The cost of adding a department store to an existing shopping centre fails to stack up for some developers in the economic climate, chief executive Bernie Brookes said yesterday.
He made the comments in Melbourne yesterday after unveiling a 5.3 per cent lift in half-year net profit to $83 million.
Australia's biggest department store secured nine new leases in 2008 as part of its plan to expand from 65 to 80 stores.
Yesterday, Mr Brookes said some of the new store projects had a "degree of uncertainty" and, although they would open, he said it would be at the developers' discretion.
"We are confident we will build the chain to 80, it's the timing associated with it," Mr Brookes said.
He said landlords typically added Myer stores on to an existing centre.
"They then have to get the funding for it and sometimes the cost to the landlord is going up at the same time, while the rent expectation is going down, which makes it harder to stack up."
The three lease agreements with stressed property developer Stockland were singled out as projects where landlords were experiencing delays. Mr Brookes said delays with other landlords could also arise.
The commercial property sector has been under pressure, with players such as Westfield slashing billions of dollars from valuations.
Research director at property valuer LandMark White, Vanessa Rader, said Australian commercial projects had "ground to a halt" because developers were unable to secure finance and lenders were assessing loans stringently.
"Retail trade is pretty bad at the moment, so what's the incentive to go and add an extension to your shopping centre at a time when the market's really slow," Ms Rader said.
Myer said its first-half trade suffered as a result of the deteriorating retail economy.
Sales were down 3.7 per cent to $1.76 billion, which the company said was ahead of expectations but were likely to fall to 5 per cent in the second half.
Mr Brookes attributed the sales result to the 50-month turnaround program the Myer Group started three years ago when private equity consortium TPG acquired the stores.
The group's interim net profit rose 5.3 per cent to $83 million and net debt was down from $979 million at the time of the acquistion nearly three years ago to $652 million, with no repayments due until 2012.
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