Westfield rides a tide of mall cheer as shoppers return

Customers are back at malls and a big festive season is expected, according to Westfield owner Scentre.

The owner of the local Westfield empire, Scentre, is riding the recovery in traffic to big malls and is bullish about the prospect of busy trading going into Christmas.

The company unveiled a healthy September quarter and is benefiting from inflation, both as shoppers spend more and as many of its leases are tied to the main price index.

Scentre chief executive Elliott Rusanow said the operating performance was strong, with customers “continuing to return to our destinations and our business partners’ sales growing at an increasing rate”.

He was bullish about the performance despite the spectre of rising interest rates trimming spending, and noted that sales growth was accelerating and debts retailers incurred during the Covid-19 pandemic were being repaid. “This is the first festive period in … three years that people aren’t restricted or don’t have restrictions on what they can and can’t do,” he said.

Westfield centres had 391 million customer visits, up 16.7 per cent on the same time last year, and it expects to hit about 500 million visits this year.

Sales in its malls jumped to about $6.4bn in the third quarter, up $2.7bn on last year., and it is ahead of trading before the coronavirus crisis. “On a comparable basis, our business partners have achieved 14.8 per cent more sales in the 3rd quarter compared to the same period in 2019,” he said.

Scentre has struck 2464 lease deals this year, including 1547 renewals and 917 new merchants. More than 200 new brands have come into Westfields this year.

Customers are back at malls and a big festive season is expected, according to Westfield owner Scentre. Picture: John Gass/NCA NewsWire

Mr Rusanow said sales were growing at a higher rate than inflation, and also pointed to improving inventory control for many retailers as supply chains re-open and margins increase.

Scentre reconfirmed it expects funds from operations, a measure of earnings, to be above 19c per security for 2022, representing more than 14.2 per cent growth for the year. Distributions are expected to be at least 15c per security for 2022, showing at least 5.3 per cent growth.

Speciality shops were particularly strong and leaders include discount department stores, leisure and sports, and fashion.

Macquarie's analysts said the improvement in sales quarter on quarter was positive, but said it was cautious on Scentre’s ability to pass through the impact of current high inflation to retailers over the life of leases.

Morgan Stanley analysts said the Westfield business seems to be heading in the right direction in the post-Covid rebound. They said that strong rent collection in the quarter suggested that some of the $200m in accounts receivable owing to the company had been collected.

Morgan Stanley said that Scentre’s guidance looked conservative on the back of the positive metrics, while its shares were steady at $2.90 on Thursday.