Spar Group Ltd., the South African retail group that majority owns Spar franchise operator BWG Foods in Ireland, reported full-year profit that beat analysts’ estimates as customers switched to more affordable, company-branded food.
Net income rose 13 per cent to 1.35 billion rand ($120 million) in the 12 months through September, the Durban-based company said in a statement today. That compared with the 1.29 billion-rand average of analyst estimates compiled by Bloomberg. Sales at the Tops liquor chain jumped 14 per cent to 6.6 billion rand, helping push comparable retail revenue up 8.2 per cent.
“Whether things are good or things are bad, people still seem to drink,” Chief Executive Officer Graham O’Connor said in a phone interview.
Revenue growth of 15 percent to 55 billion rand was driven by “house brands, which offer value to cash-strapped customers,” the company said. South African consumers have been under pressure this year as economic growth slows to an estimated 1.4 per cent, the lowest since a 2009 recession, while the Reserve Bank has raised its benchmark interest rate twice.
Spar plans to increase the pace of openings this fiscal year, with 36 new Spar outlets planned, 59 Tops sites and 30 Build It hardware shops, O’Connor said.
The company bought a majority stake in BWG Group, which owns the Spar brand in Ireland and southwest England, for almost 800 million rand in August to boost sales outside its home market. BWG contributed 2.7 billion rand to total sales, and O’Connor expects it to generate about 30 per cent of turnover next year.
“BWG adds another revenue channel and gives margin upside,” Alec Abraham, an analyst at Sasfin Securities in Johannesburg, said by phone. “Spar’s like-for-like sales were a positive surprise,” said Abraham, who raised his recommendation on the stock today to buy from hold.
Bloomberg News, edited by ESM