SPAR Group forecasts halving of headline earnings as UK divestment proceeds
Revenue from continuing operations rose 2.1% in the first half, but headline EPS is expected to fall by 50% to 60% year-on-year, weighed down by impairments and promotional spending.
South Africa’s SPAR Group has reported a divergence between top-line growth and bottom-line performance for the first half of the 2026 financial year, forecasting a sharp decline in headline earnings despite a 2.1% increase in revenue from continuing operations. The retailer attributed the earnings contraction to margin compression, elevated promotional spending, and operational challenges in its KwaZulu-Natal (KZN) division.
For the 26 weeks ended 27 March 2026, SPAR expects headline earnings per share (EPS) from continuing operations to fall by 50% to 60% year-on-year, settling between 174 cents and 217 cents. This represents a significant drop from the 434 cents recorded in the corresponding period of the prior year. EPS from continuing operations is projected to decline by 55% to 65%, landing between 140 cents and 180 cents, compared with 399 cents previously.
The group identified several factors driving the margin pressure, including above-inflation cost growth, higher debtor impairments, and strategies that prioritised top-line growth over profitability in KZN. Logistics capacity issues at the KZN distribution centre disrupted service levels and increased costs. However, SPAR noted that corrective measures and leadership changes have yielded results, with the division recording three consecutive profitable months from February to April 2026.
Geographically, revenue in Southern Africa grew by 1.7%, while Ireland saw growth of 2.2% in euro terms and 3.4% in rand terms. The Irish unit, operated by BWG Group, improved both gross and operating margins through better supplier trading terms and a favourable sales mix. Other segments showed mixed results, with SPAR Health revenue climbing 26.1% and the Build it division rising 1.3%.
Financially, the period was marked by approximately R128 million ($7.8 million) in extraordinary impairments, including goodwill and corporate store write-downs, up from R71 million in the prior period. Including discontinued operations, headline EPS is expected to fall by 55% to 65% to between 104 cents and 133 cents.
Concurrently, SPAR is advancing the sale of its UK business to AF Blakemore & Son, a transaction classified as a discontinued operation. The deal encompasses the right to operate Spar in South-West England, 71 company-owned stores, warehouse infrastructure, and associated retailer supply agreements. Completion is expected in stages between June and September 2026.
Looking ahead, SPAR outlined initiatives focused on margin recovery in KZN, retailer engagement, and cost realignment. The group remains cautious regarding rising fuel costs, debtor risk, intensifying competition, and broader macroeconomic uncertainty as it navigates the transition.
