After years of global economic uncertainty, it is evident that consumer confidence is on the rise as sales grew 1.2% for January, which tripled economists’ forecasts of just 0.4% growth. Perhaps even more pleasing is that the annual growth rate in retail turnover is now sitting at 6.2%, compared to the average of just 3% spanning over the last five years.
Although January retail figures can often be deceiving given the strong seasonal influence, confidence is being boosted thanks to greater exports from our miners than economists had expected. The figures also built on top of a strong December quarter, indicating the strong momentum has carried forward into 2014.
While retailers such as JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and Myer Holdings Ltd (ASX: MYR) will benefit from the improving consumer confidence as stronger sales push up profits, landlords such as Westfield and Federation Centres Ltd (ASX: FDC) will also benefit from greater foot traffic and improved business confidence.
Reflecting their more positive outlook, Federation Centres delivered shareholders a 13.6% increase in its interim dividend from 6.6c to 7.5c per share while Westfield also boosted its full-year dividend to 51c, an increase of 3% compared to 2012.
Although Westfield remains one of Australia’s strongest companies, it has been out of favour with investors thanks to the rapidly growing online retail sector. While this certainly does pose as a threat to the business, Westfield is taking the appropriate steps to improve long-term sustainability by selling non-core assets in favour of redeveloping its more profitable stores.
The share price is also likely being held back as investors await greater clarification on the proposed merger with Westfield Retail Trust (ASX: WRT). At just $10.37 a share, Westfield Group is a good bet for long-term focused investors, particularly with its 4.9% dividend yield.