Premier Investments has provided a trading update stating FY24e sales will be $1.60 billion and Retail EBIT (pre AASB-16) at $326 million. The result suggests 2H24 sales fell by 2% with EBIT down 15%. Weak sales trends are likely across the board, with Peter Alexander sales per store and Smiggle soft too. The weaker 2H24 EBIT margin decline is a function of operating cost growth exceeding sales growth in our view.

Over the past decade, retail rental growth has been less than sales growth for many ASX-listed retailers. Can this trend continue? In Issue 8 of Price Watch, we analyse floor space supply and demand. We expect retail supply per capita to fall by 0.7% p.a and retail demand to rise by 0.5% p.a. This is a meaningful disconnect placing upward pressure on rents. We expect half the gap to be solved through productivity initiatives by retailers and landlords to work floor space harder and reduce anchor tenant space. The retailers with the highest exposure to the top 30 shopping centres are Accent Group, Premier Retail, City Chic and JB Hi-Fi.