SPAR flags declining sales amid profit improvement efforts

Embattled retailer SPAR saw its shares drop on Thursday after a trading update flagged a 1.6% decline in total sales from continuing operations for the 18 weeks to January 31, 2025.

The shares fell 6.02% to R8.71 by 3.18 pm on the JSE, down 11.51% in three years as it battles to stabilise the business amid hot competition from retail giant Shoprite and Pick n Pay and in a tough consumer environment.

Retail sales in Southern Africa grew 3.4% across 2 029 supermarkets and liquor stores, driven by strength in lower- and middle-income formats. The online platform, SPAR2U, posted a 285% surge in order volumes compared to the prior period. Build It recorded a 7.3% increase in top-line sales, matching gains at the retail level, while the pharmaceutical division delivered a 13.3% turnover rise, boosted by solid wholesale and Scriptwise results.

Overseas, however, Ireland and Switzerland logged sales declines of 1.6% and 5.2%, respectively in local currency, weighed down by cost-of-living pressures.

CEO Angelo Swartz credited strategic moves for the margin uptick.

“Achieving improved profitability in such volatile market conditions is a testament to our clear and decisive strategy. It’s particularly pleasing to see strong momentum in our lower- and middle-income stores, and we remain committed to rewarding our customers’ trust across all markets,” he said. He pinned Southern Africa’s margin recovery on fixes at the KwaZulu-Natal (KZN) distribution centre, the sale of underperforming corporate stores, and tighter cost controls.

The KZN SAP system overhaul has brought better pricing visibility, with further rollouts planned for Build It’s Imports Warehouse and the Eastern Cape distribution centre by mid-2026.

Swartz also said the disposal of SPAR Poland, completed on January 31, 2025, was a key step in a European strategic review set to wrap up by June 2025.

“Our European strategic review is progressing well, and we expect completion by June 2025. This review aligns with our refined capital allocation framework, designed to create sustainable value for stakeholders,” he said.

The company said the broader 1.6% sales drop stems from constrained consumer spending across all regions, undercutting SPAR’s push into value-driven formats.

While SPAR2U and targeted promotions have lifted certain areas, international operations and overall turnover show persistent strain. The Poland disposal advances the European rethink, but declines in Ireland and Switzerland reveal ongoing challenges.

Swartz said strengthening the balance sheet remains a top focus.

“We have engaged productively with our lenders and have multiple levers to reduce debt, including effective working capital management, prudent capital expenditure, and the disposal of non-core properties,” he said. He added that innovation stays central to SPAR’s plans.

“Looking ahead, we remain focused on innovation and efficiency, ensuring that our communities, our shoppers and our retailers remain at the heart of everything we do,” he noted. The group’s interims are due to be posted on or about June 4, 2025.
BUSINESS REPORT