SPAR profits fall sharply

by NJABULO MKHIZE
DURBAN, (CAJ News) – THE SPAR Group has reported a significant decline in profitability for the six months ended 27 March 2026, underscoring a difficult trading period that has prompted a wide-ranging operational reset aimed at restoring growth through stronger support for independent retailers.

The retailer recorded a 55.5% drop in headline earnings per share (HEPS) to 199.9 cents, reflecting weaker trading conditions, cost pressures and operational inefficiencies across parts of its business.

Operating profit fell to R730.7 million, or R882.0 million before extraordinary items, down from R882.0 million in the prior comparable period, highlighting sustained margin pressure across the Group.

Group turnover rose marginally by 2.1% to R67.7 billion, but remained below inflation, signalling underlying volume decline rather than meaningful top-line expansion.

Gross profit margin was broadly stable at 10.6%, compared with 10.7% previously, indicating limited pricing recovery in a challenging retail environment.

Net debt increased to R7.3 billion from R5.4 billion at September 2025, driven by working capital timing effects, although it remains significantly below the 2022 peak of R9.8 billion.

Retailer loyalty held steady at 78.5%, reflecting resilience in SPAR’s independent store network despite operational strain.

The results were shaped by three key factors: underperformance in KwaZulu-Natal (KZN), a weak Black Friday trading campaign, and residual balance sheet clean-up costs.

While the Group acknowledged the pressure on earnings, management said the period provides a clear baseline for recovery and restructuring.

Group Chief Executive Officer Reeza Isaacs said the challenges were internal rather than structural.

“These are not market problems; they are execution problems, and they are fixable,” Isaacs said. “We allowed our cost base to outgrow revenue for too long. We also failed to treat retailer profitability as our primary metric. Confronting these issues openly is a necessary step in building credibility and ensuring that future performance is grounded in accountability and measurable execution.”

Isaacs said SPAR’s future strategy would be anchored in rebuilding the performance of its independent retailer base, arguing that sustainable group growth depends on stronger store-level profitability.

The Group has now shifted its focus towards what it describes as a retailer-first operating model, built around five core pillars: improved procurement and pricing, more effective marketing investment, a repositioned SPAR2U digital platform, upgraded retail technology systems, and direct initiatives to improve retailer profitability.

These measures include centralised management of key value items, a full review of marketing return on investment, investment in digital retail tools, and support programmes aimed at improving store efficiency through staffing, benchmarking and cost control.

In KwaZulu-Natal, SPAR reported early signs of stabilisation after a structured turnaround programme delivered three consecutive months of operating profit.

Improvements in product availability, reduced stock-outs and changes to fresh produce supply models have supported the recovery, alongside leadership changes in key operational roles.

Internationally, SPAR completed its portfolio simplification strategy with the exit from Southern England (AWG), following earlier disposals in Poland and Switzerland.

This leaves the Group focused on its core South African and Irish markets.

In Ireland, BWG Foods delivered a resilient performance, with sales rising 2.2% to €855.7 million and improved gross margins, reinforcing the strength of SPAR’s independent retail model in a competitive market.

Despite the earnings pressure, early indicators suggest some stabilisation. Gross profit growth returned in February and March, SPAR Health grew 26%, and SPAR Rewards sales increased 9.3% year-on-year.

The loyalty programme now has 12.8 million registered members, with users spending significantly more per basket than non-members.

Isaacs said the recovery process would be measured and sustained rather than immediate.

“The path forward is about proof, not promises,” he said.

“We are committed to rebuilding trust one store at a time by fixing the engine room that powers our retailers. Recovery will not be defined by a single reporting period. It will be defined by consistent operational improvement, stronger retailer outcomes and visible progress over time.”

– CAJ News