Vukile’s SA portfolio underperforms other REITS, say analysts

Phoenix Plaza, a Vukile property. Photo: Supplied

Phoenix Plaza, a Vukile property. Photo: Supplied

Published Feb 6, 2024


Retail sales across Vukile Property Fund’s rural, township and urban shopping centres quickened during the festive season, the company, which owns shopping malls and other properties, said yesterday, although analysts said this masked the company’s less rosy performance in South Africa compared with other real estate investment trusts (REITS).

Vukile said sales volumes at its township shopping centres led its overall performance for the period after notching up growth of 13.2%, followed by rural shopping centres that were 7% stronger and urban shopping centres that returned a 4.5% uplift.

“Vukile’s SA property portfolio’s sales only grew 2.6% for calendar year 2023. That’s very poor and considerably worse than other retail REITS,” posted The Passive Income guy (@hazelwood_dave) on social media platform X.

In the 2023 calendar year, Vukile said sales under its portfolio grew by 2.6%. It attributed this to “festive trading figures being notably higher” than in 2022. Trading densities for December had also firmed up by 7% compared with the same period a year earlier.

However, many analysts were less welcoming of the upbeat trading update by the company, highlighting that the trading volumes were a mismatch against those provided by Statistics South Africa.

“SA retail sales increased 5.3% in November, much better than Vukile. Remember, Vukile sales numbers are nominal values,” added The Passive Income Guy.

Nonetheless, according to Vukile, shopper footfall in the portfolio during the month of December was 2% stronger, demonstrating “strong and steady” support.

Moreover, “a quarter of shoppers who visited Vukile’s malls on Black Friday also returned during December,” with the township and rural malls enjoying “higher rates of repeat visitors”. This reflected positively on the “central role they play” in their communities.

Shares in the company traded 2.32% stronger in afternoon trade on the JSE at R15.44.

Under its South African portfolio, Vukile’s portfolio experienced “a seasonal uptick in the fashion trade”, with womenswear sales surging 14.5% in December, reflecting an overall 10.4% increase for the final two months of the year.

The menswear category saw a healthy 8.1% growth in sales during November and December 2023. Sales across the grocery/supermarket category rose by 2.4%, while the fast foods segment saw a 5.4% rise, indicating steady demand for essentials.

As a result of this, and based on a continuously strong trading performance, Vukile is now expecting “to outperform the upper end of its upgraded 8–10% growth in its dividend guidance for the year ending March 31, 2024.

“The forecast above assumes no material adverse change in trading conditions, contractual escalations and market-related renewals. The forecast also assumes no material further change in interest rates and exchange rates,” Vukile said.

The company’s Spanish portfolio is expected to continue on its strong performance streak during the past few months.

In the last quarter of 2023, the Spanish portfolio “demonstrated excellent performance, leading Europe with a 5.3% growth” in footfall .

“For the 2023 festive season, Spain ranked top with a 5.7% increase in visits. Castellana outperformed this benchmark, growing its portfolio footfall by 6.1%. Castellana closed the 2023 calendar year with a new record footfall of more than 44.8 million visits for the 12 months, up 6.4% from 2022,” Vukile said.

In terms of sales, 2023 numbers for the Spanish portfolio grew by 7.9% over the stronger 2022 period.

Vukile’s shopping centre portfolio in Spain had demonstrated sales growth of 9.6% in 2023, outperforming retail parks at 3.7%.

Black Friday and festive season trading was also positive, with increases in sales of 7.0% in November and 6.1% in December – representing real growth in the portfolio.

“The three categories achieving the highest increases in sales were media and technology (19.5%), health and beauty at 14.2%, and food and beverage with 12.3% growth.”