Are consumer sales recovering? 3 retail property trusts to watch

A little more than one month after the federal election, retailers are looking for improved signs that customers are getting back to the shops in time for the Christmas holiday season. Consumer confidence has shown an uptick in figures, yet how strong that feeling will motivate consumers is a concern.

Investors can keep on the story by following the news and reports on retail property owner and manager companies like shopping mall operators and retail real estate investment trusts (REITs). They watch over and aggregate the sales data of all their retail tenants since the rent they charge can fluctuate according to the data.

CFS Retail Property Trust (ASX: CFS) is currently developing shopping centres such as the Emporium in Melbourne and DFO Homebush, with a development pipeline of $1.2 billion in total. Fund manager Michael Gorman stated in its 2013 September quarter report, “Sales growth moderated slightly during the period and we witnessed a continuation of previous trends among the key retail categories. However, the DFO portfolio continues to shine in the challenging retail environment with strong comparable sales growth recorded once again.”

The long list of store brand names wanting to be in the Emporium includes a number from overseas like Uniqlo, which will be putting more pressure on David Jones (ASX: DJS) and Myer Holdings (ASX: MYR) to attract customers even if centre floor traffic increases as expected.

According to the report, supermarkets showed 4.4% growth in the quarter, followed by retail specialty stores at 1.8%. Within specialty stores, homewares and jewelry were top growers. Though a smaller category in total sales figures, DFO centre growth was 9.2%. Department stores saw a 2.2% decline.

Westfield Retail Trust (ASX: WRT), which oversees the development and management of Westfield shopping centres in Australia, reported a $572 million net profit after tax (NPAT) for the 2013 half-year period up until 30 June. Within that time, comparable sales growth was 2.3%. It currently has $332 million invested in three development projects, and expects these will return a 12% profit for the fund.

Federation Centres (ASX: FDC) is the restructured trust that holds shopping centres once under the former Centro Retail Australia. It has been building up its development pipeline, now around $1 billion, and rebuilding its presence in regional and sub-regional locations. Sales for the year up to 30 September were up 2.8%, and it forecasted between 2%-3% growth for FY2014 as well.

The S&P ASX 300 A-REIT Index (ASX: XPK) hit a peak in May 2013, and after pulling back some has firmed up over the past few months

Foolish takeaway

Following the news and reports of how shopping centre sales and growth are performing is the best way to take the pulse of retail shopping since these centres pull in the majority of shoppers and most major retailers can be found there rather than in standalone stores. In addition, it can be a guide for finding new investment ideas and up and coming businesses that are ringing the register to the tune of a higher stock price.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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