‘Exceptional’ spending by luxury buyers improves Vicinity Centers’ prospects

In Sydney, Vicinity will seek to add more luxury stores to its Chatswood Chase mall, currently undergoing a $210 million expansion and renovation, to meet demand for luxury branded items from shoppers in the upper North Shore.

Huddle called luxury spending “extraordinary,” adding that sales growth in the industry since the lockdown has been “extraordinary.”

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

“Brands have also increased their appeal to a much broader clientele, including a younger clientele, and expanded into the masculine side of luxury,” Huddle said.

Vanessa Rader, Ray White’s head of research, said the S&P Global Luxury Index has posted its highest returns since April 2022, despite rising interest rates that are likely to dampen spending.

Rader said it highlights growing consumer appetites for these luxury brands, both domestically and among overseas visitors.

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“The growing emphasis on these amenities within our business district is bringing a new level of quality and activity to the city after a difficult few years and now accounts for 23.4 percent of our streetfront stores in our premier retail core,” she said.

Sequoia Asset Management’s Winston Sammut said Vicinity’s half-year results beat expectations as earnings benefited from better cash earnings and the absence of lockdowns during the period.

Rental income was strong, receiving 97 per cent of bills compared to 92 per cent in the corresponding period, with specialty stores and small majors such as JB Hi-Fi posting 21.7 per cent sales growth.

However, Vicinity CEO Peter Huddle warned that “although guidance has been raised, full-year results could be impacted by a fall in consumer confidence due to continued rate hikes.”

Huddle said the factory outlet division saw strong sales growth over half, and while capital cities were seeing workers returning to their CBDs, stores like Sydney’s QVB and The Strand were still experiencing some lag in sales.

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

“Nonetheless, we are aware of the near-term impact of rising interest rates and the increased cost of living on Australian households and expect the retail sales growth rate to moderate in the second half of 2023.”

Vicinity reported an interim dividend of 5.75 cents, payable March 7.