Spar to add stores, upgrade distribution

The Spar Group opened 32 new Spar, 32 Build it stores and 73 Tops outlets in the year ended September, while 129 stores underwent major refurbishments. Overall, Spar now services 1,340 retail stores throughout South Africa, being 810 Spar stores, 287 Tops liquor outlets and 243 Build it builders' merchants stores.

A total of 25 new Spar franchises, 30 Build it and 40 Tops at Spar stores should open in 2008, and Spar stores are forecast to increase their national retailing footprint by a further 5% in 2008, it said on Wednesday.

The group reported diluted headline earnings per share of 298.4 cents for the year ended September, up 29% from 231.2 cents a year ago. HEPS were up 30.1% to 312.3 cents.

A final dividend of 112.5 cents per share was declared, making a total dividend of 185 cents per share – up 50% from the 2006 dividend of 123 cents per share.

Spar said it had produced a solid set of trading results on the back of an excellent performance at retail, aggressive marketing, strong consumer spending and higher inflation.

The group's earnings grew 28.3% to 523 million rand and turnover was up 27.6% to 21.7 billion rand. Operating profit was 28.5% higher at 774.7 million rand and gross profit, at 1.78 billion rand, increased 24.4%.

Spar group CEO Wayne Hook said while there was no question that Spar's excellent trading performance was enhanced by the positive trading environment, much of the impetus came from a great retail performance, aggressive marketing campaigns and improved efficiencies, which were being facilitated by new radio-frequency warehouse technologies.

With the exception of the Western Cape Distribution Centre, which was being replaced with a new facility, all of the Group's distribution centres now use these improved technologies.

The volume of goods moved through the group's distribution facilities increased 14% over the previous year.

During the past year, Build it opened 32 new outlets and Tops 73. At year-end the group serviced 243 Build it and 287 Tops stores, respectively.

The group's six distribution centres handled approximately 137 million cases during the year, up 14% on 2006.

In order to keep up with demand, its six nationally dispersed distribution centres are being upgraded.

A new 33,550m² distribution centre in the Western Cape will be up and running in April next year and work has started on a 23,500m² expansion of the South Rand facility's dry goods warehouse, which should be operational by November next year.

The Group has also acquired a 42,000m² site in Mount Edgecombe in KwaZulu-Natal for a dedicated perishable goods facility. This new facility should be operational by early 2009.

Spar's capital expenditure for 2008 is estimated at around 400 million rand.

Spar remains cash flush – it had 454 million rand cash on hand at the year end. The group is financing its capital expansion program out of its cash reserves and plans to continue with its vigorous new store-opening program in 2008.

Looking ahead, Hook believes there is little doubt that higher interest rates will dampen the high level of consumer spending. However, with the group focusing on driving additional growth through existing outlets and an aggressive new store-opening program, he is confident that strong growth can be achieved during 2008.

Article via I-Net-Bridge