Spar's reset continues – but dividends remain off the table

Daily Maverick

2 days ago

Spar shareholders might still be waiting for a dividend, but with a strategic retreat from Europe and a renewed focus on local markets, there's hope for payouts by 2026—if it can navigate the consumer pressure back home.
There is still no dividend for Spar shareholders, almost three years after the last payout. But the tide may turn by the end of 2026.
Spar chief financial officer Reeza Isaacs told Daily Maverick this week that while no dividend had been declared for the interim period, the company was modelling scenarios to possibly resume payouts within the next 18 months.
'We were a dividend-paying share,' Isaacs said, 'and I think our investors expect us to get back to paying dividends.'
Spar is retreating to familiar territory after burning a few bucks in Europe and is preparing to face a battered consumer back home.
The company is scaling back on its operations in Europe and keeping its eye on the markets it believes it can count on during this 'strategic reset'.
'We completed our exit from Spar Poland in January this year and finalised the restructure of our southern African debt in March,' Spar group CEO Angelo Swartz said.
'The decision to exit Switzerland and the UK was taken after a strategic review of our European footprint. These actions align with our long-term commitment to focus on our core geographies.'
Trouble in the Alps and rain over Devon
This move back to core markets comes after heavy losses and operating headaches in Europe.
Spar's Swiss and UK ventures, once part of a grand international expansion, have been declared discontinued operations. The Swiss arm posted an operating loss of CHF2.4-million (R52-million), after a cyberattack in March cost the company an estimated CHF2.5-million (R54-million) in profitability, Swartz said.
Concerning the sale process of Spar's UK and Swiss operations, Isaacs told Daily Maverick that it was 'still in negotiation'.
Poland: A 'necessary' loss
Between impairments, foreign exchange translation losses, and debt repayment costs, Swartz said the exit from Spar ventures in Poland alone delivered a R531-million blow to Spar's income statement.
He framed the loss as necessary: 'This transaction was a key enabler of our balance sheet optimisation strategy,' he said, noting that there were no further cash exposures linked to the now disposed of Polish operations.
In the meantime, management insists the strategy is working. 'We are building a stronger, more profitable foundation. Our cost discipline, margin management and pricing strategy are working,' Swartz said.
'We're making more from each rand we earn,' Schwartz said.
How does this affect you?
Spar's exit from Europe means its attention, energy and cash are now concentrated at home. That could mean more promotion, investment in delivery and better competition against heavyweights such as Checkers and Pick n Pay.
But it's also a sign of the pressure consumers are facing. Spar's data shows that customers are doing more small shops and sticking to budget-friendly items.
Back from the brink in KZN
Stabilisation of Spar's KwaZulu-Natal distribution centre, which previously experienced significant issues with its SAP system, contributed to an improved operating margin.
Isaacs called KZN's recovery 'a strong turnaround with a marked improvement in profitability'.
But Swartz was candid about the ambitions of the group's revenue. 'Let's be candid: sales growth was below expectations. The southern African consumer is still under severe pressure.'
For a while now, South Africans have been price conscious, said Prof Ronald Goldberg, associate professor in marketing management at North West University. This is even more prevalent in 2025 due to rising fuel prices, inflation and limited disposable income, he noted.
In Ireland, Spar's revenue fell marginally amid store closures and volume declines driven by inflation, Isaacs said, and added that high-cost categories like cacao and coffee took a hit, while tobacco sales dipped from the previous year.
According to McKinsey's 2024 State of Grocery Retail report, retail media networks (RMNs) are boosting retailers' bottom lines in Europe and North America and could offer similar gains in South Africa. (Graph: McKinsey)
Cost, convenience, and playing catch-up
The company is relying on a few strategies to win back market share. These include improving its price perception, scaling online and on-demand fulfilment, and supporting store level execution through retailer rebates, Swartz said.
SPAR2U, the company's online grocery delivery service and app, saw delivery volumes surge to 174% year on year and operates in 580 locations. Spar's new partnership with UberEats is also expanding its reach without the cost of new retail space.
Offering multiple platforms to a consumer is a complex task and could hold increased risk for any retailer if not implemented with caution, Goldberg said. 'For a retailer like Spar, the implementation of a multi-platform approach could enhance brand presence as well as diversify their value proposition.'
Isaacs said that even though they were 'playing catch-up' when launching SPAR2U, the growth they had seen from the service had been exponential, which showed that consumers preferred online grocery shopping.
'Many customers are becoming increasingly motivated by convenience,' Goldberg said and added that before the pandemic, South Africans were sceptical about online shopping. 'Since then, consumers have now become so used to shopping for anything anywhere by pushing a few buttons on a device.'
According to Swartz, Spar's customer loyalty remains strong at nearly 80%. But he has ambitions to improve on this figure: 'We're just on 79% right now. I'd like to see a 12-month rolling average over 80%,' he said.
Brand loyalty still exists, but it's no longer unconditional. 'Consumers weigh price and convenience heavily, while brand loyalty is earned through sustained performance and relevance,' said Goldberg.
Spar and brand equity
With retailers such as Checkers investing heavily in innovation and customer experience, Goldberg says that Spar's continued relevance will depend on:
Its ability to standardise core brand values;
Leveraging its localised strengths; and
Continuing to offer increased value and reasons for customers to shop at its stores.
Shifts in consumer choices
The average basket size of Spar consumers remains stable, but the frequency of shopping has changed. Schwartz noted smaller, more frequent shops, particularly in its lower-income stores, which grew more than 6% as top-end clusters declined.
'This affirms our strategy to deepen the value offer,' Schwartz said, referring to SaveMor, Spar's private budget-conscious label.
Goldberg agrees. 'Consumers are opting to buy value items instead of luxury items. I believe the majority of the South African market constitutes a cost-sensitive market currently, where success in selling products depends on the perceived value-for-money equation.'
Spar COO Megan Pydigadu added that any divestment decision in Switzerland would prioritise continuity and sustainability.
'We want to make sure we are disposing of the business in the best manner for our employees in Switzerland, for our retailers and also our suppliers,' she said.
Looking ahead, the company is focusing on operational execution, strategic partnerships and margin discipline to turn the tide.
'We understand this environment,' Schwartz said. 'We've taken steps to shield the business from the worst of it, and we are now better positioned to capture upside when the consumer turns.' DM