Market looks for lead on Westfield's global development plans

Retail landlord Westfield will unveil a net profit of close to $717.6 million for the first half of 2014 when it reports its results on Wednesday.

Retail landlord Westfield will unveil a net profit of close to $717.6 million for the first half of 2014 when it reports its results on Wednesday.

Investors expect updates on the group's $10 billion-plus global development pipeline with any news of a potential partnership in Brazil.

The world's biggest shopping centre owner pulled out of a deal in South America, but has maintained its view of the region as an important part of the world for growth.

The possible new deals come as the retail sector is under pressure.

Westfield first warned the market in February that leases for new specialty stores would experience a fall in rents of about 5 per cent, as tenants adapted to tougher market conditions.

On a leasing spread basis, the rental reversions went from -2.6 per cent last year to -4.9 per cent in the first half of this year.

The listed associate, Westfield Retail Trust (WRT), which owns half of the Australian and New Zealand shopping centres with Westfield Group, is forecast to report a half-year net profit of $296.7 million with a distribution of 9.7¢.

At the May 13 investor update, for the March quarter, the two groups released "steady as she goes" reports, although the trends show continued weakness in Australia and New Zealand, which was more of a challenge for WRT, while negative rental reversions increased over the quarter.

Brokers said there were no signs of a turn for the better in its specialty retailers' sales, with the moving annual turnover growth flatlining.

UBS analysts said the fashion market in Australia had a sales pool of $40 billion, being a combination of online and bricks and mortar.

The fashion market (apparel and department stores), including international entrants and online, is expected to generate about $2.5 billion of incremental sales over the next three years, equivalent to 2 per cent compound annual growth.

"Based on our total market forecast growth of 2 per cent, we estimate existing retail apparel chains to continue to report negative like-for-like sales with new space also taking some market share.

"We remain overweight offshore malls, Westfield and convenience retail, Federation and Charter Hall Retail REIT, and underweight domestic regional malls, Westfield Retail Trust and CFS Retail," the UBS analysts said.

"We estimate that international retailers [such as Zara, Topshop, H&M, Uniqlo] will grow Australian bricks and mortar sales from $170 million in 2013 to about $900 million in 2016."

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