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Shares in Massmart take a heavy knock as earnings tumble

by , 19 August 2015

Early this morning, Massmart released a trading statement covering the six months to the end of June.

The retailer warned of a large fall in profits for its coming results. Once the market opened, this led its shares to plunge in value.

Let's take a closer look at what's going on…


Massmart’s earnings could be as much as 30% lower


Massmart Holdings [JSE:MSM] revealed its earnings will be between 22.4% and 29.8% lower compared with the same period last year, reports Fin24. On an earnings per share basis, this brings it down to between 117.8c and 130.2c a share.

An equities analyst with Sasfin Securities, Alec Abraham, told Bloomberg this is because Massmart is “dealing with costs incurred from being part of Wal-Mart”. And it’s during a “time when the South African economic environment isn’t supporting consumers and Massmart’s business model”.

Massmart, the fifth largest retailer in SA, is feeling the strain of importing with the rand being so weak, says MoneyWeb. The company “imports most of its electronic products”.


The weak rand played a large part in Massmart’s earnings fall


By taking out the impact of the weaker rand, Massmart said “headline EPS would have fallen by at least 9%,” reports Fin24. But the company’s impending results also reflect the tough environment retailers are dealing with.

Earlier in trading, shares in Massmart were down the most in one day “in more than 15 years,” says the SABC. Shares fell almost 10.5%.

At time of writing, shares in Massmart had recovered slightly to trade 9.47% lower at R115.75.

Massmart’s trading statement comes the day after Shoprite “met estimates with an 11% rise in full-year profit,” adds MoneyWeb.

So not great news for Massmart today. Its results are due for release on 28 August.

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Shares in Massmart take a heavy knock as earnings tumble
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