UPDATE 1-Wal-Mart's South African unit Massmart beats forecasts

Thu Feb 27, 2014 9:56am EST

* Diluted headline EPS up 30 pct at 608 cents

* Consensus was 600 cents

* Shares surge as much as 6 percent

By Tiisetso Motsoeneng

JOHANNESBURG, Feb 27 (Reuters) - Wal-Mart's South African unit Massmart slightly beat forecasts with a one-third rise in full-year profit on Thursday, boosted by an extra trading week and currency swings as debt-laded consumers spend guardedly.

Retailers in Africa's biggest economy are among the worst- performing stocks in the past 12 months, reflecting investor fears about the impact on consumer spending on now-tepid economic growth, rising fuel prices and high household debt.

Shares in Massmart jumped as much as 6 percent during the session before settling at 3.7 higher at 116.19 rand by 1345 GMT, paring losses so far this year to about 10 percent.

But analysts said the surge in the share price on Thursday was no indication that consumer spending is about to improve because rising interest rates are expected to squeeze consumer finances further this year.

"If you are not a day trader, you obviously have to make a reasonably long-term call on the retail sector and, as far as I am concerned, it is still under a fair amount of pressure," said Reuben Bleeders, an analyst at Cape Town-based Gryphon Asset Management.

Nearly a quarter of South Africans have no job in an economy - sub-Saharan Africa's biggest - where average household debt accounts for 75 percent of disposable income.

Massmart's rival Shoprite this week posted its slowest profit growth in eight years and two other retailers - Truworths and JD Group - have separately written off a total of more than $100 million of consumer debt in the six months through December.

Massmart reported a 30 percent increase to 608 cents in diluted headline EPS in the year to end-December, a touch above a 600-cent estimate in a Reuters poll 11 analysts.

Headline EPS, the main profit gauge in South Africa, was boosted by an extra trading week and favourable currency swings, without which it would inched up about 8 percent.

Sales rose nearly 10 percent to 72.5 billion rand ($6.70 billion). Sales in the first eight weeks of the 2014 fiscal year grew 9.4 percent, prompting chief executive Grant Pattison to give a cautiously upbeat outlook for the rest of the year.

"The strong start suggests better prospects for 2014 compared to 2013. While we remain cautious about the state of the consumer, we are more positive about the business as we reap the rewards from the operational focus of last year," Pattison said.

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