Spar plans to open 35 new stores this year

The group would also open 45 new Tops at Spar stores, which sell liquor, he said.

In the year to September, retail trading conditions were tough as consumers were under pressure and competition increased. Spar would have to be more innovative in future in securing greenfields sites, but there were still opportunities, especially in the informal market, O'Connor said.

In the past year the group opened 19 Spar stores, below the target of 23, and closed 17 that either failed to meet standards or for financial reasons. The group opened 51 new Tops at Spar stores, well ahead of the target of 35. Build It added 18 new stores in the past year but these retailers came under pressure from labour unrest, imported cement, and competition from small foreignowned stores in outlying areas.

"Looking forward, the primary focus is retailer profitability, underpinning the long-term economic sustainability of the Spar Group's business," O'Connor said. Spar's plans to develop a new distribution centre in Lanseria, close to Johannesburg, have been complicated by land zoning issues, but O'Connor said he was confident the site would be operational in 2019. "We are nevertheless pursuing an alternative site, which will allow us to make a final decision in 2015."

In August, Spar bought an 80% stake in Irish retail group BWG.

O'Connor said there were opportunities for the bigger group in Ireland and southwest England, as well as synergies in distribution and marketing.

In Africa, Spar's expansion into Botswana, Namibia and Swaziland had been successful and it was making progress in Mozambique and Angola, but the group had found business in Zimbabwe to be "challenging".

"As competition in the retail sector intensifies, we continue to focus on aggressively driving new business opportunities, organic growth, stringent cost control and securing operating and supply chain efficiencies," he said.

O'Connor forecast Spar would report a strong trading performance in the present year and BWG's profitability would improve in the short term.

Spar shares tested new highs last week, touching R161.63, a 21% gain over the past year.

Source: Business Day