SPAR plummets as another CEO bites the dust

SPAR CEO Angelo Swartz is leaving and will be replaced by finance head Reeza Isaacs as profit growth continues to lag at South Africa’s second-largest grocer. The shares fell.

In a surprise move, SPAR said Swartz will leave by the end of the month, making him the second CEO to go at the struggling retailer in a little over three years.

SPAR shares dropped as much as 8.2% on the news, the most in 17 months, extending their decline on the Johannesburg bourse to more than 40% over the past year. 

“We are somewhat surprised by Mr. Swartz’s resignation given that he led the group through challenging and complex exits from Poland, Switzerland and helped oversee about 30% reduction in gross debt,” Sa’ad Chothia, equity research analyst at Citigroup, wrote in a note. 

Still, slowing wholesale growth, a shrinking margin and continued SAP system issues in the supply chain, “which could lead to further profit pressure, are potential reasons we could pinpoint for his resignation,” he said. 

While revenue and margins have shown resilience in a tough retail environment, profit growth has been modest and SPAR hasn’t yet restored dividends, with competitiveness in some segments remaining a challenge.

Isaacs, a seasoned retail executive who only joined the company as CFO a year ago, now faces the task of driving growth at a company that is facing slowing wholesale sales, a shrinking margin and continued issues in its supply chain following a bungled and costly implementation of a new software system.

Swartz, who became chief executive officer in October 2023 and has been with the group for 19 years, inherited a business reeling from a costly SAP implementation bungle and broader financial strain. 

Under his leadership, SPAR has focused on simplifying operations, reducing debt and strengthening its balance sheet, including exiting loss-making overseas units in Poland and Switzerland, which has cut net debt and improved cash generation. 

Beyond profitability potentially worsening, the CEO’s departure “mid-way during a turnaround with margins still far away from guided targets,” likely sparked the share-price reaction, Chothia said.

Isaacs will take over as CEO on March 1, the Durban-based company said in a statement Friday. Swartz will remain available over the next three months to support an orderly transition, it said.

South African grocers are facing increased local competition amid muted economic growth, with most tapping into parts of the country that have yet to rely on formal retailers.