Scentre Group (ASX: SCG) share price has rocketed as much as 28% higher today on the back of its 2020 earnings and distribution outlook update.
This morning, ASX real estate investment trust (REIT) announced that its operations have performed in line with expectations during the early part of 2020.
Despite this, Scentre Group suspended the outlook for 2020 that was previously announced and will provide an update at its AGM held on the 8 April this year.
Financial position
In Scentre's COVID-19 update released to the market on Wednesday this week, the group reiterated that as at 31 December 2019, its available liquidity was $1.8 billion, interest cover was at 3.6 times, funds from operations (FFO) to debt ratio was 10.3% and balance sheet gearing was 33%. With this, the group announced it has sufficient liquidity to cover all debt maturities in 2020.
Recently on 10 March 2020, the group announced its share buyback program would be paused. Scentre announced the $321 million remaining in the program will instead be utilised to reduce outstanding debt and provide additional capital capacity.
Shopping centres remain open
In Wednesday's release, the group acknowledged a statement made by Australia's Prime Minister, Scott Morrison, that shopping centres are essential activities.
Scentre Group CEO Peter Allen said, "Our Westfield centres, which include supermarkets, grocery stores, food markets and retail stores are an essential part of the Australian community," adding that they, "play an important role in assisting our community as it works through the response to the COVID-19 pandemic".
"We will continue to manage and operate our centres to ensure the well-being of our customers and retail partners. This includes a heightened focus on high standards of cleanliness and hygiene," Allen stated.
Commenting on Scentre's tennants, CEO Allen said, "We are also working with our retail partners as they manage their business through this volatile period".
The impact of COVID-19 on shopping centres
In a recent ABC article, IBISWorld senior industry analyst Yin Yeoh was quoted saying, "Shopping malls have seen a a decline in foot traffic due to the bushfires and an outbreak of the coronavirus".
These events have had an impact on retail sales figures, which were down 0.7% down in December and 0.3% down in January.
Yin continues, "When people are entering shopping malls it [is] for a quick dash for grocery purchases. This in turn could lead to a lesser discretionary spending in other areas in the shopping malls, including cinemas and restaurants."
COVID-19 impact on online sales
In further struggles to the traditional retail sector, online sales have soared in Italy on the back of COVID-19.
According to Statista, online sales in Italy between February and March 2020 have grown significantly compared to the same period in 2019. The research company stated that on March 8, online sales in Italy registered a 90% increase compared to the same period of the previous year.
