‘Extraordinary’ spending from luxury shoppers boosts Vicinity Centres outlook

In Sydney, Vicinity will look to add more luxury shops to its Chatswood Chase mall currently undergoing a $210 million expansion and refurbishment to cater for the demand for luxury brand items from upper North Shore shoppers.

Huddle called the spending on luxury “extraordinary”, adding that the sales growth in the sector since the lockdown period has been “exceptional”.

Many well-known brands such as Hermes, LVMH, Cartier and Chanel have invested in opening larger stores with more offerings from handbags to apparel and accessories.

“The brands have also increased the appeal of their offer to a much broader clientele, including a young clientele, and expanded into the male side of luxury,” Huddle said.

Ray White head of research Vanessa Rader said despite growing interest rates being expected to dampen spending, the S&P Global Luxury Index has recorded its greatest returns since April 2022.

Rader said it highlights the growing appetite for these luxury brands by consumers, both domestically and from overseas visitors.

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“The growing emphasis on these establishments within our CBD brings a new level of quality and activity back to the city after a difficult few years and now represents 23.4 per cent of our street-fronted shops within our prime retail core,” she said.

Sequoia Asset Management’s Winston Sammut said Vicinity’s half-year result came in ahead of expectations as earnings benefited from better cash collections and the absence of lockdowns over the period.

Rent collections were strong, receiving 97 per cent of billings compared to 92 per cent in the corresponding period with speciality stores and mini majors, such as JB Hi-Fi, delivering sales growth of 21.7 per cent.

But Vicinity CEO Peter Huddle warned that “whilst guidance has been upgraded, the full-year result may be impacted by a fall in consumer confidence on the back of ongoing interest rate rises.”

Huddle said the factory outlet division had strong sales growth over the half and while capital cities had seen workers return to their CBDs, stores such as the QVB and The Strand in Sydney still had some lag in turnover.

“From a consumer demand perspective, the Australian retail sector continues to be a benefactor of an extremely tight employment market and robust household income growth and savings rates,” Huddle said.

“That said, we are mindful of the impact of rising interest rates and increased costs of living on Australian households in the near term, and we expect the rate of retail sales growth to moderate in the second half of the 2023 year.”

Vicinity reported an interim dividend of 5.75¢ payable on March 7.