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Tanger Factory Outlet Cuts Guidance, But That's Not What You Should Be Worried About


  • SKT shares fell as management cut full-year guidance.
  • Pressuring guidance were an uptick in retail bankruptcies and continued use of short-term leases to maintain their high occupancies.
  • With their short-term leases having spreads of -25.9%, I am concerned that the situation is much more dire than many are implying.
  • I am maintaining my "avoid" rating.


Tanger (NYSE:SKT) fell on Wednesday after reporting disappointing earnings in which they cut guidance. While the cut to FFO guidance was rather minimal, I caution readers that Wall Street appears to be worried that this is the beginning of a new negative trend. Further, I am concerned with the aggressive negative leasing spreads seen in their short term leases. I am reiterating my “avoid” rating as the risk is not yet priced in.

Business Overview

SKT is a storied mall outlet REIT which owns 44 properties in the U.S. and Canada:

(2018 Q1 Presentation)

They have had a long history of same center net operating income (‘SS NOI’) growth (though the beginning of this year is so far negative):

(2018 Q1 Presentation)

They have BBB+ credit ratings from both S&P and Moody’s (Baa1) but I should note that the outlook at S&P was changed to negative on February 15, 2018.

Perhaps the most important fact is that they are a member of the esteemed “Dividends Aristocrats” index, as they have increased their dividend for the past 25 consecutive years:

(2018 Q1 Presentation)

With shares trading with dividend yields above 6%, is this the time to buy the dip? Is this a safe stock to pound the table on? I have my reservations, and lay them out below.

Guidance cut

SKT cut 2018 FFO/share guidance to $2.40-$2.46 from $2.43 to $2.49. This is only about a 1% decrease at the midpoint, but there is more. They also cut SS NOI growth guidance to (2.5%) to (1.5%), down from (1.0%) to 0%. These are in stark contrast with the other mall REIT I follow, Simon Property Group (SPG), which raised FFO guidance and came in strong with 2.3% SS NOI growth. Before we jump the gun and say

This article was written by

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Analyst’s Disclosure: I am/we are long SPG, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am currently working with Rida Morwa of High Dividend Opportunities who has covered SKT in the past. This article however is my opinion only and does not reflect the opinion of Rida Morwa or High Dividend Opportunities.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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