Economy has turned the corner, CEOs of Woolworths, Scentre, Eagers, Medibank and IOOF declare

Major retail, media, health, and property companies are riding a lift in confidence and are chasing ­opportunities that the pandemic crisis has thrown up.

The nation’s economy is gathering momentum. Picture: NCA NewsWire

Business leaders have given their strongest indication yet the economy has turned the corner as it comes out of the depths of the coronavirus crisis with major consumer-facing companies calling a pick-up in economic activity this year as they look to capitalise on the more buoyant environment.

Major retail, media, health, and property companies are riding the lift in confidence from the return to more normalised working conditions and are chasing ­opportunities that the crisis has thrown up.

Marking one of the biggest reporting days on the ASX, dozens of businesses issued relatively upbeat outlooks, saying they expected earnings to recover unless further coronavirus outbreaks sweep capitals and they are hit with restrictions on their activities, pointing to the importance of the vaccine rollout, keeping borders open and getting people back into cities.

The broadbased recovery was displayed as businesses from Woolworths to WiseTech outlaid growth initiatives rather than cost-cutting measures as the cycle turns up against the backdrop of higher corporate and consumer confidence, low interest rates and rising employment.

Fragility remains in the travel and hospitality sectors, but they are benefiting from domestic spending on leisure, and foot traffic is returning steadily to city malls, mirroring the pattern seen in suburban areas.

Woolworths chief executive Brad Banducci called out a successful rollout of COVID-19 vaccines as supporting consumer confidence and keeping the economy bubbling.

“We haven’t seen a plummet in consumer confidence … it has been relatively surprisingly stable so far in everything we have seen and as we do our measurements, so it [vaccines] might be helping,” Mr Banducci told The Australian.

Woolworths CEO Brad Banducci at the retailer’s Sydney offices. Picture: John Feder

HomeCo chief executive David Di Pilla pointed to encouraging signs for retail tenants in the group’s portfolio. “We remain very optimistic around the outlook for the retail sector and in particular our daily needs-­focused segment,” he said. “With a continued low interest rate environment and stronger household balance sheets, strong consumer spending should continue over the first half of this year.”

His comments came as figured showed that workers’ pay ­increased faster than expected in the December quarter, aided by the post-COVID labour market recovery and a delayed lift in the minimum wage, with the Australian Bureau of Statistics reporting a 0.6 per cent lift in the wage price index, which was ahead of expectations.

In larger malls, Scentre chief executive Peter Allen said there was strong demand by retailers who had stayed put after the crisis. “We’re certainly seeing that our retailers are continuing to take … five-year leases,” he said.

“Consumer confidence continues to grow … in the fourth quarter of 2020, we averaged 46 million customer visits per month, which is on par with the same period in 2019.”

Mr Allen expects increased consumer confidence flowing through to the group’s Westfield malls. “The vaccination program has kicked off and we’re likely to see less border closures; limited international travel opportunities means more domestic spend and Australians’ savings levels are up,” he said.

Scentre brought in more than 200 new retailers in the last half, with a high proportion of dining and entertainment tenants, and existing tenants were taking longer deals.

“The year finished with more new lease deals being agreed in the last quarter than the last quarter of 2019,” he said.

Peter Allen is the CEO of Scentre Group, which manages all Westfield Centres in Australia. Picture: Aaron Francis for The Australian

Scentre is bringing in new fashion, accessories, and health and beauty tenants, with even under-pressure categories beginning to flourish again.

Eagers Automotive chief executive Keith Thornton pointed to the opportunities in the wake of the pandemic, saying market conditions had improved. “Restrictions on international travel has resulted in a reallocation of consumer spending, while changes in personal attitudes to public transport have also driven higher demand for vehicles,” he said.

Media companies are also more bullish.

Nine Entertainment chief executive Hugh Marks said the television broadcaster had come out on the other side of the pandemic in a strong operating position, particularly as the ad market has started to recover.

“From an advertising perspective, this latest half year was a tale of two quarters. The advertising market clearly turned in late September, earlier and more sharply than we had anticipated,” Mr Marks said.

Mr Marks said Nine was well positioned to benefit from this improvement in the ad cycle, which had continued into the first quarter of calendar 2021.

Health companies are also getting back to normal. NIB chief executive Mark Fitzgibbon expected the health system to start returning to normal by the end of this financial year — if not, he said, Australians would witness a new era.

“Whatever happens from there, you will start to regard it as the new normal,” he said. “How much that new normal differs from the pre-COVID-19 normal, only time will tell. I do have a hunch that the new normal will be a little bit more efficient because doctors will be more inclined to go for more conservative options.”

Medibank has set aside $310m to fund a backlog of claims from deferred surgeries from COVID-19 cancellations. While opinions vary on how much provisions should be given the pandemic’s outlook remains uncertain, Medibank chief executive Craig Drummond said it was vital health insurers set aside funds.

IOOF chief executive Renato Mota in Melbourne. Stuart McEvoy for The Australian.

And if too much has been set aside, he said he would return the savings to policyholders.

“We had a more recent lockdown in Victoria, which we ended up providing for in this current half. We need to make sure there is sufficient time elapsed but (any savings) will go into some version of a rebate against future premium increases.”

Financial services companies are also positioning for a more positive environment.

“Generally speaking, we have a positive outlook on the market … the general economy, I think, has been quite positive (in the first few weeks of the calendar year) and that’s been reflected in the activity levels in the business,” IOOF chief executive Renato Mota said.

Additional reporting: Giuseppe Tauriello, Cliona O’Dowd,
Lilly Vitorovich