South Africa's Massmart hit by lower sales, earnings warning

JOHANNESBURG (Reuters) - Shares in Massmart Holdings Ltd fell more than 21 percent on Tuesday after the South African retailer posted lower-than-expected full-year sales and said it expected its headline earnings to drop by up to 44 percent.

An increase in value-added tax, unemployment and inflation levels, coupled with higher fuel prices have reduced spending power in South Africa, causing slower sales and pointing to a gloomy outlook for the retail sector results season in February.

Massmart, which sells general merchandise, fresh food, groceries, home improvements and appliances, said it expects headline earnings per share (HEPS), which includes restructure costs, for 2018 to fall between 34 and 44 percent from the 688.1 cents reported in 2017.

Massmart shares were down 18.65 percent to 93.30 rand at 1452 GMT, which would be the biggest daily fall in the stock in nearly nine-months if they close at this level.

Group sales fell 3 percent to 90.9 billion rand ($6.55 billion) as sales growth in all divisions, except discount retailer Game and DionWired, slowed during the crucial November and December shopping months in the 52-week period. Compared to 2017, which had 53 weeks, sales are up 2.9 percent.

Nine analysts polled by Refinitiv expected sales to inch 0.11 percent lower.

The trading update followed flat half-year sales from supermarket operator Shoprite.

Last week Thursday Woolworths and budget clothes retailer Mr Price Group also reported slower sales growth, while clothes retailer Truworths said it expected diluted HEPS to drop between 5 and 7 percent.

($1 = 13.8729 rand)

(Reporting by Nqobile Dludla; Editing by James Macharia)