Retail giant Spar is readying to deploy a new SAP system, as it continues to navigate challenges at its distribution centres.
This emerged yesterday, when the company announced its financial results for the 26 weeks ended 31 March.
Central to the programme is the planned go-live of its future-fit SAP Finance platform during the 26 weeks ending 25 September, as part of Spar’s digital transformation strategy.
The retailer says the new system will streamline critical finance functions by eliminating manual processes in areas such as claims management, settlement and reconciliation, while laying the foundation for broader systems integration.
The move comes as Spar was earlier this year slapped with a R168.7 million lawsuit by one of its largest franchisees, the Giannacopoulos family, over failures in the SAP system rollout at its flagship KwaZulu-Natal (KZN) distribution centre.
Spar Group encountered multiple obstacles during the deployment of the SAP software, particularly at its KZN distribution centre, which was the first to adopt the system in February 2023.
The transition resulted in various go-live and integration issues, significantly impacting distribution operations in the region.
These challenges disrupted stock deliveries to retailers’ stores, leading to reduced service levels and a decline in retailer loyalty.
The failed SAP enterprise resource planning system cost the retail group R1.6 billion.
Spar delivered a subdued performance in the period under review, with revenue from continuing operations increasing 2.1% to R67.5 billion.
It says gross profit rose 0.6% to R7.1 billion, while the gross margin declined by 10 basis points to 10.6%, reflecting operational challenges in Southern Africa that were partially offset by improved margins in Ireland.
According to the company, operating profit fell sharply to R730.7 million from R1.4 billion in the prior period, largely due to three factors.
The retailer’s KZN distribution centre accounted for R123 million of the decline, as operational disruptions, elevated out-of-stock levels and a logistics structure ill-equipped for higher volumes weighed on performance.
Black Friday promotional overspending contributed a further R212 million hit to operating profit, with the additional investment failing to generate the expected returns.
In addition, debtor costs increased by R159 million compared to the prior period, driven by a more conservative approach, a change in methodology and financial distress among selected retailers within the network.
Spar notes that KZN is the group’s single most critical near-term execution priority, as a structured stabilisation programme has been launched with dedicated workstream ownership.
It points out that new leadership is in place across merchandise, finance and retail operations. Dependency on external truck hire has been reduced, while out-of-stock rates have improved significantly, it adds.
By period-end, the retailer says KZN had recorded three consecutive months of positive operating profit, ending the period marginally above break-even.
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