Spar bleeds billions: can the retailer be saved?

One of South Africa’s biggest grocery retailers, Spar, has been navigating a challenging economic climate for some time.

It began with closing stores because consumers were not buying enough food. But now the retailer is taking bigger steps, as it offloads its Spar Switzerland and Appleby Westward Group (AWG) business.

“Shareholders are advised that, following this strategic review, the group is exploring divestment options for Spar Switzerland and AWG,” said the retailer in its SENS announcement on Thursday.

That was the beginning of outlining the pain the retailer experienced during the 26 weeks ended 28 March 2025. The retailer stated that the value of its struggling Swiss and English assets had decreased by R4.2 billion.

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Tough times for Spar

The retailer has warned shareholders that headline earnings per share could decline by 24% and 34%. The warning is released ahead of the publishing of financial results on 4 June 2025.

According to the Johannesburg Stock Exchange (JSE) listings requirements, companies are required to publish a trading statement as soon as they are satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported on will differ by at least 20% from the financial results for the previous corresponding period.

Spar said it is in talks with a UK-based business that is well-positioned to develop and grow AWG in South West England. In Switzerland, it has been in talks with parties with extensive business interests in the region and experience in European food retailing and distribution.

Spar Swiss and AWG

“Total impairments of approximately R4.2 billion were recognised, including R3 billion in Switzerland and R1.2 billion in AWG. The impairments take into account the fair value of the disposal groups less costs to sell,” said the retailer.

Delivering further financial losses, Spar said that the divestment of its Polish business resulted in a loss on disposal of R531 million during the interim period.

“This loss has been recognised in relation to the sale of the Polish operation and takes into account the satisfaction of certain suspensive conditions that were pending at the reporting date but have since been fulfilled, enabling completion of the disposal.

“The fulfilment of these conditions resulted in the final adjustments to the disposal proceeds and associated costs, and there have been no further cash outflows since the disposal became wholly unconditional and was implemented on 31 January 2025.”

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South Africa performance

The Sens announcement further details that in southern Africa, the groceries and liquor segment is expected to deliver modest top-line growth on a comparable basis, while operating profit is expected to maintain solid momentum.

“The KwaZulu-Natal distribution centre continued its positive trajectory, reflecting improved profitability. This performance, together with continued focus on cost discipline, translated into modest operating margin expansion on a comparable basis.”

Spar said that Ireland delivered a resilient performance in a challenging trading environment, supported by improved gross profit and operating margins in local currency terms, as well as reduced interest expenses driven by lower gearing.

“These gains were partially offset by adverse foreign currency translation effects on consolidation.”

Strengthening the balance sheet

Spar said it had made substantial progress in strengthening the balance sheet, with the successful refinancing of its South African and Swiss facilities, improving liquidity and reducing funding costs.

“The group anticipates that the successful completion of the aforementioned divestments will materially deleverage and strengthen the balance sheet further.”

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