Spar, South Africa\u2019s second-largest grocer by revenue, plans to cut debt and focus on its home market after exiting Poland this year.<\/p>\n\n\n\n
The company, which is in talks to restructure its obligations, expects withdrawing from the loss-making Polish unit will free up about R500 million of earnings a year. <\/p>\n\n\n\n
Spar has R10 billion of debt \u2014 largely euro-denominated \u2014 with about R250 million due this year.<\/p>\n\n\n\n
\u201cWhat we should be doing as all corporates, and Spar hasn\u2019t been great at this in the past, is looking at our capital-allocation policy and making sure that is well thought through, particularly when you are funding expansion,\u201d Chief Executive Officer Angelo Swartz told reporters in Johannesburg on Thursday (14 March).<\/p>\n\n\n\n
The exit from its smallest market will help the retailer focus on South Africa, which accounts for more than 60% of its revenue. <\/p>\n\n\n\n
Spar needs to take on rivals, including Shoprite and Pick n Pay, which are transforming their food business into well-defined premium and discount units \u2014 a strategy it currently lacks.<\/p>\n\n\n\n
\u201cWe have found ourselves at a crossroads<\/strong>,\u201d the CEO said. With economic inequality in South Africa on the rise \u201cand at a rapid pace, what that\u2019s meant from a retail perspective is that it tended to favour brands that were a lot more distinct,\u201d he said.<\/p>\n\n\n\n Spar\u2019s has so far tried to cover both the high and lower end of the market with one brand, he said.<\/p>\n\n\n\n In South Africa, Spar is also interested in expanding in baby and pet stores, among other adjacent categories that Swartz declined to identify.<\/p>\n\n\n\n Swartz was appointed to his post in October with a mandate to strengthen the retailer after top executives resigned over governance issues.<\/p>\n\n\n\n In November, the company, which supports a network of independent retailers who trade under its brand through its warehousing and distribution business, halted its dividend and reported a 47% drop in full-year operating profit.<\/p>\n\n\n\n The decline in earnings has seen Spar\u2019s shares slump 21% this year, compared with a 15% gain on the six-member grocery store index.<\/p>\n\n\n\n
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