SPAR takes a big hit

 ·12 Jun 2024

SPAR’s latest financial results for the six months ended 31 March 2024 came in below expectations.

SPAR’s total turnover, including Southern Africa, Ireland, South West England and Switzerland, increased by 7.9% to R77.2 billion.

However, profits were flat, with headline earnings declining 7.6% for the period.

“All regions have been dealing with inflationary cost pressures and prolonged higher interest rates placing pressure on consumers and business alike,” said SPAR.

“This, coupled with the hangover of system issues in South Africa, has impacted the results for the first six months of the year.”

Although the group delivered an operating profit of R1.6 billion—up 0.2%—net finance costs negatively impacted profit before tax, which declined by 11.2% to R1.14 billion.

Thus, diluted headline earnings per share declined by 7.6% to 464.8 cents.

With the challenges facing the group, it has not declared an interim dividend for the period.

Excludes SPAR Poland, which is now a discontinued

SPAR Southern Africa saw a total increase in wholesale turnover of 4.8% for all business units.

The wholesale grocery business reported growth of 4.0% against internally measured wholesale price inflation of 7.0%.

Turnover from SPAR’s private label increased by 7.6%. SPAR’s on-demand shopping app, SPAR2U, was available on 420 sites at the end of March 2024, up from 356 sites in September 2023.

Online volumes thus increased by 463% against the prior reporting period.

TOPS at SPAR saw wholesale turnover increase by 12.8% after being boosted by the timing of the Easter long weekend in March.

When combined, wholesale grocery and liquor turnover increased by 5.2% for the period.

Building materials business, Build it, daw wholesale sales performance declined by 0.4%, reflecting a weak construction industry.

The group’s pharmacy business, however, showed double-digit sales growth, with 15% turnover growth for the period.

“A detailed review of the Southern African region on a cost line basis has resulted in costs being well managed during the period,” said the group.

However, the SAP ERP, which was launched at the KZN distribution centre in February 2023, is still giving issues.

“Of these, two remain the negative gross margin impact caused by buyers having less visibility of pricing and subsidies and inefficiencies of the warehouse management system.”

“With respect to the gross margin issue, further developments and designs are being implemented to improve the pricing screens and will be productionised in September 2024.”

“The decision has also been made to implement a more cost-effective warehouse management system that is better suited for our business.”

Although the first half was weaker than the group expected, its management is confident that it is taking the necessary steps to position the business for a better second half.

“The various cost-saving initiatives and improved situation at the KZN region will improve profitability going forward.”

“The operating environment in South Africa continues to be challenging. Inflation, prolonged high interest rates, muted GDP growth and high unemployment continue to place consumers under pressure.”

“SPAR’s tiered private label approach is well placed to offer better value for all shopping budgets.”

“Agreeing on the target operating model, improving profitability and finalising the system modernisation
rollout plan are key focus areas for the months ahead.”

Read: How much ‘bin pickers’ make in South Africa – with some earning more than the national average

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