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South Africa-based, Walmart owned Massmart has appointed a new chief executive less than a month after it announced its existing chief executive, Guy Hayward, would step down by the end of 2019. Simultaneously, the retailer has said that it is expecting its operating profit to be flat.

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Netherlands-based SPAR International reported sales rose 5.4% globally to €35.8bn. The organisation said entry into four new markets, the addition of 335 new stores and the continued focus on its ‘Better Together’ strategy had underpinned the pace of its growth.

2018 ‘an exceptionally strong year for SPAR’

Discussing the results, SPAR International’s managing director, Tobias Wasmuht, described the retailer’s performance as representing ‘another exceptionally strong year for SPAR’. Wasmuht went on to highlight the importance of the retailer’s ‘Better Together’ strategy, of which it was in the third year of five. The strategy is focused on ‘SPAR’s core ethos of uniting together the global scale and resources of the SPAR network so that all shall benefit’.

At the end of 2018, SPAR operated in 48 countries, with 13,112 stores under the brand accounting for 7,441,838 sq. m of selling space.

Continued strength across Europe

SPAR said sales grew by 4.1% to €22.1bn in Western Europe and by 15.8% in Central and Eastern Europe, to €5.8bn.

In Western Europe SPAR said its continued investment in its stores and the growing shopper trend of buying little, often and locally was benefiting its members, who operated neighbourhood-based stores. This trend was being accentuated by longer term trends, such as ‘smaller and single households, as well as aging populations and urbanisation’, which are likely to continue to benefit the retailer.

In Central and Eastern Europe SPAR gave more country-specific reasons for growth in the different markets where it operates. SPAR Hungary saw growth advance by 9.8%, SPAR Croatia by 15.3% and SPAR Slovenia by 4.1%. SPAR highlighted how its partners’ combined sales broke through the €2bn mark for the first time, with sales up by 27.8% in local currency terms.

Strong growth in Africa and the Middle East

Across the 15 countries where it operates, SPAR said sales rose by 8.2% to €5.9bn. South Africa continued to dominate its performance in the region, where it generated sales of €4.9bn, after growing sales by 5.7% at constant exchange rates. This was supported by fast paced growth in Botswana (+19.2%), Cameroon (+65.6%), Mozambique (+56.2%), Nigeria (+8%) and Zimbabwe (+39.1%).

There was continued good growth in the Middle East, where it said its partners had ‘been able to adapt and tailor their retail proposition in tune with modern consumers’.

SPAR approaches €2bn in sales in Asia

In its smallest region, SPAR said its seven countries’ operations generated sales of €1.96bn in 2018 from their 573 stores. China accounted for most sales, with its members generating sales worth €1.5bn in 2018 ‘with particularly strong growth in the Shandong and Guangzhou provinces’. It highlighted the importance of its members’ growing use of technology in-store, such as ‘facial recognition payment technology and engaging with customers instore through mobile applications, including scan & go solutions’.

Short term focus to remain on ‘Better Together’ strategy

SPAR said its performance in 2018, and over the last three years when it has generated a ‘compound annual growth of over 5%’ gave it the confidence to sustain its existing strategy. This will see it accelerate its international joint buying and procurement ‘ by further harnessing [its] international scale, pooling [its] global resources to reap economies of scale in all areas of [its] business and uniting [its] global partners to be and act better together’.

By region, SPAR said it expected to benefit from existing trends in Western Europe, expansion in Central and Eastern Europe, through the award of two new licence agreements in the region, with a similar reason given for its faith in driving growth in China. It noted that ‘plans are at an advanced stage for the expansion of SPAR in South and Central America’, which would see it enter the continent for the first time.

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South Africa-based, Walmart-owned Massmart has announced its chief executive, Guy Hayward, will step down by the end of 2019. Simultaneously, the retailer has set out its expansion plans to 2021 as it looks to grow outside its home market.

Chief executive to leave by the end of 2019

Massmart said Guy Hayward will leave by the end of 2019, after a period of five years as the company’s chief executive. No successor was announced, with the retailer saying ‘the process to appoint Guy’s successor is underway and the board will make further announcements in due course’. Hayward will remain in place to help smooth the appointment and arrival of the new chief executive.

Expansion to help grow regional presence

Separately, Massmart announced it was planning to open 47 new stores between 2019 and 2021. It said about a third would be added outside of South Africa as it looks to offset the slow pace of growth it was facing in the country.

South Africa-based Pick n Pay has released audited results for its 2019 financial year, which ended on 24 February 2019. The retailer said the results shows it had enjoyed ‘market-leading turnover growth of 7.1% with market share gains throughout the year’.

The numbers…

Pick n Pay said its turnover rose 7.1% over the 52-week period, to ZAR86.3bn (US$6.0bn), while over the 53-week period it increased by 9.6% to ZAR88.3bn (US$6.1bn). In the 52-week timeframe the retailer said its trading profit margin was 2.4%, while its profit before tax in South Africa increased by 23.8% to ZAR1.8bn (US$124.8m).

The performance was particularly pleasing for the retailer given the challenging trading environment it is working in, while it also showed the positive effect of the changes it has been making over the last six years. Pick n Pay said like-for-like sales rose 4.8%, despite selling price deflation of 0.3%. Its performance in its home market, where like-for-like sales increased by 5.2% and turnover growth stood at 7.4% underlined the importance of its South Africa-based operations.

It said its performance in its home market ‘mitigated some operating challenges experienced outside its borders’, where it faced testing conditions in Zambia and Zimbabwe. It generated a turnover of ZAR4.7bn (US$326.0m) outside South Africa, a rise of 5.3% on the previous year in constant currency terms. Pick n Pay said like-for-like sales rose by 1.5%, again in constant currency terms.

Performance result of six years’ work

Pick n Pay stressed how the positive results were not exceptional and were underpinned by six years’ hard work and investment. In the announcement it said it had put ‘a relentless focus on improving cost and operating effectiveness has enabled the Group to invest in a winning customer offer through lower prices, more attractive promotions, better and more innovative products, compelling value-added services, and brighter and more modern stores’.

In its 2019 financial year this enabled it to:

  • Invest in prices: the leaner cost base had allowed it to support ‘substantial price investment over the year’. To remain price competitive the retailer said it monitored at least 2,500 prices weekly, while it had also ‘improved its relative price position by at least 3% across thousands of products’. It has also ‘refined its promotional calendar’, which meant it was able to offer shoppers more value and make it clearer what promotions were available. The same step also improved supplier collaboration
  • Create stronger supplier relations: cutting the number of promotions helped create stronger supplier partnerships as part of its wider Buy Better programme. It said the initiative had ‘unlocked more than ZAR500m (US$34.7m) of value through [the] Buy Better programme… driving volume growth
  • Reward loyal shoppers better: through its Smart Shopper loyalty programme Pick n Pay said it had sent its shoppers a personal message every week to provide discounts on the products ‘most relevant to them
  • Improve its fresh offer: as part of its Our Fresh Promise initiative, which was launched in May 2018. It said the programme has seen it deliver ‘a substantially improved fresh offer, with better quality, more choice, and longer-lasting freshness across all categories’. This focus enabled it to provide ‘ a 20% increase in fresh availability, a 5% reduction in waste, and strong sales growth year-on-year
  • Build a modern estate, with wider reach: through a mixture of new stores, it opened 130 across all formats in its 2019 financial year, and investment in existing stores Pick n Pay said it improved shoppers’ access to its brands. 103 stores were updated, while it also closed 20 under-performing stores
  • Grow its online offer: Pick n Pay has a long-standing presence in grocery ecommerce and uses it to differentiate itself from competitors’ offers. Although it acknowledged the channel remains ‘a relatively small part of [its] business’, it ‘will be increasingly important in the future’. Investment in the channel saw volumes rise by 17%, with turnover growing by 24.3% year-on-year
  • Expand outside South Africa: despite the challenging nature of operating outside its home market and the results it saw in FY2019, Pick n Pay underlined the importance of growing in other markets ‘without placing the core South Africa business under undue strain’. During the period it said it opened two supermarkets, a standalone liquor store and optimised eight supermarkets in Zambia

Investment to increase in FY2020

Looking to the year ahead, Pick n Pay will invest ZAR2.0bn (US$138.7m), up from ZAR1.5bn (US$104.0m) in its most recent financial year IN FY2019 the money was split between new stores (ZAR476m (US$33.0m)), refurbishment (ZAR620m (US$43.3m)) and supply chain capability and IT infrastructure (ZAR377m (US$26.1m)).

In its 2020 financial year, Pick n Pay said the money would be invested to expand the presence of its Boxer banner and to update existing stores’ look and feel. New store growth will also be driven by additions to the Pick n Pay Express chain. Overall, the retailer will open more than 100 stores in the coming year.

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