Spar’s juicy results send shares soaring
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DURBAN - RETAILER Spar Group’s shares leapt more than 11 percent yesterday after better-than-expected results and as it declared an annual dividend with an 8.8 percent increase in earnings in the face of Covid-19 challenges.
The group reported that for the year to end September its normalised diluted headline earnings increased by 8.8 percent to 1 262.6 cents a share, and its total dividend increased by 8.1 percent to 865c.
Its turnover increased by 13.5 percent to R124.3 billion. The group attributed the improvement to consumers choosing local and conveniently situated shopping destinations that ensured their safety and well-being during the pandemic.
Spar said that all of its markets were impacted from March by the pandemic and lockdown.
“As an essential service provider of groceries, our stores traded throughout the lockdown periods, but with periods of restriction on the sale of liquor, cigarettes and building materials experienced in South Africa,” the group said.
Its operating profit increased by 15.6 percent to R3.4bn.
Spar Southern Africa contributed growth in wholesale turnover of 5.8 percent to R78.6bn.
“Our core food business increased sales by 9.2 percent, supported by strong demand for groceries, with internally measured wholesale food inflation rising to 3.9 percent.”
However, Spar’s liquor division, Tops, lost almost a third of its total trading days due to the restrictions on the sale of liquor, with wholesale turnover for the year falling by 15.8 percent.
“Despite trading restrictions on building materials during the initial five weeks of lockdown, Build It delivered a resilient performance in a weak sector, with wholesale turnover down by 0.9 percent,” the group said.
The total Southern African store network increased to 2 414 outlets, with 65 net new stores opening across all brands. The group completed 310 store upgrades during the period.
In Poland, the group said the pandemic had been disruptive to its plans, and the business has been most vulnerable to the impact of lockdown restrictions, but it contributed R2.1bn to group revenue.
Spar also has operations in Switzerland and Ireland.
Jordan Weir, a trader at Citadel, said the results were ahead of expectations. “These results certainly were a positive surprise to investors who had expected the lockdown period to have a more-detrimental effect on results compared to the pleasing numbers that were reported,” he said.
Weir said the better-than-expected results assisted the share price to move higher in the morning.
“One of the more material reasons for the stronger performance came from customers opting to shop at smaller, local convenience stores in their neighbourhoods, rather than at larger crowded malls where Spar’s larger competitors tend to be housed. Spar was well positioned to capitalise on this trend, filling the role of a more community-based, smaller outlet.
“The strategic size and location of Spar’s stores in more suburban areas managed to bear fruit in a way that investors possibly hadn’t expected,” Weir said.
Spar’s shares closed 13.28 percent higher at R205.21 yesterday.