Australian property group Stockland has recorded just a 1% lift in second-half moving annual turnover (MAT) for its apparel retailers compared to the second half of FY22.
This is despite a 22.5% lift in apparel MAT across the full year of FY23 to $479 million - the highest for any specialty category at Stockland.
Other key specialty categories also recorded growth drops in the second half despite a higher growth for the full year, including food and services, with homewares hitting negative growth in the second half.
Overall, specialty retail recorded a 4.1% growth in MAT for H2 FY23, with an 18.6% growth for the full financial year.
Department stores, which also include low-price retailers such as Kmart or Big W, and stores that are greater than 400 sqm in gross lettable area (mini majors) also recorded the same slump in the second half.
Department stores dropped to 5.3% in the second half, while mini-majors slowed to 2.9%, despite a 16.8% and 9.5% lift respectively in the full financial year.
Both sectors hit $747 million and $794 million in MAT for FY23.
“As expected, the cumulative effect of successive interest rate increases led to a slowing of sales growth in discretionary categories such as apparel, jewellery and homewares over the June 2023 quarter,” Stockland CEO of commercial property Louise Mason said.
“Sales growth for the essentials categories to which our portfolio is heavily skewed is tracking in line with inflation.”
Mason added that specialty sales productivity across its town centre portfolio is well above industry benchmarks.
“This is reflected in positive leasing spreads and an overall portfolio occupancy rate of over 99%32 .”
The valuation of its town centre portfolio declined by $113 million - or 2.0% - with market rent growth partly offsetting 26 basis points of cap rate softening, Stockland noted.
Stockland’s department store portfolio made up 1.2% of the property group’s total rental income for FY23, followed by discount department stores at 7.1%. Mini-majors is 12%, while apparel and jewellery make up the largest chunk of 20.3%.
Cotton On is the leading apparel brand by income, according to Stockland, at 1.7%, followed by Just Group at 1.5% and Retail Apparel Group at 1.4%. Ninth and tenth place goes to Accent Group and Mosaic Brands respectively, at 1.2% and 1.1%.
Cotton On comes in fourth place as the top 10 retail tenants by income, with Woolworths, Wesfarmers and Coles making up the top three respectively, at 7.4%, 4.7% and 4.2%.
Stockland’s statutory profit for FY23 was $440 million, compared to $1.38 billion in FY22.
The statutory result for this period includes a negative $250 million of net commercial property re-valuations.
Stockland noted this reflects a softening of market capitalisation rates, offset by strong income growth across its town centres and logistics portfolios.
Statutory profit in the previous corresponding period included a net revaluation uplift of $725 million.
“Our FY23 result reflects a strong operational performance and the continued implementation of our strategy in an uncertain macroeconomic environment,” MD and CEO Tarun Gupta said.
“Our strategy is designed to be commercially sustainable, combining our scale and innovation to make meaningful impact in decarbonising our footprint, embedding circularity principles in our operations, enhancing social impact by supporting housing diversity and affordability and strengthening the climate resilience of our portfolio.”