SPAR warns of weaker profits

SPAR has revised its expectations for the 2026 fiscal year, projecting weaker financial performance due to persistent operational hurdles, leadership instability, and unresolved conflicts with its independent retailer association. The retailer confirmed its results would underperform compared to 2025, with the steepest declines expected in Southern Africa, particularly in grocery and liquor operations.

The company admitted that recent efforts to improve operations had not yet produced sufficient revenue or cash flow gains to counter broader economic challenges. Growth in Southern Africa remains constrained, while wholesale sales and trading activity have weakened because of intensified competition and rising consumer costs. Increased expenses for fuel, utilities, and borrowing have further reduced disposable spending and squeezed wholesale revenue.

SPAR will withhold earnings-per-share forecasts until market conditions become clearer, aligning with JSE listing rules. This outlook follows a turbulent period marked by leadership disputes, including the guild’s demand for the removal of former chairman Mike Bosman and deputy chairperson Shirley Zinn, who resigned on August 17, 2026 amid declining confidence. The guild also highlighted concerns over procurement processes and distribution inefficiencies.

Unlike conventional supermarket chains, SPAR depends on independent retailers to manage its stores, with these businesses organized under the guild. While the company reports progress in working with guild members, its priority now is aligning on commercial and operational objectives. However, restoring trust will require sustained progress and measurable benefits for retailers.

Technical failures have compounded the retailer’s challenges, including a botched SAP system rollout at its KwaZulu-Natal distribution hub, which resulted in financial losses and a R168 million legal claim. The company has since relocated from a temporary overflow warehouse to reduce rental expenses and completed repairs at the center, where gross margins are now stabilizing.

Under its recovery strategy, SPAR is evaluating underperforming corporate stores, with options including operational adjustments or closures. The retailer is also enforcing stricter controls on promotions and monitoring core product lines to safeguard profitability. These measures will be implemented gradually over the 2027 financial year, with KwaZulu-Natal remaining a central focus.

The retailer’s market valuation has plummeted since January, erasing approximately R10 billion in shareholder value, while its stock price has dropped by more than half. To address leadership gaps left by Bosman and Zinn, SPAR will appoint new directors by early November 2026, with an external recruitment firm overseeing the selection process.