Scentre Group retailers post record sales in 2023 as foot traffic spikes

A sharp increase in foot traffic at Scentre Group’s (ASX: SCG) portfolio of Westfield shopping centres has delivered record sales of $28.4 billion for its retail tenants in 2023, up $1.7 billion compared to a year earlier.

The solid 6.4 per cent lift in sales, which may also reflect the inflationary effects on the goods sold, has helped the shopping centre group post a 5.2 per cent increase in funds from operations (FFO) to $1.09 billion for the 12 months to the end of December.

While the retail price increase may cloud the impact of organic sales growth, Scentre Group notes that the result was aided by a 6.7 per cent increase in foot traffic across its centres over the past year.

This was coupled with solid demand for retail space which pushed occupancy across the company’s portfolio to 99.2 per cent from 98.9 per cent a year earlier.

Scentre Group wrapped up 3,273 leasing deals during the year, including the addition of 307 new brands to Scentre portfolio which comprises 42 Westfield retail centres in Australia and New Zealand.

The latest sales figures include a small contribution from the newly completed final stage of the $355 million expansion at Westfield Knox in Melbourne, which was opened in November.

Scentre Group reveals that customer visitation to Westfield Knox was 14 per cent higher than the comparable period in 2019 following completion of the capital works program.

Scentre Group CEO Elliott Rusanow says the group’s focus on ‘creating the places and experiences that more people choose to come to more often and for longer’ has helped drive a strong operating performance including an 8.8 per cent increase in net operating income to $1.95 billion.

“Customer visitation to our 42 Westfield destinations for the year was 512 million, up 32 million or 6.7 per cent on 2022,” says Rusanow.

“This was underpinned by our activation program which included new strategic partnerships with leading brands Disney, Live Nation and Netball Australia.

“During the year we continued our focus on strategic customer initiatives including our Westfield membership program. We now have over 3.8 million members, an increase of 640,000 for the year.”

Business growth across its portfolio has underpinned Scentre Group’s capital expenditure program which includes the expansion of Westfield Sydney located beneath the Sydney Tower on Pitt Street Mall.

The expansion will add 6,000 square metres of luxury retail space over five levels which will introduce the new Chanel boutique to the property, along with upmarket brands Moncler, Omega and Canada Goose.

“During the year we commenced redevelopments at Westfield Mt Gravatt in Brisbane and Westfield Tea Tree Plaza in Adelaide to introduce new usages and business partners,” says Rusanow.

The $50 million redevelopment at Westfield Mt Gravatt, formerly known as Garden City, will introduce Uniqlo, Harris Scarfe and a range of specialty stores to the space previously occupied by David Jones which had anchored the centre since it was constructed in 1971 until its departure last month.

Westfield Tea Tree Plaza in Adelaide is undergoing a $27 million redevelopment that will introduce a JB Hi-Fi store, an expanded Timezone and additional dining facilities.

The works are part of a $4 billion pipeline of retail development opportunities identified by Scentre Group.

“Our strategy to create extraordinary places and experiences where people choose to spend their time, enabling more businesses and brands to connect with more customers, is expected to continue to deliver growth in earnings and distributions,” says Rusanow.

“Our Westfield destinations, strategic land holdings and our unique brand provide significant long-term growth opportunities for the group.”

Scentre Group is targeting funds from operations ranging from 21.75 cents to 22.25 cents per security for 2024, which is 3 to 5.4 per cent up from its latest 2023 result.

The group is paying a final distribution of 16.6 cents per security and is expecting distributions of at least 17.2 cents per security for 2024.