the downturn, the group declared a final dividend of 35.0 cents (FY24: 9.0 cents), even as profitability came under pressure across its fund management, insurance, and investment banking operations.

Capital Appreciation Limited (CTA) -0.60%

Capital Appreciation forecasts EPS of 17.32–17.60 cents and HEPS of 17.35–17.57 cents for FY25, reflecting 24–26% growth. Strong momentum in the Payments division and steady but below-par performance in Software supported the results. FY24 figures were restated following accounting adjustments by newly appointed auditors. Both divisions remain cash-generative with expanding client bases. Audited results are due 24 June 2025.

Marshall Monteagle PLC (MMP) 0.00%

Marshall Monteagle projects a 62% drop in HEPS to US$2.20 cents and a 93% plunge in EPS to US$1.0 cent for FY25, largely due to fair value losses on its investment portfolio and the revaluation of South African commercial property assets. The update is based on unaudited figures, with full-year results expected on 27 June 2025.

Kroger Company (KR) +9.84%

Kroger lifted its FY2025 identical sales growth guidance to 2.25%–3.25%, citing stronger-than-expected Q1 performance and resilient consumer demand for private-label and promotional goods. EPS of $1.49 beat expectations by $0.03, while same-store sales grew 3.2%, comfortably ahead of the 2.4% consensus. Despite maintaining its profit forecast, management committed to further price cuts and discounting, targeting value-conscious shoppers amid inflationary uncertainty driven by tariffs. The retailer plans to shutter 60 underperforming stores and took a $100 million impairment charge. Additionally, Kroger is reassessing its e-commerce strategy following Ocado's full drawdown of a credit facility linked to their long-standing partnership.

Accenture Plc (ACN) -6.86%

Accenture posted Q3 revenue of $17.7 billion and EPS of $3.49, beating analyst forecasts, but a 6% year-on-year decline in new bookings to $19.7 billion—below estimates—dragged shares down over 6%. Weakened U.S. government spending and macroeconomic caution are weighing on IT consulting demand, with management flagging a 2% top-line hit in Q4. While generative AI bookings reached $1.5 billion, overall client signings softened, with fewer large deals than in the prior quarter. In response, Accenture is launching a dedicated "Reinvention Services" business unit to consolidate its AI initiatives, led by Americas CEO Manish Sharma. FY revenue growth guidance was raised slightly to 6%–7%.

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