Spar (SPP) HEPS Forecast update

SPP results for 1H17 were disappointing and we believe that the growing corporate stores base is a reflection of the increased stress which its franchise stores are under. Running these stores could increasingly become a distraction for SPP management, in our view, as their core competency is in supply chain management. Spar Switzerland’s performance deteriorated dramatically since its acquisition, and SPP have now deployed management from South Africa to address the performance issues in this division. While the prompt action is encouraging, there are risks with this move, mainly as it remains to be seen how well the new SA management team will deal with the operational challenges in a market they are not familiar with.