Spar battles at home but on a roll abroad
SPAR yesterday posted weak growth in the southern African market amid signs of a turnaround at its Swiss stores as well as strong numbers from its Irish market during the year to September.
Spar chief executive Graham O’Connor said South Africa was a tough market with a tough economy.
He added that despite the expectations that political and economic uncertainties would continue, Spar remained committed to driving its key strategic focus areas to support retailer profitability and deliver real business growth.
“These initiatives include ongoing, significant investments in the group’s distribution network, competitive pricing and ensuring a comprehensive product range,” O’Connor said.
Spar has a retail store network of 3 768 stores.
A final dividend of 435 cents a share, resulting in a total annual dividend of 675c a share, represented growth of 1.5 percent.
The group reported 5.3 percent growth in turnover and said profit before tax had strengthened by only 1 percent.
Total operating profit for the period was R2.6 billion, up 0.2 percent from the previous year with subdued performance from its southern Africa stores.
In southern Africa, operating profit slid 2.5 percent, as tough trading conditions eroded margins and increased costs were associated with stores acquired and subsidised stores.
Spar southern Africa experienced a significant slowdown in sales, which, together with cost pressures, resulted in net margin contraction.
The core business reported muted sales growth of 4.2 percent because of the tough trading environment.
“These results reflect the weak state of consumer buying power and confidence, which has been exacerbated by retrenchments, political uncertainty and climatic challenges in South Africa,” said O’Connor.
He added stiff price competition among retailers was evident.
“Despite these challenges, the group is encouraged by the strong performances from our business in Ireland and the early positive signs of the turnaround in Switzerland.”
Headline earnings a share fell 6.6 percent to 952.5c compared with 1 020c in 2016.
Spar Switzerland reversed a half-year loss as a result of early gains from implementing its plans to improve the retail offering.
The BWG Group contributed R20.5bn to group turnover, reflecting a positive 1.5 percent euro-denominated growth.
However, the euro’s 10 percent weakening against the rand over the year eroded the strong trading performance in Ireland.
“It seems like the currency gods are ganging up against us,” Spar chief financial officer Mark Godfrey said yesterday.
Tops at Spar extended its double-digit growth trajectory, achieving a 12.4 percent increase in reported retail turnover to R10bn from R8.9bn in 2016.
The building materials business reported wholesale sales growth of 2.1 percent.
Spar shares fell 0.87% percent to close at R169.21 on the JSE yesterday.