Spar splits SAP rollout into phases as franchisee lawsuit and leadership shake-up mount

The South African wholesaler is decoupling its finance and warehouse systems migration after a failed implementation in KwaZulu-Natal triggered a R168.7-million legal claim and a string of executive departures.

Spar Group has overhauled its approach to its SAP technology rollout, opting to separate the migration of financial systems from distribution centre operations in a bid to contain execution risk. The decision comes as the group contends with a large-scale lawsuit from one of its franchisee families and the abrupt departure of its chief executive.

The revised plan, outlined in a trading update published Monday, shifts the focus toward "capability enablement rather than distribution centre integration." The original implementation had sought to run warehouse, finance, and purchasing transitions simultaneously. Under the new approach, those components will be handled in distinct phases.

Spar said the migration to a unified SAP finance environment, built around a single chart of accounts, is on track for completion within the current financial year. A second phase covering drop shipment reporting, credit management, and pricing governance will follow.

The strategic pivot traces back to the troubled SAP S/4Hana deployment at the group's KwaZulu-Natal distribution centre in early 2023, which caused significant supply chain disruptions for retailers in the region. Industry estimates cited by Business Day placed the broader fallout at roughly R1.6-billion in lost turnover and R720-million in lost profit by September 2023 alone.

The Giannacopoulos family, which operates 46 Spar, SuperSpar, and Tops stores, has since filed a R168.7-million lawsuit against the group in the Durban High Court. The claim includes R142.9-million in lost gross profit across the 2023 to 2025 financial years, as well as R25.8-million in damages tied to volume-based rebate programmes the family says it was unable to meet due to supply failures. Spar confirmed it has been served with a summons, noting that the amount claimed "significantly exceeds" an initial figure of R5-million and that earlier attempts to settle the dispute had not succeeded. The group added that all other KwaZulu-Natal retailers affected by the early implementation, with the exception of the claimant and one other, have reached settlements.

The SAP developments are unfolding alongside considerable leadership turbulence. Chief executive Angelo Swartz resigned on 20 February, 28 months after taking the role, and will be succeeded by chief financial officer Reeza Isaacs from 1 March. Chief operating officer Megan Pydigadu will move into the CFO position. Swartz, who had led Spar's KZN division before becoming group CEO in October 2023, had recently described the next stage of the SAP rollout as "the single biggest risk" to the company's recovery. His predecessor, Brett Botten, also left after less than two years in the top job amid governance concerns, and several senior executives tied to the original SAP project have since departed.

On the financial side, Spar reported wholesale turnover growth of just 2.1% year on year for the 18 weeks to 30 January 2026, with its Southern Africa business growing at only 0.9%. Gross profit margins in that segment declined, a result the company attributed to a weaker sales mix, Black Friday promotional activity, and continued spending on loyalty programmes and margin recovery in KZN. The group cautioned that operating margin performance for the first half of fiscal 2026 is expected to remain under pressure, with recovery described as likely to be "gradual and weighted toward the second half."

To stabilise its cost base, Spar said it is pursuing a range of structural measures, including distribution network optimisation, centralised procurement for non-trade spending, tighter credit controls, and an expanded private label offering. The board also announced plans to appoint a dedicated managing director for the Southern Africa grocery and liquor segment, its primary revenue driver, to improve operational focus and accountability.

Spar's share price has fallen close to 35% over the course of 2025. Following Monday's trading update, shares dropped a further 5%.