South African retailer the Spar Group announced a worse-than-expected trading update for the first four months of its 2021 financial year. The retailer’s South African performance lagged the overseas operations, with the company recording strong growth in Poland and Switzerland. The trading update outlines the tough macroeconomic environment faced by retailers in South Africa, with inflation exceeding sales growth indicating negative volumes against the prior period. Spar did reference the poor performance of its alcohol division due to alcohol bans being implemented as a result of the South African governments measures to curb the spread of the coronavirus. However, given the poor performance of the alcohol division, it seems as if the group’s core food business has given up market share to competitors. Spar’s hardware and home-ware subsidiary, Build it, produced stellar growth with the ‘do-it-yourself’ home improvement trend continuing. – Justin Rowe-Roberts
SPAR SENS statement:
Trading update for the 18 weeks to 29 January 2021
Continued mixed trading performance due to Covid-19 pandemic
• The Group sales increased by 9.8% to R42.99bn for the 18 weeks ended 29 January 2021
• SPAR Southern Africa recorded wholesale sales growth of 3.4%
o Core SPAR grocery business increased sales by 2.8% and like-for-like sales increased 2.5%, with internally measured price inflation of 5.1%
o Liquor sales declined by 17.9%, adversely impacted by the nationwide ban on the sale of alcohol as a result of the pandemic and periods of restricted trading when the ban was lifted
o Build it sales growth increased by 25.6%,as demand for building materials remained strong, driven by investment in home improvements as consumers spent more time at home due to the pandemic
• BWG Group in Ireland increased turnover by 4.3% (EUR-denominated) boosted by strong contributions from all the retail brands and the corporate retail stores
• SPAR Switzerland achieved turnover growth of 13.8% (CHF-denominated), reflecting continued support of local community stores under lockdown conditions
• SPAR Poland turnover grew by 38.1%, attributed to the increased support from SPAR retailers, despite ongoing lockdown measures and the challenges faced while developing the new business
The Group increased sales by 9.8% from R39.15bn to R42.99bn for the eighteen (18) week trading period ended 29 January 2021 when compared to the corresponding previous period in 2020.
Spar Southern Africa
Group sales in Southern Africa increased by 3.4%, which reflected the weaker consumer spend and lost liquor business. The core SPAR grocery business reported sales growth of 2.8%, with same store sales increasing by 2.5%. Internally measured price inflation of 5.1% reflected the upward movement of prices in a wide range of grocery and perishable items. The liquor business was heavily impacted by the closure of TOPS at SPAR retail stores during the period due to lockdown regulations banning the sale of alcohol, and significantly reduced trading hours when the ban was lifted. Wholesale liquor sales declined 17.9%. Conversely, the Build it business continued to benefit from increased consumer spending on residential dwellings and reported a sales increase of 25.6%.
The Group’s Irish business continued to report strong growth across all retail brands, compensating for the decline in the Cash & Carry and food service businesses, as the region experienced increased lockdown restrictions, which have severely impacted the hospitality industry but have seen consumers supporting neighbourhood stores. The Appleby Westward Group in South West England made a significant contribution to the turnover result with a strong corporate retail performance. In EUR terms, the Irish business increased turnover by a solid 4.3%. Combined with a slightly weakened rand, the business recorded sales growth of 19% in reported currency.
The Swiss business performance reflects the strong, continued support of local community stores as the country experienced strict regulatory lockdown measures. Turnover increased by 13.8% in CHF terms. This business contributed an increase in turnover of 31.0%in reported currency.
Reflecting the increased support from the SPAR retailers, turnover increased by 38.1% in local currency and 48.8% in ZAR terms. The Polish business has experienced set backs as a consequence of the pandemic lockdowns, however good progress continues to be made in many of the strategic focus areas.
The financial results for the six months ending 31 March 2021 will be released on SENS on or about Wednesday, 19 May 2021. Shareholders are advised that the financial information contained in this announcement has not been audited, reviewed or reported on by the Group’s auditors.