UBS cuts share price outlook on shopping centre owners
A string of retail collapses is set to hurt the shopping centre giants behind the Westfield and Stockland malls. And now Amazon has launched a new threat.
Business
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The nation’s biggest shopping centre owners face a far tougher trading environment following the rapid-fire collapse of a string of major retail chains, a leading investment bank has warned.
UBS has cut its share price outlook for both Scentre Group and Stockland — two of the nation’s biggest retail landlords — following a spate of retail collapses during the key Christmas and New Year trading period.
Analysts at the investment bank have slapped a “sell” recommendation on shares in both listed shopping centre owners, saying the companies will be weighed down by store vacancies and the loss of anchor tenants.
The analysis adds to the pall over the nation’s retail sector, which generates $320 billion a year in sales.
Fashion chains Jeanswest and Bardot, educational retailer Curious Planet, audio heavyweight Bose, video games seller EB Games and department store chain Harris Scarfe have all either toppled into administration or announced major store closures over the past three months.
The latest bout of turmoil to hit the retail sector has put a cloud over the future of about 360 stores.
Jeanswest operates 146 stores across Australia. These remain open but a restructure is expected to result in closures.
Bardot is in the process of shutting 58 store while Curious Planet, which formally traded as Australian Geographic, will shut its entire network of 63 outlets.
EG Games has announced plans to close 19 stores while Bose will shut eight.
Harris Scarfe runs 66 stores. It is closing 21 as part of a deep restructure aimed at attracting a rescue buyer.
UBS estimates the retail collapses will affect up to 84 tenancies at Scentre, which owns the Westfield shopping centres in Australia.
Of these, at least 43 stores will shut, including 15 Bardot and 24 Curious Planet outlets, UBS estimates.
Scentre is the most exposed to Harris Scarfe, with 10 locations in its portfolio. Stockland is also exposed to Harris Scarfe, leasing four stores to the department store chain that are scheduled to shut.
The latest store closures at shopping centres come as key flagship tenants such as Myer and David Jones push to hand back 20 per cent of their total floor space to landlords.
At Scentre, net profit plunged 49 per cent to $740 million for the six months to June. The company is due to release full-year results next month. Net profit at Stockland fell 70 per cent to $311 million for the year to June.
A Scentre spokeswoman said the group’s malls clocked up 535 million customer visits a year and that number was growing.
She also said the occupancy rate across its portfolio stood at more than 99 per cent.
“We are always listening to customer feedback to identify new and sought-after brands so we can remix and curate the right offering of retail products, services and experiences when opportunities present,” the spokeswoman said.
NEW AMAZON THREAT
The bleaker outlook for both landlords comes as US online interloper Amazon today announces it is launching its “flex” delivery business in Melbourne and Sydney.
Amazon Flex is an Uber-style delivery business where Amazon pays workers to deliver its packages using their own cars. Australia is the ninth country where Amazon is rolling out the delivery business.
Amazon Australia operations director Craig Fuller said the delivery platform would allow the US e-commerce titan to expand its delivery network, ramp up at peak times and speed up delivery times.
“We are always looking at new ways to deliver convenience to customers,” Mr Fuller said.
“As customer demand and delivery needs continue to grow in Australia, Amazon Flex gives us the agility to supplement the work we do with our existing carrier partners so we can speed up delivery times and respond to peaks in demand.”
Shares in Scentre dipped 1.25 per cent on Tuesday to $3.94.
Shares in Stockland were flat at $4.99.
Originally published as UBS cuts share price outlook on shopping centre owners