Will Sales-Boosting Initiatives Drive Simon Property’s Q2 2018?

Projected revenue

Simon Property Group (SPG) is undertaking omni-channel retailing and portfolio-restructuring initiatives to maintain traffic amid the retail crisis. Analysts expect the company to report revenue of $1.35 billion in the second quarter, depicting a 0.7% fall from its revenue of $1.36 billion in the same quarter of the previous year.

The company’s revenue losses due to some retailers leaving malls could more than offset the benefits it’s derived from its sales-boosting initiatives. During the first quarter, its occupancy rate contracted 100 basis points year-over-year to 94.6%.

Will Sales-Boosting Initiatives Drive Simon Property’s Q2 2018?

Retail stores are experiencing falling traffic and sales as consumers turn away from visiting malls in favor of online shopping. This shift has caused several retailers to close, leaving behind many vacant spaces in malls. When large retailers leave malls, it deprives the malls of their anchors, translating to huge losses for mall owners such as Simon Property, Federal Realty (FRT), GGP (GGP), and the Macerich Company (MAC).

Counterefforts

Simon Property Group is redeveloping its vacant spaces to lease them out to food plazas and entertainment zones to sustain its revenue. At the end of the first quarter, it had redevelopment and expansion projects—including the addition of new anchors—in progress at 28 of its properties across the United States, Canada, and Asia.

Under its omni-channel retailing initiative, the company has started “happy returns” services at several of its malls. The platform will allow shoppers to return online purchases from select retailers at the Simon Guest Services Desk for immediate credit. Simon Property has done a smart thing implementing this service, as when shoppers make returns, they tend to make additional purchases from malls—thereby driving mall footfall.

Apart from this, the company has partnered with Electrify America to install electric vehicle charging stations at over 30 of its properties.

Healthy start to 2018

SPG reported revenue of $1.39 billion in the first quarter, surpassing the revenue of $1.35 billion it reported in the same period last year. Higher base minimum rent per square foot and leased spread per square foot drove the company’s revenue growth during the first quarter. Although its occupancy rate contracted 100 basis points to 94.6%, retailer sales per square foot for its malls and outlets improved 4.2%.

Simon Property makes up ~8.1% of the iShares Cohen & Steers REIT ETF (ICF).