Australasian shopping mall giant Scentre Group has hit guidance with a 3 per cent lift in earnings to $676.2 million, despite a troubled outlook for retail sector.
While anemic consumer spending has put pressure on Australia’s shopping centre landlords, Scentre Group has been remixing its Westfield shopping centre portfolio to meet demands for leisure-focused customers and to combat the threat posed by e-commerce.
Announcing its full year earnings, the group said annual sales at its $54.6 billion Westfield portfolio had increased to $24.4 billion, accounting for more than seven per cent of all retail sales in Australia, with customer visitation hitting 535 million.
In its first half, the company generated funds from operations of $676.2 million.
Statutory profit fell 49.4 per cent $740 million for the half year down from $1.46 billion at the same stage of the previous year.
Scentre pointed to higher property revaluations recorded in the preceding year's first half while also taking into account some asset sales and centre redevelopments.
The group forecast growth in funds from operations for its full year of around 0.7 per cent, which takes into account the impact of its recent transactions. Distributions for the half at 11.3 cents were also in line with forecast.
Scentre chief executive Peter Allen is looking to position the group as the best platform for retailers looking for both a physical and online presence repositioning its Westfield centres towards experience-based offerings.
A staggering 42 per cent of the group's portfolio now boasts experience based offerings which can only be consumed on-site, including dining, entertainment, health, fitness, financial, education and beauty services.
“The first six months of 2019 has been an active period for the Group as we focus on delivering what the customer wants,” Allen said.
“We have been able to achieve this whilst continuing to grow cashflow and distributions for our security holders and maintain our strong financial position.”
Allen noted re-leasing spreads, which are the difference between rent charged for new tenants and what existing tenants pay in renewal, was negative 4.5 per cent, compared with the negative 4.8 per cent for the same time last year.
The comparative sales growth for specialty stores was up 2.3 per cent.
The first half was dominated by the decision to divest $2.1 billion in capital to pursue “strategic objectives”, selling office towers above Westfield Sydney to US private equity giant Blackstone in a $1.52 billion deal and the $575 million half stake in Westfield Burwood to the Perron Group.
Scentre plan to recycled capital from those transactions back into the redevelopment of the Westfield malls and funding a security buy-back program of up to $800 million.
“We will continue to invest in deepening our understanding of the customer and maintain our relentless focus on what they want,” Allen said.
The company has a $3 billion future development pipeline, including expanding its Westfield Sydney into the David Jones department store space in the city’s CBD.
The group also opened the Bradley Street dining precinct at Westfield Woden while at Westfield Carindale a new Kmart will be introduced.
The first 40 shops in the 230-store NZ$790 million (AUD$750 million) Westfield Newmarket, which is New Zealand's biggest retail redevelopment at 8.8 hectares, will open at the end of this month.