Spar Group reports good growth in revenue despite Covid-19 challenges

Supported by strong demand for groceries during lockdown, food business sales increased by 9.2 percent.

The Spar Group has reported a solid 13.5 percent growth in turnover, putting earnings at R124.3 billion. In its annual results, the group indicated that Spar Southern Africa contributed growth in wholesale turnover of 5.8 percent to R78.6 billion. Its core food business increased sales by 9.2 percent, supported by strong demand for groceries during the lockdown. 

In its first results to factor in the effect of the pandemic, the group reported that all its markets felt the impact of Covid-19 from March. As an essential service provider of groceries, stores traded throughout the lockdown periods, albeit with periods of restriction on the sale of liquor, cigarettes and building materials.

The group said in a statement it had adapted to changing consumer behaviour during this time and has benefitted from customers choosing local and conveniently situated shopping destinations that ensured their safety and wellbeing. “Remaining agile, challenging ways of operating and implementing contingency plans have been necessary to secure our supply chains and ensured that our retailers continued to receive the service they expected,” said the statement.

The group notes that consumers are opting for their local, convenient, and trusted community retailer during this time and says this is perfectly aligned with the group’s vision of being the first-choice brand in the communities it serives. 

On the downside, TOPS at Spar liquor business lost almost a third of its total trading days due to the restrictions on the sale of alcohol, with wholesale turnover for the year decreasing 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 only 0.9 percent down. 

During the period, the total Southern African store network grew by 65 new stores across all brands to reach a total of 2,414 stores. The group completed 310 store upgrades, against 298 upgrades in the comparable period.

The retailer cautions that in Southern Africa an existing weak economy has been severely impacted by the pandemic. The consumer environment is expected to remain constrained, with many South Africans under financial pressure.

The group reports that further afield, its businesses in Europe are facing a second Covid-19 wave, but have contingency plans in place to deal with the disruption, having learnt many lessons from the initial lockdowns. 

The group outlined the state of its European business saying that, “Our Swiss business is well positioned to maximise the opportunities brought on by shifts in consumer behaviour, new business gained and by the changing dynamics in the marketplace. In Poland, we will concentrate on building relationships and driving loyalty with our Spar retailers. We are focused on breaking even in this region by the end of 2021. Spar’s extensive distribution and logistics capability, market-leading brands and overall support of independent retailers, ensure that we remain suitably positioned to deliver exceptional value to consumers.”

Headline earnings rose 0.5 percent to R2.18 billion, and Spar increased its total dividend by 8.1 percent to 865c per share.