No Spark for Spar

Spar (JSE: SPP) has recently seen its share price fall through the floor, slumping to a near nine-year low amidst weaker-than-expected sales across most regions as higher prices suppress consumer demand. A myriad of macroeconomic headwinds resulted in the local retailer’s share price falling by nearly 25% in May alone.

The local retailer is forecasting a potential 35% decline in its headline earnings per share (HEPS) for the six-month period that ended 31 March 2023. The group’s overall turnover increased by a measly 7.9% year-on-year to approximately R72.9 billion. Excessively high debt levels have placed undue stress on the local food retailer in a rapidly rising interest rate environment which has seen the South African Reserve Bank (SARB) hike the repo rate to 8.25% and the prime rate to 11.75%, in the latest Monetary Policy Committee (MPC) meeting.

To further cement negative sentiment within the overall retail industry in South Africa, inflation risks have recently been revised to the upside, with headline inflation now expected to remain above the upper target band until at least the third quarter of 2023. This will place additional pressure on the already-struggling South African consumer, which could further decrease sales volumes for Spar.

Sources: Business Live, IOL, Trading View

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