Spar A more balanced approach to price investment and evidence of margin recovery remain vital going forward

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Spar A more balanced approach to price investment and evidence of margin recovery remain vital going forward

an avoid further self-inflicted setbacks (e.g., execution Adj. EBIT - 26E (R mn) 2,910 1,899 -34.7%

Adj. EBIT - 27E (R mn) 3,123 2,717 -13.0%

issues such as the Black Friday promotion and KZN DC disruption) and rebuild

retailer engagement – particularly if retailer loyalty can be sustained above ~80%. Half Yearly Forecasts (FYE Sep)

In that scenario, we think there is scope for a more meaningful earnings recovery, Adj. EPS (c)

albeit from a depressed base. As such, we lower our earnings estimates by 14-40%, 2025A 2026E 2027E

due to a 60% earnings miss in 1H26, and reduce our multiples-based PT Dec-27 H1 433.32 199.28A 337.04

H2 334.88 320.66 423.33

to R69 (from R85). We maintain our Neutral rating. FY 768.41 519.94 760.37

The journey to recovery remains uncertain, although we see scope for Style Exposure

improvement provided Spar avoids further ‘own goals’. In its recent results, the

group highlighted several execution-related headwinds, including KZN DC

disruptions (R123m impact to operating profit) and Black Friday (R212m

impact), alongside retailer loyalty levels remaining below 80%. While Spar has

become more competitive across its consumer basket, it is clear this has come at

a cost to margins, with earnings down 54% in 1H26. The key challenge we see now

is to adopt a more balanced approach to price investment while rebuilding a

credible path towards the 3% EBIT margin target – an outcome we view as more

of a stretch in a more aggressively priced market. A second consideration is the

required investment in online, which is likely to entail both incremental capex and

some near-term margin dilution as the proposition is built out. In addition, Spar