Woolworths fleeces Spar?
Spar spars over snacks and treats
It’s hard not to be suspicious about Woolworths' decision to release a trading update, for a 20-week period, the same day that Spar released its results (Wednesday). JSE companies report results at 26 and 52 weeks, roughly, but do need to flag earnings expectations if they are high or low enough. Also, hard to be too suspicious when speculating, lawyers insist.
But those looking for smoke may see some in how investors reacted to the two releases. Spar’s shares crashed almost 15% on disappointing dividend and earnings news, while Woolworths leapt almost 6%, and adding more than 3% on Thursday as well. Not baaad.
Of course, this is not to suggest Woolworths knew exactly what was in Spar’s report, but it may have had some idea, especially as it is also a grocer that shares certain markets. Spar is also in the midst of implementing a new enterprise resource planning system, a massive, and expensive undertaking, and therefore a risky one. Spar, of course, knows this, and recently appointed Ernst and Young to strengthen its IT audit functions for precisely this reason.
Woolworths' namesake in Australia, which is not connected to Woolworths SA, also struggled with its new system, and SA’s Woolworths may have noticed, perhaps when googling stuff.
But even if it didn’t, implementing such systems is already famously difficult, especially, it seems, for firms slinging food and booze.
Woolworths may also have got a sense it was eating Spar’s lunch if significantly more customers were eating theirs, but, it seems both have taken load shedding hits, and both are clearly in the fight for customers.
The news on Wednesday, in part, was that Woolworths' SA food business grew turnover 7.1% in the 4.60273 months to 13 November (5.1% in comparable store terms) Food inflation was 7.9%, but it kept its price moves to an average 6.3%.
Spar's internally measured inflation for food was 6.9% for its year to end-September, while turnover in its core SA grocery was "a robust" 5.3%, or 4.9% in comparable retail terms. Advertising and promotional costs jumped a fifth.
Of course, SA food is not the be-all and end-all of either firm's business, but they do share the JSE, and a limited pool of investors. Regardless of the motives, how nice of Woolworths to help out on the day, as some of Spar's shareholders looked for alternatives.
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