WFD Westfieldc Stapled

   By Rebecca Thurlow 
 

SYDNEY--Westfield Corp. (WFD.AU) reported a net profit of US$2.32 billion in its first full year following the break up of billionaire Frank Lowy's global shopping mall empire, as the company bets on glitzy new shopping mall developments to boost earnings.

Sydney-based Westfield spun off its Australian and New Zealand malls into a separate company called Scentre Group (SCG.AU) in 2014. The company was left with 40 shopping malls, mainly in the U.S. Last year it sold six American shopping centers for US$1.3 billion to concentrate on new developments in prime locations such as the new World Trade Center mall in New York that promise higher returns for investors.

"We are well on our way in executing our strategy to create and operate flagship assets in leading markets that deliver great experiences for retailers and consumers," said Westfield's co-chief executive officers Peter Lowy and Steven Lowy in a statement.

Westfield has been ramping up its international expansion since the demerger. In August 2014, it raised its stake in a €1.4 billion (US$1.5 billion) shopping-mall project in Milan, Italy, to 75% from 50% in a push to expand outside the U.S. and Britain. The project is expected to start construction between 2017 and 2018.

Westfield has a US$10.5 billion pipeline of current and future developments, with projects under construction including a US$800 million redevelopment of its Century City mall in Los Angeles, an expansion of its Westfield UTC mall in San Diego and a 600 million British pound (US$841 million) extension of Westfield London. New York's World Trade Center mall is now fully leased and is scheduled to open in August.

Late last year, it completed construction of a new open-air shopping village at Topanga, Los Angeles and a new shopping center in Bradford in the U.K. An expansion at its Valley Fair mall in Silicon Valley is expected to start this year and construction of a new shopping center at Croydon in South London is scheduled to kick off by the end of 2018.

The restructured company, which has a market value of 20 billion Australian dollars (US$14 billion) expects funds from operations, a measure of underlying earnings that strips out depreciation, amortization and gains on asset sales, to fall to between 34.2 US cents and 34.5 US cents a share this year from 37.7 US cents in 2015, because of lost revenue from the recently divested malls and lost income as Century City mall is revamped. However, Westfield said the guidance represents 3-4% growth in pro forma terms.

Distributions to shareholders are forecast to be flat at 25.1 US cents per security this year.

The latest result included US$632 million of asset revaluation and was helped by shoppers spending more at its U.S. and U.K. malls. Specialty store sales--which, unlike department stores focus on a single product range like clothing or electronics--rose by 6.4% to US$726 million.

Morningstar analyst Tony Sherlock said in a research note ahead of the result that Westfield's tenants are facing pressure from online competitors. That's prompting the mall operator to reposition its portfolio to focus on high-end retail stores less likely to be affected by online retailing, he said.

-Write to Rebecca Thurlow at rebecca.thurlow@wsj.com

(END) Dow Jones Newswires

February 23, 2016 19:51 ET (00:51 GMT)

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