By Ross Kelly
SYDNEY--A mild U.S. winter and an improving economy encouraged
shoppers to spend more in Westfield Corp.'s malls at the start of
the year, helping the company boost rental income in cities like
New York and Chicago.
Westfield said retail sales at its mostly U.S. shopping malls
rose significantly in the first quarter as the benign winter led
American shoppers to venture out more often and fret less about the
looming prospect of higher interest rates.
Sales in specialty stores at Westfield's 40 existing malls--38
of which are in the U.S. and two of which are in London--surged by
almost 10% from a year earlier, the company said. Unlike a
department store, a specialty outlet is one that focuses on a
particular niche, such as clothes or electronics.
The better retail conditions helped Westfield increase rental
income in the year through March by 5.2% to A$88.42 (US$71.86) a
square foot. The quarter's higher sales also bodes well for what
the company can charge existing and new stores in future. Westfield
said its malls in the U.S. and U.K. were together 94.3% leased as
of March 31.
"This is probably the strongest quarter we've seen," said Steven
Lowy, joint chief executive, following Westfield's annual
shareholder meeting on Thursday. "It needs to be tempered a little
bit because last year the weather on the east coast was really
poor," he added, referring to a cold snap the previous winter that
kept many shoppers away.
According to Mr. Lowy, factors other than the weather fueled
U.S. retail sales in the first quarter, including the country's
ultralow interest rates, falling gasoline prices, and an improving
economy marked by lower unemployment and rising wages. The
Westfield result comes a month after the largest U.S. mall operator
by market value, Simon Property Inc., said it boosted first-quarter
earnings by 6.2% on higher occupancy and rental rates.
Still, the longer-term outlook for the U.S. economy remains
uncertain, with consumers apparently cautious about spending more
before knowing when the Federal Reserve might start raising rates
from post-financial-crisis levels. Retail sales across the country
were little changed in April, and have been down or flat in four of
the five past months.
Like Simon Property, Westfield has been benefiting from focusing
attention on larger malls in denser population centers. Last year,
the Sydney-listed company spun off its stable of older properties
in Australia and New Zealand to seize riskier, though potentially
more lucrative, opportunities in the U.S. and Europe.
It has also been shedding smaller U.S. shopping-mall assets, and
plans to sell another six properties by the end of the year, when
Westfield is set to begin opening a mall at the site of the World
Trade Center. According to Mr. Lowy, the site has already been
almost fully leased. Meanwhile, construction on a new "flagship"
mall in Milan, Italy, is expected to begin within the next three
years.
The company is considering further geographic expansion, said
Chairman Frank Lowy. "We're looking everywhere," he said in
response to a shareholder who asked whether Paris and Berlin were
in Westfield's sights. "We're seriously considering all options for
these big population centers."
Write to Ross Kelly at ross.kelly@wsj.com
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