June 14, 2018 / 5:26 PM / in 6 days

Polish shopping center operator EPP looks to small cities to drive growth

(Reuters) - EPP (EPPJ.J) is looking to expand in smaller Polish cities, as rising wages and a state child benefit program drive consumer spending in less affluent provincial areas, the shopping center operator’s chief executive said on Thursday.

FILE PHOTO: Shoppers use escalators as they visit a shopping mall in Warsaw, Poland November 6, 2017. Picture taken November 6, 2017. REUTERS/Kacper Pempel/File Photo

Polish consumers are spending more as a tightening labor market has pushed up wages, while the conservative government’s 500+ child benefit program has added to the spending power of families with two or more children.

“The biggest increase in disposable income in Poland is not in the big cities, it’s in the smaller cities,” Hadley Dean told Reuters in a telephone interview.

“That is a combination of the middle class spreading across Poland... but also 500+ and the increase in the minimum wage has had a huge impact in these cities.”

Poland’s conservative government introduced the 500+ child benefit program in 2016, giving families 500 zlotys ($136.15)a month for their second and each subsequent child. It also raised the country’s minimum wage to 2,100 zlotys gross monthly in 2018 from 2,000 zlotys in 2017.

Saying that the impact on spending power is more noticeable for lower-paid families in small provincial cities, Dean took the central city of Kalisz as an example.

“We’re seeing an increase in sales in Wroclaw of let’s say 2 percent and we’re seeing an increase in sales of 12.5 percent in Kalisz,” he said.

In 2017 Kalisz had a population of just over 100,000, making it more than six times smaller than Wroclaw, according to data from Poland’s Central Statistical Office.

ONLINE IMPACT

While shopping centers around the world have been grappling with competition from online retailers, Dean is confident about the sector’s future in Poland.

“In Poland 50 percent of online sales are click and collect, so actually online sales are amplifying in-store sales in Poland,” he said.

EPP is also looking to boost sales in its food halls by providing delivery services in partnership with restaurant operator AmRest Holding (EATP.WA).

The offer, which uses AmRest Holding’s PizzaPortal online platform for orders, is being trialed in Wroclaw and the company aims to roll it out to other shopping centers, Dean said.

“What we’re doing is helping the food operators in our shopping center make more money, but of course we make more money too,” Dean said, adding that EPP thinks the offer could increase food court sales by 15 percent.

Shares in the company, which is incorporated in the Netherlands and listed in Johannesburg, have risen 5.8 percent year to date, which compares with a 9.1 percent fall in the Johannesburg Stock Exchange Mid Cap Index .JMIDC.

Reporting by Alan Charlish in Gdynia; Editing by Alexandra Hudson

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