URW reports sales growth
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Our case for buying Unibail-Rodamco-Westfield last month was based on the idea that its premier locations would be relatively insulated from the pressure being felt by retailers from online sales - and its latest set of sales numbers support that case.
At its European centres sales grew 2.3% in the three months to 30 September, compared to the same period in 2017, helped by a 2.0% increase in people visiting the centres. It's not much, but it is a good result when compared to a slight fall in retail sales across the European Union over the same period.
In the US, there was a 5.5% rise in specialty sales per square foot for the 12 months to September 2018, compared to the 12 months to September 2017 (for the time being, management is sticking to metrics previously reported by Westfield). That was well above the national average of 0.5% growth.
The sales growth for tenants is important not only because profitable tenants renew leases and can pay more rent, but also because leases are structured where owners such as URW receive both base rent for each store and a percentage of sales.
Management noted that cost reductions following the Westfield acquisition would have a positive effect on full-year earnings per share and confirmed earnings guidance of €12.75-12.90 per share.
URW is performing in line with our expectations, but with the stock down 11% since our upgrade, it's now on a price-earnings ratio of just under 13 and a dividend yield of 7.3%. BUY.
Disclosure: The author has an interest in Unibail-Rodamco-Westfield via units in funds that he manages.
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