Spar’s shares nosedived 15% after the grocery chain’s annual results missed market earnings estimates and as consumer spend remains under pressure.
The shares traded at an intraday low R140, but have increased on the JSE by 2.26% in the past six months.
In its results for the year ended September 30, 2022, the grocer with a market value of R32 billion, posted a 3% drop in its headline earnings per share to 1160.5 cents from 1196.2c a year earlier.
FNB said last week that the market consensus expected Spar Heps growth of 4.4% on an adjusted basis on revenue growth of 5.3%.
Brett Botten, the CEO of Spar, said the group had delivered a resilient performance despite various challenges across all regions.
Group turnover increased by 6% to R135.6bn.
Profit before tax increased marginally by 0.8% from R3.01bn to R3.04bn and was impacted by an increase in net finance costs of 6.3% from R362.4m to R385.2m.
“Group profitability continued to be impacted by the consequences of the pandemic in the first half of this financial year and new geopolitical circumstances which have seen all regions experiencing fuel and energy cost pressures,” Spar said.
Mark Godfrey, the chief financial officer, said, “The pandemic was still a significant influence on these results. We thought we came out of the storm... but in fact that we were just in the eye of it.”
After the pandemic the conflict in Ukraine broke out and that caused significant inflationary pressures, he said.
Anchor Capital equity analyst Zinhle Mayekiso said the share price decline could be explained by Spar missing consensus earnings estimates for the 2022 financial year.
“Furthermore, near-term headwinds are expected to persist into the new financial year,” she said.
In South Africa, Spar said these pressures were further exacerbated by the impact of ongoing electricity load shedding.
“The group delivered an operating profit of R3.4bn, increasing by 1.1%.
Spar Southern Africa contributed 65% of turnover for the group and delivered strong growth in wholesale turnover of 8.4% to R88.1bn.
“This increase was assisted by an improved core grocery business performance which generated an increase in sales of 5.3%,” it said.
Spar said it made excellent progress with its newly developed on-demand shopping platform SPAR2U, having gone live at 87 stores during the second half of the financial year.
The group said, against the liquor trading restrictions in 2021, TOPS at Spar delivered excellent liquor sales growth of 42.6%, rebounding strongly and reaffirming its position as the number one liquor brand in South Africa.
“Build It delivered industry-leading turnover growth of 3.1% for the financial year and reported a strong second half performance as Build It retailers increased their market share,” it said.
The BWG Group (Ireland and South West England) saw turnover increase by 3.2% to R31.3bn, with a shift in sales mix into higher margin categories due to lower alcohol and tobacco sales.
“BWG Foods in Ireland reported an impressive year of new store openings, and neighbourhood stores have largely retained the gains made during the pandemic,” the group said.
Spar Switzerland delivered a decline in turnover of 1.1% from R14bn, as the group said this was a robust overall trading performance as the business continues to adjust to a post-pandemic new normal.
Spar Poland delivered turnover growth of 8.2% with a key area of focus for 2022 was to address the retailer loyalty after 58 retailers elected to leave the group on July 1.
The group declared a total gross dividend for the year of 400. cents, down 51% from last year, but in line with the temporarily adjusted dividend policy reducing the dividend for a period of two years, to fund Spar’s strategic investment in technology with SAP.
Spar said the group-wide SAP implementation had commenced smoothly, with the successful launch of the new system at the southern African central office in October 2022.
Looking forward, Spar said, during the year, the management announced a new leadership structure that would drive greater collaboration and alignment across the group.
In South Africa, against the backdrop of a constrained consumer, low economic growth, and subdued business confidence, the trading environment is expected to remain unchanged in the short to medium term; however, our national and regional marketing teams have innovative promotional programmes geared towards helping support price-conscious consumers and the needs of their communities, it said.
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