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Spar, one of South Africa’s biggest retailers, has had to close non-performing stores while navigating a challenging economic climate.
In its trading update for the 18 weeks to 31 January 2025, released on Thursday, the retailer said the group’s total sales from continuing operations decreased by 1.6%.
However, it said the group has seen positive momentum in improving operating margin levels through focused cost control and promotional activities.
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When it comes to performance by Spar Southern Africa, retail sales grew by 3.4% across 2 029 supermarket and liquor stores. It also had store sales growth of 3.0%, slightly ahead of national inflation.
The retailer said growth was robust in the lower-income grocery stores, with subdued growth in the middle- and higher-end stores.
It attributed sales growth to the planned closure of 13 grocery stores in the South Rand Region, lower promotional activity, and erratic supply in Mozambique for the grocery business.
The trading update reads, “operating losses from corporate grocery and liquor stores were reduced during the period due to improved performance and the closure of non-performing stores.”
The retailer’s shopping platform, Spar2u, has also recorded 285% growth in order volumes compared to the prior comparative period.
“We continue to focus on cost control and margin management to mitigate the muted top line growth.
Build it, a group of independently owned stores that sell building materials and hardware, and a division of the Spar Group, recorded growth of 7.3%.
Similar growth was experienced in retail.
“The pharmaceutical business delivered strong turnover growth of 13.3%, attributable to a strong performance in wholesaler and Scriptwise sales.
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“Through targeted interventions, SAP architectural modifications and a comprehensive understanding of the system, KwaZulu-Natal has experienced a positive recovery,” reads the trading update.
“Loyalty levels continue to improve and both gross profit and trading profit margins have recovered, achieving four consecutive months of profitability.
“Despite the disappointing topline growth for South Africa, lower promotional activity, improvements in KZN, and a strong focus on cost control are contributing to margin recovery for the business.”
The trading update also includes performance of the BWG Group, which is a retail and wholesale company in Ireland that operates Spar stores.
It reported a sales decrease of 1.6%, primarily due to decreased consumer spending in response to increased living costs.
Consumers are shifting their spending to larger supermarket formats in the United Kingdom.
“Operating expenses were well managed in the period, with margin improvement driven by a better sales mix and firm performance in specific categories.
“While inflation in Ireland has moderated, consumers are still highly price-sensitive and value-driven.
“The increase in the minimum wage from 1 January 2025 supports consumer spending but requires independent retailers to reassess the impact of cost inflation.”
The trading update said performance in Spar Switzerland was also affected by increased living costs, as well as intensifying competition, resulting in a decrease in turnover of 5.2% in CHF terms.
“Spar’s private-label range remains a strength, addressing the growing demand for affordability and competitive pricing.”
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