Investors dump Spar as R4bn in value lost in a week

The Spar Group, the country’s second largest grocery retailer by turnover, has endured a horrid week with its market value declining by nearly a quarter since last Friday. Shares are now trading at the lowest level in 16 years.

The selloff was sparked by the announcement a week ago that CEO Angelo Swartz had quit and would leave at the end of February. This sent shares down 7% on the day.

Read:
Shock Spar CEO resignation
Why I stepped down as Spar CEO – Swartz

Thursday was the first trading day since Wednesday where the retailer’s shares did not end lower.

The share closed up 3.7% on Thursday.

The bad news kept coming with a trading update on Monday for the 18 weeks to the end of January.

This showed that while retail sales on a like-for-like basis grew by 2.25% in South Africa, wholesale sales across the region were up by a “muted” 0.9%.

The group admitted that while topline growth, particularly in the peak Black Friday trading period, was solid, it had sacrificed gross margin to achieve this.

Read: Black Friday 2025: A fight for the R370 shopper and fastest delivery

Swartz told investors on Monday morning that he had resigned for personal reasons.

He will remain engaged with the group for the next three months – specifically focused on helping stabilise the Kwa-Zulu Natal region, which is battling to recover from a disastrous implementation of the SAP enterprise resource planning system in 2023 and 2024.

Swartz will also assist with the disposals of stores the group had purchased from independent operators as well as the handover of “key retailer relationships” to new CEO Reeza Isaacs.

Isaacs joined as CFO in January 2024 from Woolworths, where he was financial director. Current COO Megan Pydigadu will take over as CFO.

KZN division battling on

Spar shares declined by 9% on Monday. On Tuesday, Business Day reported that Spar’s KZN division had sent an email request to stagger payments to suppliers.

The email, which cited “cash flow issues”, proposed a 50% payment on 20 February, with the remainder to be paid on 10 March.

Read:
Black Friday 2025: A fight for the R370 shopper and fastest delivery
Spar ditches Pinetown, books R30m loss on HQ sale

Spar told the publication the email was poorly worded and that the proposed arrangement was “part of standard working capital management and payment term negotiations, which are common in large retail and wholesale businesses to optimise cash flow”.

Cash position

In December, the group defended its “strong” cash generation, with cash generated from operations of R5.45 billion for the 52 weeks to 26 September. It says its gearing (net debt to Ebitda) in Southern Africa improved to 1.75 times.

However, a change in reporting (where it switched to a 52-week cycle from a 12-month one) meant an earlier cut-off for payments.

Swartz said this boosted its working capital position by between R800 million and R1 billion.

Read:
Spar sells Swiss unit for R1bn
After Polish misadventure, Spar pays R683m to exit Switzerland

The selling continued on Wednesday, with Spar shares ending over 10% lower at R66.97.

Since last Thursday (before the announcement of Swartz’s departure), the retailer’s market capitalisation has declined by R4.06 billion – a 23.3% drop. This has seen its market value fall from R17.44 billion to R13.37 billion.

Turnaround

Investors are clearly concerned about the new management team’s ability to turn around the business and to get its operating margin in Southern Africa to 3%. Currently this is below 2%.

Management told investors that much of this improvement would come (roughly equally) from improvements at its distribution centres, centralisation and efficiency, and expansion of its gross margin plus other income.

There would be an additional improvement from incremental growth.

With an operating margin of just 1.75% for FY25, it is going to take a lot to go right to get to the 3% level by 2028.

Read:
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On Monday, Issacs admitted that the timeframe for this “recovery” has shifted.

Who’s been selling?

It is not yet clear whether any of The Spar Group’s largest institutional shareholders were behind the selling across the past week.

So far, 13.5 million shares have traded, with the largest amount (3.9 million) being on Friday. Its average daily trading volume for the last 52 weeks has been around 700 000 shares.

At the end of September, its largest shareholder was the Public Investment Corporation (for the Government Employees Pension Fund) with 18.63%.

Listen/read: Local retail a mixed bag in 2025, but is there value?

Allan Gray owned 8.53% on behalf of its clients, while M&G Investments, Alexander Forbes Investments and Coronation Fund Managers each held around 6%.

These five shareholders held 45% of the group.

Listen:
Spar profit plummets R5bn on Swiss, English business sales
Spar turnaround still a work in progress
Spar not looking for further expansion outside Southern Africa – Swartz

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