Shopping centre owner Vicinity Centres says shoppers are ditching department stores in favour of its Direct Factory Outlets (DFOs) as cost-of-living pressures put the brakes on discretionary spending.

Vicinity, which manages more than 50 shopping centres across Australia – including Chatswood Chase, The Strand Arcade in Sydney, Chadstone and Emporium Melbourne – said on Tuesday that retail sales had slumped in the second half of fiscal 2024.

Homewares was the most affected category: moving annual total sales were down 3.3 per cent, while jewellery sales fell 2 per cent. However, the leisure category was boosted by the popularity of athleisure wear, which pushed the sector up 5.5 per cent.

Bargain hunters also flocked to the group’s DFOs, where overall sales increased 3.5 per cent for the year to June 30, which offset some of the 5 per cent decline in sales at the struggling department stores.

For the year, the ASX-listed landlord’s funds from operations – a more accurate measure for listed property trusts – slipped 2.9 per cent to $664.6 million. Statutory net profit after tax was $547.1 million, up from $271.5 million, which included some one-off items.

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Vicinity chief executive Peter Huddle said retail tenants had to be viewed on a case-by-case basis. For example, some footwear brands were having strong sales, while others faltered.

“As expected, elevated costs of living tempered retail sales growth in the second half of the 2024 financial year, however, retailer confidence to lock in new leases remained robust, with the team negotiating more than 2000 leasing deals over the year.”

He added the deals included average annual rent increases of 4.8 per cent. Having leased out more than 230 vacant shops during the year, 99.3 per cent of Vicinity’s retail properties were now occupied, the highest level since the pandemic, he said.