Hey, EU never know what goodies you can find in Poland
JSE-listed Echo Polska Properties feeds the Polish love for shopping in the EU's fastest growing economy
JSE-listed Echo Polska Properties (EPP) enjoys a heady mix of good fortune. It is the largest retail landlord in Poland, the central European economy that has Europe's highest economic growth rate.
The Poles have a love affair with shopping, an obsession in response to the restrictive days of communism, when they were told what they could buy, how much and when.
In those bleak times, Poles could buy only from state-owned supermarkets with a meagre offering of poor-quality products, and even these were in short supply. Little wonder, then, that Polish consumers have been lapping up the large variety of goods that would not be out of place in most Western supermarkets.
EPP board director Marek Belka, an economist and former Polish prime minister, in reviewing the final results to December 2018, comments that “Poland is an outlier in Europe. It has the highest growth in the EU, can deal with external shocks, and has not suffered a recession since being admitted in May 2004.”
The internal structure of the Polish economy is well-balanced. Not overly indebted, public plus private sector debt is at 110%, a figure that compares favourably with China on 250% and the rest of Europe on 350%. Inflation is at 1.2%, unemployment at 3.6%, there is a big trade surplus in services, and the zloty has been very stable for two decades.
EPP CEO Hadley Dean points out there are few high streets in Poland and most shopping occurs in malls. While retail centres in the US and other parts of the world are shrinking due to online buying, this is not the case in Poland.
Click and collect is the preferred method of online shopping. Most Poles live in blocks of flats, which makes online delivery difficult compared with delivery to standalone residences. Also, they like to socialise in the malls; about a quarter of retail complexes are occupied by food and beverage outlets. The 2018 Sunday shopping ban merely shifted shopping patterns to the preceding Friday or Saturday, and malls remain open on Sundays with recreational activities being highly popular.
Measured by gross lettable area (GLA), EPP is the largest retail landlord in Poland, with 19 retail assets and two development projects. GLA rose 54% between 2017 and 2018 to 684,000m². The group forecasts it will have 28 retail assets and a million square metres of GLA by 2020.
EPP appears to be well managed and is the leading Polish retail landlord. However, Belka concedes that while the Polish economy has been growing at about 5% for the past two years, this is not sustainable, and sustainable growth is probably closer to 4%, with a slowdown to between 3.5% and 4% for 2019.
Despite Belka’s positive outlook for Poland, it should be remembered that its economy is inextricably linked to the fortunes of the EU, and that economy is cooling, with the ECB’s 2019 EU growth forecast slashed from 1.7% to 1.1%. Also, the European Investment Bank gives significant financial support to Poland for infrastructure projects, and if private and public funding dries up Polish unemployment could rise from very low levels, thereby challenging the good fortunes of EPP.
• Chris Gilmour is an investment analyst.