BUSINESS NEWS - Inflation – depending on the way it swings – can be a boon or a burden for retailers.

Just ask Shoprite. South Africa’s largest retailer has had to manage internal inflation that swung from a high of 7% in its South African supermarkets a year ago, to a low of 0.4% in the six months to December 2017.

In practical terms this means that 5 279 products are now cheaper than they were a year ago, and some are cheaper than they were two years ago.

Despite this swing the local supermarket operation grew sales by 7.8% generating a trading profit of R3.3 billion, R350 million more than in the corresponding period.

The non-RSA business, which trades in 14 countries in the rest of Africa, did not fare as well. Sales were down 9.5% in local currency, against growth of 155.4% in the previous year. 

The decline, which was expected considering last year’s strong performance, was exacerbated by challenges in Angola, including a drop in internal inflation from 41.3% to -1.8%.

As a group Shoprite reported turnover growth up 6.3% to R75.8 billion. The rise in turnover did not come at the expense of gross margin, which rose from 23.4% to 23.8%.

Trading profit rose by 5.0% overall.

Diluted headline earnings per share rose 14.2% to 525.2 cents and the dividend per share rose 13.9% to 205 cents.

“Some of you may think these growth rates are not good enough, but I can assure you we are very proud of them,” said a relaxed looking CE, Pieter Engelbrecht, who moved into the role from CFO a year ago.

Africa, Engelbrecht told analysts on Tuesday, “is not a disaster zone”. 

“The beauty of this business is the resilience of the RSA operation, which despite a mature market, tough competitors and deflation, was able to gain market share of 0.5%.” 

This translates into R1 billion in additional sales, with 147 million more products sold and 19.2 million more customers, he says.

And while there are short-term set-backs in the non-RSA business, “this business is still in very good nick”.