SPAR under siege

SPAR has confirmed that it was served with a summons related to its botched implementation of SAP enterprise resource planning software at its KwaZulu-Natal (KZN) distribution centre.

This summons was served by 13 retail companies, which claim that SPAR’s system change caused severe damage to their businesses and that they lost millions as a result.

In a recent trading update, SPAR addressed this legal threat, saying it previously engaged with the claimant to seek a resolution of the matter. “However, discussions did not yield an agreement,” the retailer said.

“It should be noted that the current amount claimed significantly exceeds the initial claim of R5 million, as presented by the claimant,” SPAR said. 

“To date, all KZN retailers affected during the early SAP implementation period (except for the claimant and one additional retailer) have reached amicable settlements with the group.” 

“Service levels at the distribution centre have since stabilised and are now consistent with industry standards, as previously disclosed.”

This comes after SPAR began rolling out a new SAP software system at its KZN distribution centre in January 2023, which it said at the time resulted in “various go-live and integration challenges”.

However, this did not go to plan, and severely negatively impacted the retailer’s distribution operations in the region, resulting in stock delivery interruptions to stores and lost sales.

While the system failures have now been addressed, they led to around R1.4 billion in losses.

This blunder, along with various other operational failures, saw SPAR experience significant losses over the past few years.

To address this, SPAR has been implementing a turnaround strategy, which has included exiting some of its European operations.

While this has reduced the retailer’s debt, its most recent trading update revealed that SPAR continues to struggle to keep up in South Africa’s highly competitive operating environment.

On Monday, 23 February, SPAR released a trading update outlining its performance in the 18 weeks ended 30 January 2026.

This update showed that SPAR is set to take some pain in the first half of its 2026 financial year. The retailer’s turnover grew by a modest 2.1%, while its gross profit margin shrank. 

SPAR attributed this to a highly competitive market with low food inflation and deflation in several key categories. 

“In response, SPAR deliberately intensified promotional activity to support retailers, protect volumes, and reinforced its value proposition,” the retailer said.

The company said its smaller profit margin reflects an unfavourable sales mix, the impact of its targeted promotional strategy over the Black Friday period, and its continued investment in loyalty and margin recovery initiatives in KZN.

In response, SPAR said it has identified a set of structural initiatives to realign its cost base with prevailing trading conditions and medium-term margin objectives.

This includes distribution network optimisation and key operating margin initiatives such as centralising non-trade procurement, improving credit discipline, and enhancing pricing and logistics productivity.

“While the financial benefits of these actions will materialise progressively, management is confident that disciplined execution of these initiatives will restore operating leverage and reposition the business on a structurally more efficient cost base, capable of supporting sustainable margin recovery,” the company said.

SPAR specified that margin recovery efforts should show more clearly in the second half of its 2026 financial year, with the first half expected to remain under pressure.

The company also recently announced that its CEO, Angelo Swartz, will resign at the end of this month, with CFO Reeza Isaacs expected to take the helm at the start of March.

SPAR’s interim results will be published on or about Wednesday, 10 June 2026.