SPAR earnings plummet amid botched SAP project 

SPAR expects its earnings for the 2023 financial year to plummet by up to 86%. 

The retailer released a trading update this morning informing shareholders that its earnings and profit will decrease significantly for the 2023 financial year ended 30 September.

SPAR expects to report a lower operating profit of between R1.6 billion and R2.0 billion  – an over 40% decrease compared to the R3.4 billion reported in 2022.

SPAR expects the following changes to its earnings for the year:

• Headline earnings per share will drop by between 43% to 53%
• Earnings per share will decrease by between 76% to 86%

This update follows a previous trading statement which revealed several factors impacting the retailer’s profitability.

These factors included the unsuccessful launch of SPAR’s new ERP IT system (SAP) at its KwaZulu-Natal distribution centre.

This bungled launch severely impacted the region’s trading performance and cost the retailer an estimated R1.6 billion in turnover.

The operational impact amounted to an estimated R720 million in loss of profits for this region.

In addition, due to the change in approach towards the SAP implementation roll-out for SPAR’s foreign regions, the retailer recognised a write-off of R94 million in respect of the SAP ‘asset under construction’.

The retailer also made further impairments of business assets amounting to R120 million due to a change in operational strategy towards onsite meat processing in its Irish business.

The evaluation of SPAR Poland, following the board’s decision to engage in a process to sell the company’s interests, gave rise to impairments of associated goodwill and assets amounting to R440 million.

The retailer also saw lower-than-expected turnover growth coupled with significant inflationary cost increases across all of its regions, as well as a substantial increase of R433 million in net finance costs due to higher interest rates.

SPAR’s results are expected to be published on Thursday, 30 November 2023.

As of 10:30 on Thursday, 23 November 2023, the retailer’s share price has dropped by over 6% following the release of this update.