Hammerson to prioritise premium outlets, cut department store space
Hammerson announced it is trimming its exposure to department stores and high street fashion retailers in a strategy update aimed at appeasing investors. The new focus will also see the retail property firm exit the retail parks sector to concentrate on its more lucrative flagship retail destinations and premium outlets.
The strategy overhaul comes as the owner of shopping centres including Birmingham Bullring revealed a disappointing set of half year results on Tuesday, with pre-tax profits plunging 80% to £55.8m. Net rental income fell by 3% to £178.5m during the six month period.
The company has been hit by the ‘turbulent retail market’ and the recent raft of CVAs, which have led to the closure of several stores across its portfolio.
As a result, the company will continue to sell its retail parks with the goal of reaching £1.1 billion in disposals by the end of 2019. Just this week, Hammerson sold two retail parks in Bristol and Kirkcaldy, pocketing £300 million.
Meanwhile, there will be a greater emphasis on flagship retail destinations and premium outlets, as “these are the venues we believe will maintain relevance and outperform against the shifting retail backdrop,” said David Atkins, chief executive of Hammerson, in a statement.
And to boost profits, it will step back from department stores and fashion brands, two segments that are currently struggling to revive sales amid fierce competition. Hammerson said it will shrink department store space by a quarter and high street fashion by a fifth, and will use the extra space for “differentiated brands”, aspirational fashion, leisure, events and lifestyle areas.
“Our customer and retailer offer will be amplified, and this includes a step change in our retailer line up. We will reduce the amount of floor space let to department stores and high street fashion as we actively focus on the latest consumer trends and take bolder steps to provide the best retail mix,” Atkins said.
The company is under pressure to boost its value after a £3.4 billion deal to buy London-listed Intu failed in April. Shareholder unrest increased when the company rejected a £4.9 billion takeover bid by French retail property group Klepierre in the same month.
This week’s shake-up was followed by news that Hammerson’s board of directors will reduce the number of executive directors from four to two, as Peter Cole, chief investment officer, will retire in April 2019 and Jean-Philippe Mouton will step down from the board at the end of 2018.
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