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South African retailer Pepkor misses H1 sales expectations

JOHANNESBURG, May 29 (Reuters) - South African retailer Pepkor Holdings Ltd reported a smaller than expected 7% rise in first-half revenue on Wednesday, as cash-strapped shoppers and the shift of Easter to April this year hit demand for clothing and general merchandise.

Shares in the company, previously Steinhoff Africa Retail Ltd, were down 5.65% to 16.70 rand at 0825 GMT.

Retailers are struggling in South Africa as an increase in value-added tax, unemployment, and higher fuel as well as utility prices have reduced consumers' spending power.

Pepkor's revenue for the six months ended March came in at 35.3 billion rand ($2.4 billion) compared with 33 billion rand in the same period last year, while operating profit before capital items rose 25.2%. On a comparable basis, profit was up 6.9% in the period.

The company also pointed to a shift in the timing of the busy Easter trading period, which took place in April this year compared with March in 2018.

Pepkor's clothing and general merchandise business, which contributes 66% of group revenue, saw sales grow 5.2%, with discount chain PEP supported by good growth in its baby and home departments, while the Ackermans chain "outperformed the market once again."

"By Pepkor standards, the sales growth achieved by many of its retail brands was lower than expected," the company said in a statement, without saying what it had projected.

"The challenging conditions within the discount and retail sectors weighed on sales growth."

Pepkor, which is present in 12 African countries, said Zimbabwe remained a concern in the PEP business and operations had been intentionally slowed down there "while viability is assessed and risk is managed."

The retailer has temporarily halted stock inflows to Zimbabwe due to the economic crisis there.

In furniture, appliances and electronics, Pepkor said customer spending focused more on essentials than durables, resulting in a decline of like-for-like sales of 1.6%.

"Management remains cautiously optimistic about the retail environment and expects improved consumer confidence following the completion of South Africa's elections," it said.

President Cyril Ramaphosa, inaugurated last Saturday after the ruling African National Congress clinched a 57.5% majority in a general election earlier in May, is expected to announce his cabinet this week, a test in his ability to deliver reforms.

($1 = 14.8660 rand) (Reporting by Nqobile Dludla; Editing by Mark Potter)