SPAR’s turnover lifts 8.8% despite challenges
● Group cites difficult operating conditions across all its regions
SA grocer SPAR grew turnover 8.8% for the 24 weeks ended March 15, it said yesterday.
It said turnover was negatively affected by fluctuations in exchange rates since it reported for the 20 weeks ended February 16.
SPAR cited challenging operating conditions in all its regions — SA, Ireland, Switzerland and Poland.
In its home market, SPAR Southern Africa’s total wholesale sales grew 5.7%, affected by a weaker than expected grocery business performance.
Combined core grocery and liquor turnover rose 6% against internally measured price inflation of 7.2%, while the SPAR grocery wholesale business increased sales by 5%.
TOPS at SPAR liquor sales increased 12.8% and Build it delivered “pleasing” sales growth of 1.1% after sustained market contraction.
The pharmaceutical business delivered turnover growth of 17.7%, driven by increased loyalty from Pharmacy at SPAR retailers and growth in Scriptwise revenue.
BWG Group, which operates in Ireland and southwest England, continued to trade strongly with turnover increasing 6.6% in euro terms and 16.9% in rand terms.
SPAR said trading conditions in the UK “have been particularly challenging due to the seasonal nature of the business, located in an area influenced by holiday makers”.
SPAR Switzerland’s turnover fell 4.7% in local currency but increased 8.8% in rand.
The overall decline reflects the shift in consumer behaviour towards seeking cheaper products in local supermarkets and across the border; however, SPAR’s convenience stores have benefited from unseasonably warm weather over the past four weeks, it said.
SPAR Poland’s turnover decreased 4.2% in Polish currency, but increased 13.2% in rand, negatively affected by the loss of a small number of retailers after the group’s announcement to dispose of its interests in this market.
The group appointed advisers after SPAR decided to dispose of its interest in SPAR Poland, and significant progress has been made, “ensuring the most optimal outcome for all stakeholders”.
It shrank group net debt to R11.5bn from R12.8bn at endMarch 2023.
The group said its SAP ERP system, which went live in February 2023 at the SPAR distribution centre in KwaZuluNatal, “is stable and functioning as designed, however, [it] is not yet at the efficiency levels anticipated”.
The main areas affected are the region’s ability to manage gross margin and delivery cycles, which has, as a consequence, resulted in lower-thanexpected gross profits, increased labour costs and a higher investment in working capital in this region.
A strategic review of the SAP system and rollout process has been undertaken to ensure further implementations across distribution centres are significantly de-risked.
The group said that while wholesale sales performance had been weaker than expected, it was encouraging that retail sales for February increased by 10.9%, and 9.5% on a likefor-like basis, positively benefiting from the leap year.
For the five months to the end of February, retail sales increased 7.1%, with like-for-like sales rising 5.8%.
SPAR said it believed retail sales allowed for a more accurate industry comparison across peers, and the resilient performance indicated the continued strength of its brand.
“The current EBIT margin performance remains under pressure predominantly due to the business challenges that have continued in KwaZuluNatal, which have affected profitability more than expected during the period.”
It continues to focus on optimising the system as well as improving loyalty, which should lead to an improvement in margins in the second half of the 2024 financial year.
With turnover growth not at expected levels, the Southern African business has responded by improving operational efficiency and focusing on cost saving opportunities, it said. —