Scentre Group rides the retail boom as shoppers splash an extra $800m over six months

Westfield shopping centre owner Scentre Group (ASX: SCG) has been riding a retail sales boom in the first six months of this year as retail spending across its properties surged more than $800 million to $12 billion.

In a sign that another retail major has left the pandemic behind, sales are now $500 million higher than the first half of 2019 – a full six months before COVID hit.

Scentre Group has posted an operating profit of $540.5 million for the six months to 30 June this year, up 17.5 per cent from a year earlier. The result was built on an 8.8 per cent lift in group revenue to $1.17 billion.

The statutory profit of $479.8 million includes property revaluation gains of $286.1 million.

Scentre Group CEO Peter Allen, a 26-year veteran of the company who is stepping down at the end of September, credits a focus on the customer experience for the company’s strong result which has been supported by a rise in retail occupancy, rental income and customer visits.

“Our customer-focused strategy is to create the places that more people choose to come, more often, for longer,” he says.

“We have welcomed more than 277 million customer visits in the year to date and expect to achieve approximately 500 million visits in 2022. Our 42 Westfield Living Centres provide the most efficient and productive platform for our business partners to engage and transact with customers.

“In the six-month period to 30 June 2022, our business partners achieved over $12 billion of sales, $800 million more than the first half of 2021 and $500 million more than the first half of 2019, pre-pandemic.”

Scentre Group has lifted its portfolio occupancy by 30 basis points since June last year to 98.8 per cent.

“During the first six months we completed 1,579 lease deals, with leasing spreads improving significantly to 3.9 per cent,” says Allen.

“These lease deals included 585 new merchants of which 108 brands are new to the portfolio.”

Scentre Group has also boosted average rent across its portfolio by $5 to $827 per square metre since 30 June last year.

“Gross rent collection during the half was $1.25 billion, exceeding billings and reducing debtors,” says Allen.

“The group has seen continued strong collections with a further $220 million collected in July.”

From 1 October 2022, Scentre Group’s current CFO Elliott Rusanow will step into the CEO’s role overseeing the company’s $35 billion retail centre portfolio.

Rusanow, a grand nephew of Westfield founder Frank Lowy, has been working with Allen to ensure a seamless transition of the company’s leadership.

The incoming CEO says the business has ‘proven its resilience over many years and through various economic cycles’.

“Our business is in a strong position to deliver long-term growth by being essential to people, their communities and the businesses that interact with them,” he says.

Among the development highlights of the first half, Scentre Group opened the $55 million rooftop entertainment, leisure and dining precinct at Westfield Mt Druitt which led to a significant increase in the number of customer visits and the length of their visit.

The $355 million expansion of Westfield Knox in Melbourne has achieved pre-leasing in line with budget with the first stage, due to open in December, already 96 per cent leased.

Earlier this month, the group announced a tie-up with CleanCo to source 100 per cent renewable electricity to power its Queensland portfolio from 2025, helping the company achieve net zero by 2030.

Scentre Group is targeting a 14.2 per cent increase in funds from operations for the full year, with distributions of at least 15c per security. The payout for the first half is 7.5c per security.