S.Africa’s Massmart Sees H1 Profit Drop, Shares Slump 8 Percent
South African retailer Massmart forecast a sharp decline in half-year profit on Wednesday, hurt by unfavourable currency moves, putting its shares on course for their biggest one-day slump in more than 15 years.
Massmart, controlled by U.S. retail giant Wal-Mart Stores Inc, said headline earnings were expected to fall by between 22.4 percent and 29.8 percent, or in a range of 117.8 cents and 130 .2 cents per share, in the 26 weeks to June 28.
Headline EPS is the main profit measure in South Africa and strips out certain one-off items. South Africa’s fifth biggest retailer value, which imports most of its electronic products, has been struggling as the weakness of the rand currency, which hit a record low last week, pushes up the cost of imported products.
Excluding the impact of currencies, headline EPS would have fallen by at least 9 percent, Massmart said. The company’s problems also reflects an industry-wide slump in Africa’s most advanced economy as consumers battle job losses, high personal debt levels and rising interest rates.
Shares in the high-volume, low-margin retailer fell more than 10 percent, on course for their biggest daily percentage slump since early 2001. They closed the day 8.49 per cent weaker. Rival Shoprite Holdings, Africa’s biggest retailer, met estimates with an 11 percent rise in full-year profit on Tuesday, citing market share gains from competitors.
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