Modestly improving retail trends, albeit a little below what market was expecting and I guess was expecting as it continues to be weighed down by its CBD and Victoria exposure....
1. Vicinity has valuation support, although the sales recovery appears elongated and releasing spreads are materially negative as specialty rents rebase....thats always a concern for me...
2. We are now in May, yet guidance remains absent, which doesn’t inspire confidence. Sales I thought would be better – March-quarter retail sales fell 7% on pre-COVID (3Q19) levels and 10.4% for specialty sales. These numbers improve but declines of 3.6% and 1.0%, respectively, versus 3Q20, although that quarter was affected by COVID in March.
3. March 2021 monthly total sales fell 2.3% on March 2019, and 5.5% for specialties. Much to my surprise the best performing categories in the quarter were supermarkets, which rose 1.5%, and discount department stores (DDS), which jumped 11.7%, while department stores fell 22.4% as they continue to struggle....so there is no surprises there..
4. All states except Victoria and NSW posted positive sales growth in the quarter relative to the March 2019 quarter.
5. On a moving annual total (MAT) basis, the declines in total sales of 18.3% and specialties of 26.7% were broadly flat against December 2020 numbers.
6. Visitation – March-quarter visitation was 77% of pre-COVID levels (3Q19) or 83% excluding CBDs. Trends are improving modestly, however, with visitation for the week ended 2 May at 82% of pre-COVID (or 87% ex-CBD) levels. Average spending is increasing, which partly compensates for the lower visitation numbers.
7. Occupancy levels remained flat at 98%, although leasing spreads weakened to -13.5% down on -12.6% in 1H21. So im 1/2 expecting spreads to remain double-digit negative in 2021 as specialty rents rebase.
8.Short-term leasing has been largely contained to 2020, although Vicinity noted an increase in the average proportion of leases subject to rental waivers in 3Q21 as a result of subdued sales, particularly for small businesses (SME) in Victoria and NSW.
9.Third-quarter cash collection has improved slightly to 82% of gross billings, up from 80% in the second quarter. Vicinity expects this to improve in the fourth quarter as it moves to complete outstanding COVID-19 support agreements.
10. Victoria exposure (~50% of the portfolio) and CBD exposure (15%) is weighing on its recovery. Guidance remains withdrawn as materially negative releasing spreads persist as specialty rents are rebased. As income stabilization improves, so will the markets confidence in retail valuations.....so all eyes should be watching Victoria and how it pans out... Anticipating (NAV of $1.76 and NPV of $1.93. For the NAV)....so for an upside as a trade for me taking into account we are now in the month of May...sentiment is king...and if we get an anticipated down turn in the dow...then im hoping to get in below the $1.50 as far as a value pricing ratio trade is concerned....as for long term holders....steady as the ship goes....I would think.....
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