Westfield flat but dividend looks secure

Westfield's first-quarter sales, while flat in Australia, are expected to be boosted by an improved performance from its overseas businesses.

Westfield's first-quarter sales, while flat in Australia, are expected to be boosted by an improved performance from its overseas businesses.

The world's biggest retail owner by value reported sales growth in Australia of 0.3 per cent for the quarter and confirmed that rents for new leases in specialty stores had declined by about 5 per cent.

The group said the new leases covered only about 2.2 per cent of its portfolio. Nevertheless the declines, according to analysts, reflect that times are tough in the retail sector.

Westfield reaffirmed its full-year forecast of a dividend of 51ยข.

In its results for Australia, specialty categories and department stores reported declines ranging from 0.3 per cent to 4.8 per cent over the year ending March 31, and for the three months to the end of March.

The only major area of positive growth was in food, such as takeaways and supermarkets.

Analysts at Bank of America Merrill Lynch have rated Westfield "neutral", with the stock now trading in line with the company's $12.12-per-share valuation.

"To become more positive, we would need to see Westfield accelerate its developments via acquisition of other near-term opportunities, as we suspect the market is now fully aware of the current $12 billion pipeline and US recovery," they said.

"Continuation of the share buyback would also be a positive."

JPMorgan analyst Rob Stanton said both Westfield Group and Westfield Retail Trust reported "steady-as-she-goes updates for both groups, with trends at the portfolio level generally continuing from the December quarter".

Mr Stanton said US retail sales continued to grow strongly and vacancy levels were now 150 basis points better than they were for the previous corresponding period.

"The trends show continued weakness in Australia and New Zealand, which is obviously more of a challenge for Westfield Retail Trust - negative rental reversions increased over the quarter," he said.

UBS analysts said the re-leasing spreads were negative 5 per cent, compared with negative 0.5 per cent for the same time in 2012. "Sales remain subdued, while comparative specialty sales grew 0.3 per cent during the quarter - although this was impacted by the previous corresponding period being a leap year and the timing of Easter," the UBS team said.

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