The rental war between landlords and retailers has gathered pace as Premier Investments Limited (ASX: PMV) became the latest retailer to reopen stores. But the retailer, which is Australia's biggest retail tenant, says it will pay rent based on a proportion of gross sales.
ASX retail shares seek rent relief
Premier Investments is among a plethora of Australian retail shares that have sought rent relief during the coronavirus pandemic. Accent Group Ltd (ASX: AX1) is also seeking for rent to be calculated by reference to a percentage of sales.
Premier Investments has said it's prepared to walk away from stores if landlords don't play ball. Around 70% of Premier's leases are due to expire in 2020 or are already in holdover. The company has refused to pay rent since it shut its stores in March, although it announced the reopening of stores from Friday.
Premier Investments experienced a 74% fall in sales in the 6 weeks to 6 May. Retail store sales were down 99%, however, online sales have increased by 99%. Accent Group has also seen a surge in online sales which quadrupled in the period during which stores were closed.
Accent Group has concluded successful rental negotiations with landlords of more than 100 stores, but says if it is unable to achieve an outcome it considers fair it will close stores. This has already occurred with one major landlord, with Accent Group giving notice to exit 28 stores at lease expiry over the next 6 months.
ASX REITs also suffering
Landlords are not escaping unscathed. This week, Scentre Group (ASX: SCG) said it would not be paying its interim dividend due to uncertainty around the pandemic and the timing of operating cash flows. Customer visitation to the Scentre shopping centres fell to a low of 39% of the previous year's levels in April and May.
At Scentre's properties, 57% of retailers representing 70% of gross lettable area are open, with more retailers to reopen over coming weeks. The shopping centre operator is targeting at least a 25% decrease in centre operating expenses during the pandemic period.
Vicinity Centres (ASX: VCX) reported that as of 4 May, 50% of stores in its shopping centres were open, representing 65% of gross lettable area. Vicinity withdrew earnings and distribution guidance in March given the uncertainty around the impact of COVID-19 on operations.
Vicinity is negotiating with retailers whose businesses have experienced a downturn and accelerating temporary arrangements to assist them through the situation. CEO Grant Kelley said, "inevitably, our income at this time is being impacted negatively, however we agree with the Federal Government's sentiment that landlords and tenants have a shared responsibility to tackle the challenges brought about by these unprecedented times."
