South African retailer SPAR Group Limited reported weaker-than-expected earnings for the first half of its 2026 financial year, as pressure on margins in Southern Africa, higher impairments, and heavier promotional spending weighed on performance, according to a trading update ahead of interim results due June 10, 2026.

The South Africa-listed retailer said earnings per share from continuing operations for the 26 weeks ended March 27, 2026, are expected to come in between R1.40 ($0.08) and R1.80 ($0.11). That compares with R3.99 ($0.24) in the same period a year earlier, representing a decline of 65 percent to 55 percent.

Discontinued operations weigh results

Headline earnings per share are expected to range from R1.74 ($0.10) to R2.17 ($0.13), down from R4.34 ($0.26) previously, a drop of 60 percent to 50 percent. Including discontinued operations, headline earnings per share are forecast at R1.04 to R1.33 ($0.08), compared with R2.96 ($0.18) in the prior period. Earnings per share are expected between R0.70 ($0.04) and R0.80 ($0.04), versus a prior base of R22.11 ($1.36), which included one-off items.

Revenue from continuing operations rose 2.1 percent, reflecting modest wholesale growth, though performance varied across divisions. SPAR Health delivered the strongest contribution during the period, while Grocery and Liquor lagged as competition intensified and price pressures persisted across key markets.

KZN distribution network under strain

In Southern Africa, profitability came under strain as gross margins fell by 20 to 40 basis points. The company attributed the decline to higher promotional activity during Black Friday, weaker performance in its KwaZulu-Natal distribution network, and increased debtor impairments. Operating costs also rose above inflation, adding further pressure to earnings.

The KwaZulu-Natal unit remained a key area of weakness during the period. Logistics disruptions and earlier efforts to prioritize sales growth over profitability continued to affect results. Although the unit returned to profitability in February, March and April 2026, the company said the recovery is not yet stable and operational risks remain.

Outside Africa, the Ireland-based BWG business delivered steadier performance in local currency terms. Improved supplier agreements and a better product mix supported earnings, with operating margins slightly higher than a year earlier. The result provided some balance against weaker trading in Southern Africa.

Leadership changes support stabilization plan

The group also recorded impairments of about R128 million ($7.9 million), up from R71 million ($4.4 million) a year earlier. These were largely linked to legacy goodwill and asset write-downs. Net debt increased over the period, driven by working capital movements and timing differences, though the company said it remains within its banking covenants.

Looking ahead, SPAR said it is pushing ahead with cost controls and leadership changes aimed at stabilizing margins in Southern Africa. It also highlighted a broader cost alignment program. However, it cautioned that fuel costs, credit risk among customers, and competitive pressure are likely to persist, with improvements expected to emerge gradually in the second half of the 2026 financial year.