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Spar Sees Big Jump In Profit As Consumers Turn To Store Labels And Alcohol

Listed retailer Spar has published its financial results for the full year ended September 2019, reporting an 8.4% jump in revenue, with operating profits up 7.2% despite tough conditions across its operations.

The group is a warehousing and distribution business in South Africa that owns the Spar retail brand and supports the network of independent businesses that operate under the brand in the country.

It forms part of Spar International, which has operations in over 44 countries.

The local arm, operating as The Spar Group Ltd, manages operations in Southern Africa, Ireland, Switzerland and Poland, and includes brands such as Spar (Superspar, Kwikspar, etc), Tops at Spar, BuildIt and S Buys.

Salient features:

  • Turnover increased by 8.4% to R109.5 billion
  • Operating profit increased by 7.2% to R3.0 billion
  • Profit before tax increased by 12.9% year-on-year to R2.8 billion
  • Diluted headline earnings per share increased by 9.9% to 1160.6 cents per share on a normalised basis

The group declared a gross final cash dividend of 516 cents per share.

South African operations

Spar Southern Africa delivered solid growth of 8.0% in wholesale turnover in what the group described as “a competitive environment”.

The core Spar business grew turnover by 7.0% to R57.6 billion and was again supported by strong marketing initiatives which continued to attract cash-strapped consumers.

The Tops liquor brand again delivered an impressive result with wholesale sales growth of 17.6%.

Combined food and liquor wholesale turnover growth recorded growth of 8.1%, and despite a generally weak building materials sector, Build It increased sales by 6.9% to R8.0 billion, underpinned by effective marketing and improved retailer loyalty, the group said.

Spar’s Southern Africa store network increased to 2,349 stores, with 169 new stores opened. The group completed 298 (2018: 276) store upgrades across all brands.

Of particular note, the group said, was the strength of its Spar-branded private-label products, which it said continued to “offer real consumer value and quality and remain a shopping differentiator for our retailers”.

“Total private-label wholesale sales reported in 2019 increased by 10.1% to R13.4 billion. This represents 23.3% of all Spar wholesale turnover, meaning that almost one in four turnover rands is spent on a private label product,” the group said.

Despite its growth, and in particular boost in alcohol sales, Spar said that the prospects in South Africa remain constrained.

“In Southern Africa, all indicators continue to suggest that consumers will remain under financial pressure. Confidence is expected to remain unchanged in the medium term and this will add further pressure to a constrained spending outlook,” it said.

However, it said that it will continue to focus on its distribution capabilities and brands to ensure that independent retailers remain suitably positioned to deliver value to consumers.

In early trade on Wednesday, Spar’s shares were up 1% on the JSE, trading at R200.

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Written by AN

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