SPAR seeing a turn for customers in South Africa
SPAR says its customers are starting to see an upturn in disposable income in South Africa, which is boosting its local Build It and liquor businesses.
Meanwhile, the group is making progress in selling its Polish business and has completed a strategic review of its Swiss business as it eyes its positioning in the European market.
In a trading update for the 47 weeks to 23 August 2024 today, the group said that the sale of its Polish division was well underway and awaiting regulatory approval.
SPAR previously said it was its Polish business for R185 million to Polish retailer Specjal as part of its turnaround plan but will need to pay R2.7 billion to recapitalise the company.
The group said that the deal removes the loss-making business from the balance sheet and allows SPAR to focus resources on its core business in South Africa.
In the trading update, the group said that a strategic review of the Swiss business division has been completed.
“We continue to assess our Swiss business and how it is positioned in the market to ensure we optimise returns,” said SPAR Group CEO Angelo Swartz.
“The review of our European portfolio is well underway, and it is management’s intention to accelerate decision-making in this regard over the coming months.”
The group also said that it saw positive progress in its IT solutions to improve procurements. A debt restructuring is to be completed by the end of 2024.
The group’s plan to reshape its balance sheet is also on track.
Financials
Swartz said that the growth of supermarkets and liquor retail remains resilient.
“Strong cost discipline across the broader business is helping offset softer sales in certain divisions like wholesale,” said Swartz.
Areas showing the most upside included Pharmacy at SPAR, which grew 15%. “That level of performance is exceptionally strong in current market conditions,” said Swartz.
The liquor division saw an 11% improvement at the wholesale level, while Build It showed signs of recovery.
“We saw a welcome upturn in Build It sales in the last month as the two pot retirement withdrawal system starts kicking in and interest rates start trending down,” said Swartz.
“While customers seem to be enjoying more disposable income slowly, we continue to focus on delivering everyday value and low prices for our shoppers”.
Group turnover from continuing operations increased by 4.1% in the trading period.
In Southern Africa, total sales jumped by 3.5%, showing varied performances across the business units.
“Our focus remains on returning the SA business to a 3% operating profit margin by the end of the 2026 financial year, and we are in the process of reviewing our target operating model with a view to maximising value,” said Swartz.
“The SPAR brand is the second biggest grocery offering in South Africa and remains the core of our operations and primary focus. We saw total retail growth to the end of August 2024 of 6.1% (5.7% like-for-like), showing the strength and resilience of the brand.
“We are optimistic about the months to come as we continue to grow our business while contributing to the transformation of the economy.”
The Ireland and South West England business (BWG Group) saw a turnover lift of 2.6% in euros and 7.0% in rand. In Switzerland, turnover declined by 5.8% in Swiss francs but increased by 0.8% in rands terms.
In Poland, turnover declined by 6.5% in zloty terms but increased by 3.7% in rand terms.
“This local currency decline was primarily due to the loss of a net 13 retailers and a slight reduction in retailer loyalty following the Group’s announcement of its intention to divest from the Polish market,” said Swartz.
“We have made significant strides over the past few months in future-proofing our business. While there is still work to do, our community of retailers has kept us on track.
“The success of our member stores is our success, and we remain focused on positioning ourselves as the first-choice brand in the communities we serve.”
SPAR’s financial results for the year ending 30 September 2024 will be released on SENS on or about Thursday, 28 November 2024.
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