Businesses and individual households have been left feeling nervous after today’s release of the minutes of the Reserve Bank of Australia’s most recent meeting.
The minutes revealed that the top financial body considered raising the cash rate from its already painful 12-year-high rate of 4.35 per cent.
Last week, during a drilling session from the House of Representatives economics committee, the RBA Governor Michele Bullock ruled out rate cuts this year as “inflation is still too high.”
As the markets come to grip with interest rates, consumer sentiment and the appetite of businesses to absorb temporary setbacks with conservative consumer spending trends, it was realty and retail stocks that today showed significant movement on the ASX.
Property investor, developer and fund manager Dexus saw its shares drop the most in three years as it dipped 8.5 per cent to $6.86 at one point after posting a $1.58 billion statutory loss for the 2024 financial year after recording large devaluations against its portfolio.
The statutory result was down 110 per cent on the previous year’s bottom-line loss of $752.7 million.
The group was able to deliver on its fiscal 2024 guidance for distributions of 48c per security but will lower distribution payments by more than 20 per cent this financial year.
Dexus chief executive Ross Du Vernet noted that it was a “challenging environment” but the company had maintained high occupancy across both its office and industrial portfolios, ensuring strong cashflows with Adjusted Funds From Operations, a measure of property earnings, coming in at $516m.
Australia’s largest baby hear retailer Baby Bunting meanwhile had a strong day on the market with its shares climbing 15.1 per cent to $1.75 at one point, before settling at $1.64 around midday on Tuesday after updated fiscal 2025 guidance.
Sales fell 5 per cent to $498.4 million in the 12 months to June 30, with same store sales falling 6.3 per cent. However, Mark Teperson, the boss of Baby Bunting, says that the retailer which has 70 stores in Australia has a well-defined path to return to profitability. He reportedly plans to spend $10 million to $13 million of capex this year on store upgrades and smaller formats.
In the first seven weeks of the new year, its sales are already up 3.5 per cent, or 2 per cent on same store sales measure. Baby Bunting is on track to deliver targeted 40 per cent gross margin for the 2025 full year. Pro forma net profit is expected to be in the range of $9.5 million to $12.5 million.
Rip Curl and Kathmandu owner KMD Brands also reported a slight improvement in trading over the last quarter of 2023-24, starting the 2025 financial year stronger.
The group, which also includes US hiking boots Oboz within its portfolio, said sales for the year to July 31 fell 11.2 per cent to $NZ979.5 million (A$890 million) across its three brands, including a June-quarter decline of 5 per cent.
Kathmandu in Australia performed significantly better than New Zealand, with sales tumbling more than 16 per cent across New Zealand. Rip Curl’s direct-to-consumer sales traded better than the wholesale channel, and Oboz’s wholesale business declined 23.1 per cent from last year’s figure.
Following a restructure last year, it managed to rein in operating costs. KMD said 2023-24 earnings before interest, tax, depreciation and amortisation was between $NZ49 million (A$44.57 million) and $NZ51 million (A$46.39 million) before restructuring and one-off non-cash items, in line with its June downgrade when it flagged it would achieve approximately $NZ50 million (A$45.48 million) in earnings. That is halved from $NZ105.9 million (A$96.32 million) in 2023. At midday on Tuesday, its shares were up 5 per cent on the ASX at A$0.46.
Perth’s Lakeside Joondalup Shopping Centre
Meanwhile, mall landlord Vicinity Centres beat its earnings guidance over FY24 and lifted occupancy to its highest level since before the pandemic.
Vicinity, which co-owns Chadstone Shopping Centre with Rich Lister John Gandel, reported operating earnings of 14.6¢ per security. Net profit came in at $547.1 million, double the $271.5 million in FY23.
Vicinity Centres has also settled the $420 million purchase of a half-stake in Perth’s Lakeside Joondalup Shopping Centre, acquiring it from the Future Fund. The other half is owned by Lendlease, via its unlisted Australian Prime Property Fund. The acquisition includes retail development management rights. “The acquisition of Joondalup, together with the forthcoming redevelopment of Galleria and sale of four non-strategic assets in Western Australia, reflects our deliberate strategy to recycle and redeploy capital in order to right-size our investment and strengthen our asset portfolio in Western Australia,” said Vicinity chief executive Peter Huddle.
Lakeside Joondalup is a near-100,000 sqm mall and anchor tenants include Myer, Kmart, Big W, Target, Coles, Woolworths and Aldi, as well as Hoyts cinemas. The mall generates $800 million in annual retail sales. It remained relatively stable on the ASX today, trading at A$2.18, around 0.2 per cent higher than its close yesterday, although it has climbed more than 10 per cent over the last month.
