When it rains, it pours for SPAR

Despite an ongoing turnaround strategy and a return to after-tax profit, SPAR’s South African operations continued to struggle in the first half of its 2026 financial year.

The group’s turnaround has focused largely on exiting many of its international operations, which has aided its balance sheet, but back home, SPAR’s bottom line continues to bleed.

SPAR released its results for the 26 weeks to 27 March 2026 on Wednesday, 10 June, which revealed a mixed performance.

The group’s revenue rose by 3.56% to R67.48 billion, and SPAR returned to an after-tax profit of R147.3 million, a significant turnaround from the R4.26 billion loss it reported for the first half of its 2025 financial year.

SPAR’s earnings were also back in the black, with basic earnings reaching 76.5 cents per share, up from a basic loss of 2,211.1 cents per share.

The group reported total comprehensive income of R71.6 million for the six-month period, another remarkable turnaround from the R4 billion loss recognised in the year prior.

However, when looking at the group’s segmental performance, it becomes clear that its local operations are struggling.

Over the past few years, SPAR has exited its Polish and Swiss operations, leaving only its Southern Africa and Ireland operations to report.

In Southern Africa, its biggest segment, SPAR’s revenue grew by 3.86% to R51.62 billion, slightly outpacing the 3.57% increase in cost of sales to R45.96 billion.

However, the segment swung to a pre-tax loss of R50.9 million, a significant deterioration from the pre-tax profit of R602.9 million reported in 2025.

The Southern Africa segment saw its operating profit plummet by 72.6% to R237.7 million, dropping to a 0.5% margin.

This stands in stark contrast to SPAR’s strong Irish operations, which grew operating profit by 3.5% to R502.8 million at a 3% margin.

The table below shows the declining performance of SPAR’s Southern Africa segment for the first half of its financial years from 2022 to 2026.

This table shows that while the segment’s revenue has grown consistently, its bottom line has steadily collapsed, effectively erasing its operating margin to a razor-thin 0.5%.

SPAR’s South African struggles

Various factors hurt SPAR’s bottom line in its local operations, including challenges at newly acquired stores, legal battles, and severe impairments.

In February 2026, SPAR acquired eight stores from the Hajimarkos group for R162 million. Only one month later, two of those stores experienced severe operational challenges, leading SPAR to recognise an impairment loss against the R149.8 million in goodwill the transaction created.

SPAR’s existing store base also struggled, with some of its corporate-owned stores transitioning from profit-making to loss-making, resulting in a R22.7 million impairment on the stores’ right-of-use assets.

The retailer’s software headaches also continued in the period, with both new and old challenges continuing to haunt the group.

SPAR’s Southern Africa division recognised another R30.7 million impairment relating to its GiCom software module.

The retailer determined that the software would not be deployed due to limited expected utilisation, resulting in the full impairment of development costs.

SPAR is also still paying the price for its botched SAP software rollout a few years ago, with the retailer now facing a R168 million damages claim from one of its franchisees, the Giannacopoulos Group.

Based on previous settlements with other retailers, SPAR had to recognise a R5.1 million settlement provision for this claim during the period.

SPAR’s Southern Africa division also had to recognise a further R13.1 million impairment on its Beyers Ridge land, which was classified as an asset held for sale.

This comes after the group negotiated a contractual selling price of R65 million, below its previously estimated recoverable value.

Finally, the sale of five retail stores in the region resulted in a R6.9 million loss on disposal.

Two redeeming features of SPAR Southern Africa’s results were the continued growth in its Liquor and Health businesses, which saw strong revenue growth of 4.63% and 27.47%, respectively.

These interim results also gave investors their first glimpse into the performance of SPAR’s newly launched Pet Storey business, which reported R31.3 million in revenue.