Nompumelelo Magwaza
Double-digit growth at Spar’s liquor and building divisions helped lift group turnover by 7.6 percent to R25.6 billion in the first half, the food and liquor retailer said yesterday.
Spar’s new chief executive, Graham O’Connor, said he was “pleased” with the results delivered by the two divisions.
O’Connor replaced Wayne Hook, who stepped down in January due to family commitments.
For the six months to March, profit before tax increased by 8.6 percent to R889.5 million with gross margin rising to 8 percent.
Headline earnings increased 9.3 percent to R642.7m with headline earnings a share up to R3.72 from R3.41 in the previous period. The retailer declared an interim dividend of R1.95 a share.
O’Connor said liquor chain Tops, which increased its wholesale turnover by 11.4 percent to R2.1 billion, managed to leverage on its new store openings, while Build It benefited from new government housing developments.
Build It staged a strong recovery, with wholesale turnover up 11.3 percent to R2.7bn amid muted market demand.
“Trading conditions remain tough with the ongoing pressure on consumer spending due to rising unemployment and increasing household debt, but despite that Spar is pleased with its revenue top-line growth at 7.7 percent, especially because it came from almost the same number of stores, representing organic growth,” he said.
Spar’s wholesale category increased its turnover by 6.6 percent to R20bn, benefiting from strong uptake of its house brands.
O’Connor said investment in Spar’s private label brands for the past 15 years was paying off. “Spar has about 2 500 private brands, which is a ratio of about 15 percent in our stores.”
Net retail trading space increased by 0.8 percent, with eight new Spar stores opened, while 65 stores underwent upgrades in line with the group’s focus on organic store growth.
The Tops division opened 19 new stores, taking the number of stores to 595.
Combined food and liquor retail sales increased by 7.1 percent; on a like-for-like store basis it was up 6.8 percent. Spar serviced 873 stores in total.
O’Connor said he was disappointed with Spar’s low-cost brand SaveMor, which was growing at a slower pace than expected. The brand currently has 28 stores in outlying areas.
“It’s been a bit disappointing but we will be having a drive on this because there is scope in this market,” he said.
The Build It house brand imports increased 29.9 percent in spite of the weak domestic currency, reflecting strong consumer support. The group opened new stores in Mozambique and Botswana.
“Spar anticipates that market conditions will remain largely unchanged for the remainder of the financial year with continued stress on muted consumer spending and economic growth,” it said.
The shares slid 0.5 percent to R126.17 yesterday.