Retail giant Spar registers a major slump in shares due to IT woes.

Estimated read time 3 min read

South African retail giant Spar saw its shares taking slump and crashed more than
15% on Wednesday following a warning that its half-years profit was set to fall by
more than a third.
Headquartered in KwaZulu-Natal, Spar is one of the biggest retail groups operating
in Southern Africa together with the likes of Shoprite and Pick ‘n Pay.
Africa Talks Business has gathered that Spar’s topline growth in South Africa was
also softer than expected as it managed problems with a new IT system that lost its
sales in KwaZulu-Natal.
At the same time, the group’s retailers had to fork out more than R700 million for
diesel as it looked to curb the ravaging load shedding implemented by Eskom.
News24 reports that a total turnover increased by 8% to about R73 billion, with Spar
Southern Africa delivering total turnover growth of 6%.
In addition, Spar’s Ireland and South West England business operations fared better
with euro-denominated turnover increasing 8.8%, while Spar Switzerland reported
that turnover fell 4.3% due to the continued decline in volumes in that market.
Meanwhile, its turnover in Poland increased 4.9%. Looking at sales at its liquor
outlet, Tops, the brand saw a decline of 1.9% and that is primarily impacted by the
high level of sales experienced in the prior comparative period due to the easing of
Covid-19 liquor trading restrictions.
“The JSE-listed retailer said that across all regions cost increases could not be
restricted in line with lower-than-expected turnover growth which had affected
profitability,” reports News24.
“The trading update rattled the market, sending its shares tumbling by more than
15% to R105.70 by market close.
“Spar, which expected diluted headline earnings per share to fall between 25% to
35%, said its southern African fuel and distribution costs had increased by 27%.
“The SAP implementation challenges are being urgently addressed and are limited to
Spar’s KZN region only. The rollout of SAP has been delayed in other regions until all
issues at the KZN DC (Distribution Centre) have been completely and satisfactorily
According to Sasfin Wealth senior equity analyst Alec Abraham, he is of the view that
while the South African revenue numbers were softer than he expected, the real
shocker was the group’s bottom line.

Furthermore, the analyst argued that Spar has also been hit by competition while
singling out Shoprite’s Checkers Sixty60 platform which registered a real jump during
the height of the devastating pandemic.
“It has a huge impact on the interest paid and that ripples through right down to the
bottom line,” he said.
“Spar’s competitive advantage in the past has always been its very strategic
convenient locations. But there is nothing more convenient than the palm of your
hand. The fact that [Checkers’] Sixty60 rolled out so quickly and it took Spar so long
to get any sort of direct delivery service going meant they lost market share and
once you lose that market share it is very difficult to get it back.”
Spar is not the only business that saw a slump in shares and the likes of PEP and
Ackermans plunged more than 10% on Tuesday after reporting shrinking retail
margins as it discounted to clear unwanted summer stock.
Pepkor, which also warned customers were prioritising essentials such as transport
over clothing, saw headline earnings slide almost 12%.

Main Image: Spar/News24

Journalist -Phumzile Ngcatshe.

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