GPT warns on retail outlook, invests in data to draw shoppers

Landlord GPT wants more help from consumer data as spending is hurt by spiralling energy costs and sluggish wages growth.

Spending habits are changing, says GPT’s Bob Johnston. Picture: James Croucher

Diversified property group GPT has issued a warning on the challenges facing the retail sector, saying shoppers are closing their wallets in the face of spiralling energy costs and sluggish wages growth.

The landlord also flagged competition from online retailers, which have been growing market share strongly in recent years, although it avoided naming US juggernaut Amazon’s expansion into Australia.

The warning follows Scentre Group’s admission this week that the shopping centre landlord had contingency plans in place in case loss-making department store chain Myer collapsed amid flatlining sales and a sliding share price.

GPT chief executive Bob Johnston told the group’s annual general meeting that it was facing the cyclical and structural headwinds by investing in data capabilities and remixing its malls.

“The consumer has responded to low wages growth and rising energy and other costs by curtailing consumption,” Mr Johnston said.

“Spending habits are also changing with a greater demand for services and experiences.

“Online retail sales now represent approximately 7 per cent of all retail sales and has been growing strongly over the last few years.”

Mr Johnston said the group’s malls were evolving to add entertainment, eateries, wellness and beauty services. The group was also investing in technology to provide better data on consumer behaviour and sharing data with retailers to help make their stores more productive.

Mr Johnston flagged further investments in its analytics operation to respond to consumer preferences. He said the group’s malls still reported positive results last year, while in the first quarter sales were positive with specialty and mini major sales up about 6 per cent on the first quarter of 2017.

The comments come amid pressure on some property trusts’ share prices due to worries over the outlook, as well as rising bond rates, although a string of retail and other assets have been changing hands at eye-watering sums.

“Clearly the retail landscape is changing with growing competition from online channels and a slowdown in consumption,” Mr Johnston said. “These factors, combined with a view that long-term interest rates have bottomed, has resulted in a dislocation between how the equity market is currently valuing REITs and how the direct market is valuing property assets.

“We are still seeing strong investment appetite for quality assets in the office and logistics sectors and several transactions occurred in 2017 for retail assets which provides support for our asset valuations and NTA.”

The landlord affirmed its guidance of growth in funds from operations and distributions of 3 per cent per security. The annual meeting was the last for chairman Rob Ferguson after nine years on the board. He reflected on the group’s transformation from the owner of disparate assets such as flats in east Germany and a US aged-care business, into an Australia-focused trust with a stronger balance sheet.

Proxy votes supported the election of former Skilled Group chairwoman and Takeovers Panel president Vickki McFadden as the new chair of GPT. The proxy votes also backed the remuneration report despite questions about the level of executive pay.