Westfield Group, the world’s largest owner of shopping centers by market value, doesn’t expect a double-dip recession in the U.S. after a recovery in the world’s biggest economy helped drive a return to profit.
“From an operating point of view, we’re not planning on a double dip,” Westfield co-Managing Director Peter Lowy said in a telephone interview today. “The real issue for us is not whether you’ve got 4 percent GDP growth or 3 percent or 2.5 percent, but the fact that we still have growth. Growth in sales from our retailers means we’re in a better position this year than we were last year.”
Net income climbed to A$960.9 million ($870 million) in the six months ended June 30, from a loss of A$708 million a year ago, the Sydney-based company said in a statement today. Earnings excluding property revaluations and costs were A$1.03 billion, beating a forecast of A$1.01 billion, according to the median of five analyst estimates compiled by Bloomberg.
Confidence among U.S. consumers rose in August, a sign the biggest part of the U.S. economy may soon stabilize. Australian consumer confidence also rose this month to its highest level since January after the central bank kept borrowing costs unchanged for a third month.
Westfield management are “more optimistic about retail sales in the U.S. by quoting positive trends in leasing, arrears and sales,” Rhett Kessler, a fund manager at Pengana Capital, which holds Westfield shares, said in an e-mail. “This represents a big change, particularly given their large exposure to this market.”
The shares rose 2.2 percent to close at A$12.57 in Sydney.
Australian retail sales fell 0.8 percent in the first six months from the same period last year, when a government stimulus was in place. Sales in July gained 2.4 percent, compared with July 2009, after the stimulus ended, Lowy said.
“Non-stimulus to non-stimulus, it gives us a view that when we look at sales going forward, we should be ok,” he said.
The company said it will pay a first-half dividend of 32 Australian cents a share, and is set for operating profit of 90 cents a share for 2010.
Net property investment income rose across all regions, with Australia and New Zealand seeing a 5.8 percent increase and the U.S. growing 3.2 percent. U.K. income jumped 15.6 percent, driven by Westfield London sales, which rose 23.7 percent in the six months and 16.8 percent on a comparable basis.
Portfolio occupancy across all the company’s markets was 97.1 percent at June 30, up 90 basis points from a year ago. U.S. specialty retail sales were up 7.6 percent with comparable sales rising 5.2 percent, the company said in its statement.
Westfield’s results underscore a statement in February that conditions in the U.S., U.K. and New Zealand businesses stabilized in the second half of 2009.
The company is focusing on a A$1.2 billion shopping center development in the Sydney city center and a 1.45 billion pound ($2.26 billion) project at Stratford, near the London 2012 Olympics site, it said. Westfield will also start up to A$1 billion of developments every year going forward, co-Managing Director Steven Lowy said on a conference call.
It will spend about 80 percent of this in Australia in the near future and will increase its expenditure in other markets as conditions in the U.S. and U.K. improve, Peter Lowy said.
“Westfield has substantial redevelopment/expansion opportunities across its global portfolio,” Rob Stanton, a JPMorgan Chase & Co. analyst in Sydney, who has an “overweight” rating on the stock, said in a note before the results. “But in the near term it’s the Australian assets that offer the clearest return prospects.”
Westfield is also on the lookout for opportunities to expand in Asia, Peter Lowy said, declining to specify which countries are of interest.
It will hold on to its 50 percent share in Westfield Doncaster in Melbourne, he said, responding to media speculation that it may seek to sell after its partner LaSalle Investment Management put a 45 percent stake on the market. The company has no plans to exit any of its major stakes in other shopping centers, he said in the interview.
Westfield announced today it will add Costco Wholesale Corp. stores to its malls in Los Angeles, Sarasota in Florida and Wheaton, Maryland.