More problems loom as Spar crashes back to 2008 levels

The Spar Group’s disastrous trading update on Friday, which saw its shares sink almost 15% on the day, sent the group back to as low as R47 – levels last seen in the depths of the 2008 global financial crisis (and before that, early 2007). This means nearly two decades of capital appreciation has evaporated as the group battles with problems on many fronts. It says headline earnings will be between 50% and 60% lower for the first six months of this financial year (to 27 March), versus the same period in 2025.

Its performance in the 26 weeks was impacted chiefly by two factors: Spar is not a retailer. To understand this group, you need to appreciate that it is, essentially, a wholesale business. Its botched SAP enterprise resource planning (ERP) implementation in the KZN region has seen its customers – the retailers – abandon much of their ordering from the group’s distribution centre (DC).

In February it said that in the 18 weeks to the end of January, ‘loyalty’ in KZN was nearly 10 percentage points behind the rest of its regions in South Africa (excluding neighbouring markets). At that point, loyalty (the proportion of stock retailers buy from the group) in KZN was 71.5% versus 80.9% for all of SA. In FY2025, the group reported an operating margin of just 1.75% in South Africa.

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A decade ago, this figure was above 3% for the group and had been at that level since at least 2011. Between 2016 and 2020, it oscillated between 2.7% and 2.8%. And since 2023, it has languished below 2% (in 2025, the group’s margin was dragged down by its UK and Swiss operations to just 1.5%).

In December, then CEOAngelo Swartzarticulated a plan to ‘restore’ the margin in SA to above 3% by 2028. There would be three main drivers here, each delivering between 40 and 45 basis points: DC improvements – chiefly fixing the issues in KZN (44 basis points), centralisation and efficiency (45 basis points), with gross profit expansion (increasing private label, for example) and other income delivering another 40 basis points.

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