The Spar Group

  • The Spar Group Ltd, is part of Spar   International, which operates in forty-four countries, supporting a network   of independent retailers trading under the Spar brand. Spar operates eight   hundred and fifty stores in SA, on a franchise basis, as a wholesaler of   goods and services to SPAR, TOPS, and Build IT stores. This is a major   variance from that of its local competitors, which in the main are company   owned retailers which in general have higher operating overhead costs as well   as larger capital expenditure requirements.

  • The diversified grocery business, includes a   number distinctive  Spar store  formats, ranging from   the smaller Spar Express and Kwickspar retailers operating in  rural and neighbourhood  locations to the Super Spar stores which are predominantly situated in major metropolitan   locations.

  • The smaller store formats offered by Spar   appeared to be a winner in the Covid-19 pandemic, as shoppers steered away   from larger shopping malls. During the reporting period, group sales increased by  12.4%  from   R99.67 billion to R112 billion, with core sales increasing by 8.7%, and like-for-like sales up by 7.5%.

  • On a geographical basis, Spar Southern   Africa sales improved by 4.8%, driven by strong core supermarket sales   growth, as consumers stayed at home, due to the lockdown. Building materials sales  from the Build It  businesses   , as well  as the Tops liquor stores, were  under  strict  regulation for much   of the  lockdown period which negatively   impacted revenues of these businesses. Building materials sales were down by   3.5% and liquor sales declined by 16.4% for the forty-eight weeks. Opening  up of the SA economy should be a   boost for the non-grocery, merchandise operations, with Build It reporting a   strong turnaround and liquor sales buoyant.

  • The offshore operations in Ireland increased   turnover by 5.5% in Euro terms, with the near customer proximity of their   stores a positive catalyst. The   Spar operations in Switzerland showed a robust increase in sales of 11.4%, in Swiss Franc, with both the neighbourhood and cash and carry stores reporting   strong sales. The European offshore operations is another difference relative   to its SA peers with these operations now appearing to gain traction after a   bumpy start. These operations also provide valuable hard currency earnings,   especially pertinent in an era of rand weakness.

  • The recently acquired Polish operations   are however struggling and are  off to a slow start largely due to the pandemic   restrictions which has resulted in delays of integrating and onboarding of existing Spar retailers. Despite the   headwinds, the Polish operations delivered turnover of R1.97 billion, with   management expecting a positive contribution to group results by the end of   2021.

  • The diversity of the SA trading operations, as well as the   operations in Europe are now   in turnaround mode with Switzerland in particular showing strong growth   in sales following store upgrades.

  • The Spar   share price has already reflected the positive tone in the trading update,   which many market commentators saw as ahead of consensus expectations. Full   financial results for the year ending 30th September 2020 will be released on   or about 18th November 2020.

The Spar Group