R1.4 billion tech blunder for Spar
Despite revenue increasing, Spar says it lost over R1.4 billion due to difficulties implementing a new SAP system in KwaZulu-Natal.
In a voluntary trading update for the 2023 financial year, the group said it saw a strong trading performance for the 47 weeks ending August 2023, with turnover increasing by 10.6% despite the cost of living crisis across all its markets and the business disruptions in South Africa.
Spar Southern Africa saw total sales grow by 5.9%, with the wholesale grocery business increasing sales by 8.1%. Wholesale price inflation for the period also totalled 10.1%.
However, TOPS at Spar liquor sales dropped by 0.6%, as sales declined following growth of 43.0% in the prior period, following the easing of Covid-19 liquor restrictions.
The combined core grocery and liquor turnover growth amounted to 7.0%; however, had the troubled implementation of the SAP system not taken place, combined turnover growth would have hit 9.0%.
The SAP implementation in KZN amounted to an estimated turnover loss of R1.42 billion over the period, the group said.
The group previously said that the cost of the implementation was roughly R786 million for the six months ended 31 March 2023, but this has increased by an additional R638 million over the five months to August 2023.
“SAP has remained a supportive partner throughout the project. After months of collaboration to
resolve the issues and drive success, management is satisfied to report that the KZN distribution
centre is once again servicing all stores in the region,” the group said,
“The SAP solution is stable and performing consistently. Overall, service levels are approaching the levels at which they were prior to the SAP implementation.”
“The learnings during this transition phase have been immense, and there is a sense of positivity
about the system as the KZN region continues to adapt to it.”
Looking internationally, the BWG Group (Ireland and South West England) saw turnover increase by 8.5% (EUR-denominated), following a strong performance in the retail brands and the widespread recovery of the hospitality sector.
Turnover in Poland also increased by 5.0% (PLN-denominated), boosted by improved retailer
loyalty, but slightly offset by the declining store.
Spar Switzerland, however, saw turnover decline by 3.4% (CHF-denominated) in a difficult market environment and the transfer of a group of corporate stores to independent retailers in 2022, hurting retail sales.
As previously announced, the group will soon have new leadership. Angelo Swartz will take over as CEO on Sunday, 1 October.
Megan Pydigadu will also take over as Chief Operating Officer on Wednesday, 1 November 2023.
Mike Bosman will also leave the role of CEO and resume the position of Independent Non-Executive Chairman of the Board when Swartz takes the reigns.
Read: Load shedding bleeds one of South Africa’s biggest retailers of R700 million
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