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Spur sees stronger growth but consumer boycott casts long shadow

Sep 06 2018 14:08
Fin24

Restaurant franchise chain Spur Steak Ranches posted strong growth in the fourth quarter of the financial year, but the group’s flagship brand still ended with lower sales than in 2017 due to a controversial consumer boycott. 

The Spur Corporation released its condensed consolidated financial statements for the year ended June 30, 2018 on Thursday morning.

Headline earnings from continuing operations grew by 13.8% to R153.7m. However headline earnings on a comparable basis decreased by 9.7% due to exceptional and one-off items in 2017 and 2018, including selling the Captain DoRegos business.

Revenue from the group’s continuing operations, meanwhile, increased by 3% to R667.2m.

Steak Ranches, which accounts for two-third’s of the group’s sales, was damaged due to a controversial consumer boycott in the wake of an angry exchange between two customers posted on social media in March 2017.  

The exchange, between a white man and a black woman, sparked nationwide outrage at the time. Spur took the decision to ban the man from all Spur restaurants, but this was met with considerable backlash.

A Facebook page called ‘Boycott/Boikot SPUR Steak Ranches’ was set up shortly after this decision, describing Spur as biased for not also taking action against the woman.

While sales dipped by 9.1% in the first half of the financial year, and by 3.2% in the third quarter, they rose by 14.8% in the fourth quarter. 

This resulted in a net decrease of 2.8% in sales for the full year. Franchise revenue declined by 3.2%

The group's CEO Pierre van Tonder said increased sales in the second half of the year were due to an improved focus on product quality, service and innovation, rather than an improvement in consumer spending.

“Discretionary spend is under growing pressure which is resulting in a continuing decline in restaurant and shopping centre foot traffic. However, the improving sales in the last six months is positive for the sales outlook as we move into the new financial year,” he said.

Overall franchised restaurant sales in South Africa, meanwhile, grew by 1.5% year-on-year.

International restaurant sales - excluding the Captain DoRegos chain which was sold off in March – increased by 2.7% on a constant exchange rate basis and declined by 0.7% in rand terms, the corporation said. 

The group also announced a total dividend of 123 cents per share for 2018, down 6.8% than in 2017.

It added it had been negatively impacted by fee concessions granted to “assist several franchisees in the aftermath of the Spur social media incident”, but the level of financial assistance has steadily reduced.

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