Director’s Cut: SPAR’s brutal reset - CEO Angelo Swartz on losses, debt and the fight back

SPAR CEO Angelo Swartz joins Alec Hogg to explain the R4.8bn write-down, the exit from Europe, sharp debt reduction, the renewed focus on SA independents, and how SPAR’s “2.0 strategy” aims to rebuild growth in one of the world’s toughest grocery markets..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here:.Listen here:.By BizNews reporter.Few retail CEOs inherit a tougher starting position than Angelo Swartz did two years ago at SPAR. European businesses hemorrhaging cash, rising competition at home, and balance sheet pressure left little room for gentle turnaround strategies. Swartz arrived knowing something fundamental had to change, and fast.Results released for the year to September reflect the cost of action. A headline loss of R4.8 billion grabbed attention, but Swartz insists the figure masks the progress beneath the surface.“It’s been a really difficult year,” he told BizNews. “We had to make some strong decisions. Exiting the European businesses meant recognising impairments on goodwill and asset values so that we could exit quickly. Those write downs are largely non cash, but they let us clear the decks.”Those exits from Poland and Switzerland now leave SPAR’s international footprint concentrated in Ireland, where a long standing acquisition continues to deliver solid returns, while a small UK business is in the process of being sold after being fully impaired to zero.For Swartz, the headline loss is less important than the balance sheet progress achieved alongside it.“Reducing debt was one of our top priorities from day one,” he said. “We set out five short term objectives when this management team arrived. The first was debt reduction. The second was exiting Poland. The third was reassessing where Europe fit in our long term strategy. We’ve ticked all three boxes.”Debt levels have fallen sharply, creating breathing room for the group and allowing its operational focus to shift decisively back home.The European story itself offers lessons that Swartz spoke about candidly. The original SPAR Ireland acquisition proved a runaway success, doubling operating profit margin and expanding into food service and cash and carry formats that now account for a large share of earnings.“The Irish business had strong management already in place,” he explained. “They just needed balance sheet strength to unlock value. We helped scale that business, and it’s grown into something really diversified.”That early success may have encouraged optimism that Switzerland and Poland would follow the same path.“In hindsight, the Irish deal created a false expectation that Europe would be easier,” Swartz admitted. “Poland quickly showed it wasn’t viable for a South African parent business. Switzerland was harder because at operating profit level it looked profitable, but when you considered the amount of debt tied up there, it simply didn’t meet the capital return hurdle.”Exiting Switzerland, he said, was the toughest call because it required walking away from business that appeared healthy on the surface.“But capital allocation matters,” he said. “For South Africa especially, we couldn’t justify the risk.”With Europe largely behind them, Swartz now describes the group as refocused and simplified.“Once the UK disposal is complete, our portfolio will be Southern Africa, Ireland and our small joint venture in Sri Lanka. Shareholders should not be concerned about any more hidden European risks.”At home, however, competition has intensified dramatically. Walmart, Amazon, Woolworths, Checkers and a revitalised Pick n Pay are battling for consumer wallets in one of the most price sensitive grocery markets in the world.“It’s tough,” Swartz conceded. “We don’t underestimate our competitors at all.”Yet he argues SPAR operates in a fundamentally different way to most retailers.“Our core model is not corporate-owned stores. We are wholesalers serving independent retailers across South Africa,” he explained. “We support entrepreneurs who operate stores in their own communities.”That decentralised structure gives SPAR a unique angle in the retail ecosystem. While rivals focus on scale through corporate store networks, SPAR leans into its partnership model.“South Africa needs more entrepreneurs,” Swartz said. “We are really proud of our role supporting independent business owners. These stores are rooted in their communities and respond faster to local needs.”It is an approach he believes provides long-term resilience, even if it creates short-term complexity. Growth in the Southern African business has been modest so far, with first-half sales rising just over one percent, improving to roughly three percent in the second half.“It’s nowhere near where we want it to be, but the trend is positive,” he said. “H2 was much stronger than H1 and we’re seeing gradual improvement.”Foot traffic remains broadly stable, but basket sizes are increasing. Convenience retail and online delivery are the newer battlegrounds where SPAR is deliberately investing.Delivery volumes have jumped by 135 percent off a low base, as the company rolls out its own digital platform while also partnering with Uber Eats for rapid grocery delivery.“Uber Eats has worked exceptionally well,” Swartz said. “They can deliver between 15 and 45 minutes. That changes consumer behaviour, but so far it’s been incremental growth rather than cannibalising stores.”Customers pay slightly higher prices through apps to cover delivery costs, but adoption has been strong.“There’s huge momentum around convenience,” he said. “Retailers can’t ignore it. Consumers expect more ways to engage with brands.”Swartz, who has spent nearly two decades inside the business, views the next phase of SPAR’s journey as distinctly local.“SPAR is immensely important to me,” he said. “This business has potential to add value to South African society through entrepreneurship. That’s where our energy is going.”Modernisation and digitisation underpin that reinvigoration. SAP rollouts across distribution centres and inventory systems will streamline logistics and data flows, allowing SPAR to operate faster and more efficiently.Those improvements, management hopes, will steadily lift margins from the current 1.7 percent back towards the long-term target of three percent by 2028.“We expect operating margins to keep improving,” Swartz said. “It’s a focused South African growth story now.”Beyond groceries, SPAR applies the same wholesaler support model into building materials and alcohol retail, where the Build It and Tops brands have become category leaders. These diversified verticals demonstrate what Swartz calls the core SPAR principle.“Through united co operation, everyone benefits,” he explained. “We coordinate independent retailers by supplying competitively priced products while building strong national brands that help them compete with large corporate chains.”After a bruising first two years as CEO, the hard reset phase is nearing completion. SPAR is leaner, less complex and better capitalised for its next chapter.“This has been about doing the difficult work first,” Swartz reflected. “Now we can finally focus on growth again.”For South Africa’s second-largest grocer, the future is no longer about chasing overseas opportunity, but rebuilding confidence one independent store at a time.

Director’s Cut: SPAR’s brutal reset - CEO Angelo Swartz on losses, debt and the fight back

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