Spar’s group sales up 5.8% despite underwhelming performance in South Africa grocery business

SOUTH AFRICA – South African grocer Spar Group saw robust trading for the 18 weeks to January 29, 2022, boosted by the lifting of liquor bans related to the Covid-19 pandemic.

The group reported a 5.8% increase in turnover to R45.5 billion (US$3.02 billion) for the period under review, up from R43 billion reported in the previous comparable period.

The jumped was propelled by the bullish performance of its liquor segment with its Tops liquor stores reporting a 55.8% surge in liquor sales in comparison to the same period in the prior year.

Spar noted that its strong liquor sales performance was the main driver of the 8.2% growth in wholesale sales that it registered in its Southern Africa business.

“Following the lifting of the Covid-19 nationwide liquor trading bans in September 2021, the Tops at Spar liquor business has subsequently seen incredible levels of growth in liquor sales.

“No trading days were lost during the period, against the 58 days lost in the prior comparative period. Liquor trading for the period represents growth of 27.9% against the 2020 period,” stated Spar.

Underwhelming food performance

Despite the exceptional growth in alcohol sales, Spar’s wholesale grocery business reported sales growth of 3.7%, excluding alcohol, against internally measured price inflation of 4.4%.

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This means the volume of food and grocery sales dropped compared with the previous period. The increase in sales is explained only by rising prices.

When Spar’s grocery performance is compared to that of the Shoprite Group’s grocery retailers – Shoprite (7.3%) and Checkers (11.4%) – which saw substantially higher sales growth, it is clear that Spar lost market share during the period.

Other than heightened competition, the core business trading was also impacted by the closure of stores due to the civil unrest in July, 2021, in Gauteng and KwaZulu-Natal.

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According to the JSE-listed food wholesaler and distributor, 28 of its format stores that were affected by the July riots remain closed with 20 slated to be reopened over the course of 2022 and eight to never be opened

In a bid to salvage the situation, the retailer has launched the pilot phase of its SPAR2U e-commerce platform and plans to have it available for use in parts of Johannesburg by the end of March.

Abroad operations showcase growth

Other than operating in South Africa, Spar has several European locations which include Switzerland, Ireland and Poland.

BWG Foods, which is in Ireland and South West England, performed well. “In EUR terms, the Irish business increased turnover by an impressive 6.9 percent for the period, and 1.9 percent in ZAR terms, demonstrating the impact of the strengthening of the rand,” the group said.

On the other hand, Spar’s Switzerland business – which is built around a convenience store model – saw a turnover increase of just 1.9%.

However, the Swiss business faces uncertain growth prospects as it has reported a slowdown in the extraordinary levels of support of local community stores experienced in the prior comparative period.

This comes as more consumers return to supermarkets to do their grocery shopping, following the easing of Covid-19 restrictions.

Spar Poland reported a stronger performance, with 11.8% turnover growth. The group has also announced that it is in the process of negotiating new contracts with Spar retailers and this process is expected to be completed by June.

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