* Politics weigh on consumer sentiment
* Retailer maintains dividend (Adds share price, analyst comment)
JOHANNESBURG, May 30 (Reuters) - South Africa's Mr Price Group Ltd posted a 12 percent drop in full-year earnings, the first annual profit decline since 2001, as consumers struggle in a sluggish economy.
The clothing retailer, however, kept its dividend unchanged, supporting its shares after weeks of decline.
Mr Price, which also sells homeware and furniture, is facing increased competition from international chains including Zara, H&M and Cotton On and has lost market share as local competitors, such as the ailing Edcon, mark down stock.
"This was the Group's first earnings decrease in 16 years during a very difficult trading period," Chief Executive Stuart Bird said in a statement on Tuesday.
Mr Price blamed a drop in sales on weak consumer sentiment and the knock-on effects of political turmoil which culminated in President Jacob Zuma firing finance minister Pravin Gordhan in March and credit ratings agencies downgrading the nation.
"Cabinet reshuffles and downgrades by ratings agencies have caused further exchange rate volatility, which the consumer ultimately has to absorb," the company said in a statement.
Mr Price, which has grown for three decades by undercutting competitors and catering to thrifty shoppers' fashion needs, said a mild winter caused rivals to mark down stock to match its own prices, further weighing on sales.
Edcon, an unlisted retailer, has had to restructure debt and clear old stock at much lower prices. Woolworths also marked down stock in what its Chief Executive Ian Moir described as a "feeding frenzy".
"The retail environment has become more competitive, with any growth in a stagnant market coming from increased market share," Mr Price said.
Diluted headline earnings per share fell to 887.9 cents in the year to end-March, from 1,012.9 cents in the previous year.
But shares in Mr Price were up 5.7 percent at 154.50 rand by 0824 GMT, compared with a 0.2 percent gain in the JSE's benchmark Top-40 index, as the company kept its full-year dividend at 667 cents per share.
"Mr Price maintaining its dividend is an indication by management that they probably don't see a deterioration in future prospects," said Gryphon Asset Management portfolio manager Cassie Treurnicht.
Lacklustre results from other retailers had weighed on Mr Price, said Treurnicht, with its shares down around 15 percent since end-March.
The company said improvement in the consumer environment is likely to only be gradual, but added that it was seeing encouraging signs in the current financial year. (Reporting by TJ Strydom; editing by Jason Neely and Keith Weir)