Friday 24 November 2017

Spar operator BWG sees sales slowdown in Ireland as deflation hits stores

BWG chief executive Leo Crawford
BWG chief executive Leo Crawford
John Mulligan

John Mulligan

BWG, the Irish group that controls the Spar franchise here, posted a rise in sales during the six months to the end of March but experienced a "significant slowdown" in second-quarter growth across all its categories.

BWG, whose CEO is Leo Crawford, is 80pc-owned by stock market-listed Spar South Africa, which released interim results yesterday.

It said that reported revenue at BWG in the six months to the end of March was 9.81bn rand, (€662m), and that it generated pre-tax profits of 184.6m rand (€12.4m).

"Rand strength against the euro substantially eroded this business result on consolidation," noted Spar South Africa.

It added that a buoyant hospitality sector here had boosted sales at BWG Food Services, however.

In euro terms, sales at BWG rose 1.6pc in the six-month period. The second-quarter sales slowdown as a result of deflationary pressure, according to Spar South Africa.

"Latest measures indicate that food and non-alcoholic drinks declined 2.6pc, while alcohol dropped 5.2pc," it noted. "While the Irish economy is growing and consumer spending has increased, this trend has not yet been seen in the grocery retail sector."

It added that Spar Ireland sales rose 4.3pc in the latest period, while sales at Londis were 3pc higher.

"The BWG Group's economic growth outlook is cautious, largely influenced by the Brexit uncertainties," noted Spar South Africa, whose CEO is Graham O'Connor.

"However, management's proactive approach to addressing the slowing sales should ensure SPAR Ireland adapts to the changing conditions and will deliver a result in line with expectation," it added.

"Recent acquisitions have strengthened this business and further retail consolidation opportunities will be evaluated to achieve its growth objectives."

Spar South Africa said that the Spar and Londis brands here benefited from new business, as 11 net new stores were added in the period and BWG grew its market share.

It said that BWG's distribution volumes rose strongly.

"The number of cases despatched from the Kilcarbery distribution centre increased 13.2pc from a year ago, with the strongest growth experienced in the perishables category," it noted. The centre is located in Co Dublin.

BWG also owns Appleby Westward, which is based in southwest England. It controls a number of Spar shops and also operates as a wholesaler. It accounts for about 11pc of the consolidated BWG group business. In sterling terms, like-for-like sales at Appleby Westward in the period rose 4.1pc, but slumped 10.3pc in euro terms as sterling sank following last June's Brexit vote.

The total number of stores across BWG's portfolio stood at 1,335 at the end of March.

Spar South Africa has more than 2,000 outlets in that country and also has stores in Switzerland. Group revenue rose 14pc to 48 billion rand (€3.2bn) in the six-month period but operating profit fell 4.1pc to 1.2bn rand (€81.7m).

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