Walmart falls as cautious guidance overshadows solid first quarter growth

Market Performance

South African Market Summary

South African equities softened yesterday, with the JSE All Share index down 0.51% to 114,052.91 points and the Top 40 falling 0.62% to 106,285.37 points. Sentiment was pressured by a sharper acceleration in April inflation, which increased expectations that the South African Reserve Bank could raise interest rates at next week’s policy meeting. Corporate news remained active, with Investec outlining plans to expand its private client franchise in South Africa and the UK, targeting stronger profit growth by 2030. Afrimat also reported a solid annual performance, with revenue up 20.3% to R10 billion and HEPS rising 32.5%, although management warned that higher diesel costs linked to the Iran war could pressure operations.

European Market Summary

European equities ended little changed on Thursday, with the STOXX 600 holding near a two-week high at 620.56 points as investors paused after the previous session’s gains and awaited progress on US-Iran peace negotiations. Sentiment remained cautious as fresh survey data signalled mounting pressure on the region’s economy, with France’s private sector contracting at its fastest pace in more than five years and Germany’s private sector shrinking for a second consecutive month. European shares have recovered from conflict-driven lows, but remain below pre-war levels, constrained by the region’s reliance on oil imports and limited exposure to the AI-led global rally. However, eurozone consumer confidence improved to -19.0 in May, beating expectations for a decline.

US Market Summary

Wall Street ended slightly higher on Thursday after a volatile session, as easing oil prices and signs of progress in US-Iran peace talks helped major indices recover from earlier losses. Investor sentiment remained sensitive to geopolitical headlines, particularly around Tehran’s uranium stockpile and control of the Strait of Hormuz, while corporate earnings added stock-specific pressure. Walmart fell 7.3% after forecasting second-quarter profit below expectations and warning that elevated fuel costs could contribute to higher retail price inflation later in the year. Economic data remained broadly resilient, with jobless claims falling and manufacturing activity rising to a four-year high in May as firms rebuilt inventories to guard against potential shortages and cost pressures linked to the Iran war.

Asian Market Summary

Asia-Pacific markets traded higher on Friday as investors assessed diplomatic efforts towards a potential US-Iran peace deal, while attention also turned to Japan’s inflation outlook. Japan’s core CPI slowed to 1.4% year-on-year in April, its weakest pace since March 2022 and below expectations, as fuel and education subsidies helped offset broader price pressures. However, investors remain alert to the inflationary impact of higher energy costs after the Iran war disrupted flows through the Strait of Hormuz, a key channel for global oil and gas trade. The data will be closely watched by the Bank of Japan ahead of its June policy meeting, where policymakers are expected to raise rates, despite risks to the fuel-import-dependent economy.

Currency Market Summary

The rand edged lower in early trade on Thursday as investors assessed US-Iran peace talks and domestic inflation data showing a sharp April increase as war-related price pressures filtered through the economy. Currency markets remained cautious after conflicting signals from Washington and Tehran over a possible peace deal, with disagreement persisting around Iran’s uranium stockpile and control of the Strait of Hormuz. The dollar held near a six-week high on Friday, supported by safe-haven demand, resilient US jobless claims and manufacturing activity rising to a four-year high in May. The dollar index traded at 99.24, close to the previous session’s 99.515 peak, as investors awaited clearer geopolitical direction.

Commodity Market Summary

Gold edged lower on Friday and was on track for a second consecutive weekly decline, pressured by a stronger dollar and expectations that higher oil prices could keep inflation risks elevated and encourage further US Federal Reserve rate hikes. Oil prices rose as investors questioned the likelihood of a near-term breakthrough in US-Iran peace talks, with disagreements persisting over Tehran’s uranium stockpile and control of the Strait of Hormuz. Although officials suggested that gaps had narrowed, markets remained cautious, particularly after ADNOC warned that full oil flows through the Strait may not return before 2027. OPEC+ producers are also expected to consider a modest July output increase, although war-related supply disruptions remain a key constraint.

Domestic Company News

Nampak Limited (NPK) +0.21%

Nampak expects a mixed first-half performance for the period ended 31 March 2026, with normalised HEPS from continuing operations forecast between 3 900.0 cents and 4 300.0 cents, representing growth of 2% to 13% from 1H25. However, reported HEPS from continuing operations is expected to fall 37% to 45%, mainly reflecting lower contributions from Diversified, partly offset by a R92 million post-tax reduction in finance costs. EPS from continuing operations is expected to range between a 4% decline and 9% growth, supported by a R239 million impairment reversal linked to Beverage Angola. Total operations will show a sharper decline, with HEPS down 45% to 52% and EPS down 84% to 86%, largely due to prior-year disposal gains not recurring.

Investec Group (INL) +4.31% (INP) +5.69%

Investec delivered a resilient FY2026 performance, supported by its diversified business model, balance sheet strength and continued client activity despite an uncertain macroeconomic backdrop. Revenue rose 4.2% to £2.28 billion, while adjusted operating profit increased 3.4% to £951.0 million. Adjusted EPS grew 4.8% to 82.9 pence, with basic EPS up 5.9% and HEPS broadly stable at 73.1 pence. Return on equity eased to 13.6%, while return on tangible equity declined to 15.7%, but management said the group remains on track to achieve returns at the upper end of its FY2030 target range. Total dividends increased 5.5% to 38.5 pence, while net core loans, customer deposits and funds under management all grew strongly, reinforcing underlying franchise momentum across core operating divisions.

Sanlam Limited (SLM) -1.09%

Sanlam delivered strong first-quarter operational momentum, supported by resilient client activity, new business growth and exceptional net client cash flows despite a volatile macroeconomic backdrop. New business volumes rose 29%, net client cash flows reached R38.6 billion and operating profit increased 8% on a comparable basis. The group maintained strong capital levels, although discretionary capital declined to R3.2 billion after additional investments in its Indian insurance operations. Life insurance and health earnings increased strongly, while investment management and credit businesses also delivered growth. However, general insurance earnings were pressured by elevated catastrophe and large-loss claims across Southern Africa and Pan-Africa. Sanlam continued executing strategic initiatives, including the Ninety One transaction, increased Shriram ownership and preparations for South African banking services.

Pick n Pay Stores Limited (PIK) -1.02%

Pick n Pay expects its FY26 losses to improve from the prior year, reversing earlier guidance that headline losses would increase by more than 20%. The revised outlook follows stronger-than-expected results from Boxer, better trading and margin management in the Pick n Pay segment during the final month of FY26, and the effect of a low FY25 earnings base. The group now expects a loss per share of between 94.36 cents and 105.46 cents, improving 5% to 15% from FY25, while headline loss per share is expected to improve 10% to 20% to between 49.23 cents and 55.39 cents. Pick n Pay segment trading losses remain significant, however, at an expected R2.0 billion to R2.1 billion.

Global Company News

Walmart Inc. (WMT) -7.27%

Walmart shares fell after the retailer maintained conservative full-year guidance despite solid first-quarter growth, as investors weighed resilient demand against rising consumer cost pressures. Net sales increased 7.1% to US$175.7 billion, while operating income rose 5% to US$7.49 billion, supported by demand for low-priced groceries and essentials as shoppers sought value. However, higher fuel costs linked to the Iran war reduced operating income by about US$175 million and could add pressure to food prices and household budgets. Walmart expects annual net sales growth of 3.5% to 4.5% and EPS of US$2.75 to US$2.85. Second-quarter guidance also disappointed, with adjusted EPS forecast below expectations, although e-commerce sales remained strong, rising 26%.

Zoom Communications Inc. (ZM) -2.69%

Zoom raised its full-year revenue and profit forecasts, supported by continued demand for artificial intelligence features as the company works to strengthen enterprise and consumer engagement. The video communications platform has been integrating AI agents and companion tools across its meeting and collaboration services to improve functionality and support customer retention. For fiscal 2027, Zoom now expects revenue of US$5.08 billion to US$5.09 billion, slightly above its previous range, while adjusted EPS guidance was lifted to US$5.96 to US$6.00 from US$5.77 to US$5.81. The company also authorised an additional US$1 billion share buyback. First-quarter revenue of US$1.24 billion beat expectations, although second-quarter revenue and EPS guidance came in slightly below consensus forecasts.

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