SPAR warns of up to 60% earnings drop after SAP system disruption

SOUTH AFRICA – South Africa’s SPAR Group has warned that its headline earnings per share for the six months ended 27 March 2026 could decline by between 50% and 60% in a trading update released to investors.

The company attributed the expected slump to ongoing disruption affecting its operations in KwaZulu-Natal, while wholesale turnover still recorded modest growth during the period.

It also projected diluted HEPS from continuing operations to fall to between 173 and 216 cents, compared with 433 cents in the previous corresponding period, while diluted earnings per share were forecast to decline by 55% to 65%.

The decline has been linked mainly to the troubled implementation of SAP S/4HANA at the KwaZulu-Natal distribution centre, which was introduced in early 2023 as a pilot project to modernise supply chain systems.

According to the group, the rollout was affected by data migration errors, workflow breakdowns, integration challenges with legacy systems, and limited warehouse management functionality, which forced a partial reliance on external solutions.

These disruptions led to stock shortages, delayed deliveries to franchise outlets and weakening confidence among retailers across the network, affecting performance in the Southern Africa division.

Industry estimates suggest the system failure contributed to more than R1.6 billion in lost turnover and about R720 million in lost profit by late 2023, with continuing effects into 2026.

This equates to roughly US$89 million in lost turnover and about US$40 million in lost profit when converted from rand at an estimated exchange rate.

A separate legal dispute has emerged after a major franchisee group, the Giannacopoulos family, which operates 46 Spar, SuperSpar and Tops stores, filed a claim worth R168.7 million, alleging that compensation is owed for sustained supply chain failures and lost earnings.

This claim is valued at approximately US$9.4 million based on conversion from rand.

While several affected retailers have already reached settlements, the ongoing court action adds further financial uncertainty for the group.

SPAR is expected to publish its interim results on 10 June 2026, providing a fuller picture of the financial impact of the disruption.

The group continues to work on stabilising its distribution systems while assessing long-term operational recovery plans.

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