South Africa’s SPAR profit falls sharply as debt rises amid operational disruption
KwaZulu-Natal distribution challenges and higher costs weigh on performance as debt levels increase.
SOUTH AFRICA – South African grocery retailer SPAR Group has reported a significant drop in earnings alongside a rise in debt, as operational disruptions and higher promotional spending continue to pressure its business.
The company posted a 53.9% decline in headline earnings per share for the 26 weeks ending March 27, falling to 199.9 cents from 434 cents a year earlier, while operating profit dropped 45% to 740.5 million rand (US$44.74 million).
Margin pressure and logistics disruptions
The retailer’s operating margin narrowed to 1.1% from 2.1%, reflecting weaker profitability across its core grocery and wholesale operations despite modest revenue growth.
A major drag on performance came from its KwaZulu-Natal distribution centre, where operational disruptions, higher stock-outs and an aggressive sales push reduced efficiency and lowered profitability.
Promotional spending linked to Black Friday alone cut profits by 212 million rand (about US$12.8 million), with the company stating the outlay failed to deliver expected returns.
Financial strain and supply chain issues
Debtor-related costs increased by 159 million rand (about US$9.6 million), while net debt rose to 7.3 billion rand (about US$440 million) from 5.4 billion rand (about US$326 million) as working capital pressures intensified.
Revenue increased slightly by 1.7% to 50.8 billion rand (about US$3.07 billion), but sales volumes remained under pressure as price inflation outpaced internal selling prices.
System overhaul continues to weigh on operations
The performance challenges have been linked in part to the rollout of the SAP S/4HANA system at the KwaZulu-Natal distribution hub, which has faced data migration errors, integration failures and warehouse management limitations since its introduction.
Industry estimates cited in earlier reports suggest the system disruption has contributed to billions of rand in lost turnover and hundreds of millions in lost profit since 2023, with ongoing effects still visible in 2026.
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