South African retail group Spar’s profitability over the past year has been significantly affected due to a problematic implementation of SAP at its KwaZulu-Natal (KZN) distribution center. Despite a rise in turnover by 9.3% in the 20 weeks ending on 16 February 2024, the group noted that the grocery business’s weaker-than-expected performance heavily impacted the total wholesale sales growth of 5.6%.
The company revealed in a trading update that the SAP system implementation at the KZN distribution center in February 2023 led to extensive disruption and an adverse effect on profitability. While the system operates as designed, the group admitted that its capabilities to predict demand and manage availability have yet to be optimized. The less-than-ideal usage of the system has caused margin impact and inflated costs for the region.
Despite these challenges, the group’s on-demand platform, SPAR2U, showed promising growth with sales increasing by 450% from the prior year. Tops at Spar Liquor reported robust sales growth of 12.7%, and the group’s pharmaceutical business recorded turnover growth of 11.6%. Despite a downturn in the construction and building materials retail sector, Build it managed a sales growth of 0.5%.
Internationally, the group noted a turnover increase of 7.1% (in euro terms) in Ireland and South West England, but operations in Switzerland and Poland observed a decline in turnovers. Negotiations for the sale of Spar’s interests in Poland are ongoing. Further information will be made available as the process advances.
