Spar to cut prices to weather downturn

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Spar Group

Johannesburg - Spar, a South African food and liquor retailer, is counting on regular discounts for sales growth as consumers face higher unemployment, increasing household debt and rising interest rates.

The proportion of sales from discounting to total sales has increased over the last five years, with promotions now accounting for more than 20 percent of revenue, chief executive Graham O’Connor said in a phone interview

“People want bargains, they want to have specials, so you certainly need to do it,” he said.

“If you don’t do it, you won’t get a vast majority of your customers into the stores.”

While this strategy is driving sales, “there are more and more cherry pickers going for the specials and really rotating the stores where the specials arise,” he said.

South African retailers have been struggling as consumer spending slides.

The country’s retail sales growth slowed to 1 percent in March, from 2.3 percent the previous month.

Clicks, a South African beauty and pharmaceutical retailer, last month said volume growth was supported by discounting and promotions, accounting for 26 percent of sales in the six months through February.

Even as South Africans spend less on food, they are spending more on alcohol, O’Connor said.

Spar opened 19 new Tops liquor stores in the six months through March, taking the total to 595, and plans to add a further 20 in its second half.

The company may open 300 Tops outlets over the next six to seven years, he said.

Spar’s net income rose 9.4 percent to 642.9 million rand in the fiscal first half, the Durban-based company said in a statement today.

Profit by this measure climbed 13 percent in the first six months of fiscal 2013.

The shares declined 1.1 percent to 125.41 rand as of 3:53 p.m. in Johannesburg, valuing the company at 21.7 billion rand. - Bloomberg News

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