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Tanger: Customer Traffic Is Back To 80% Of Pre-COVID-19 Levels

Jun. 08, 2020 2:11 PM ETTanger Inc. (SKT) StockMAC, SPG48 Comments
Marel profile picture


  • People stuck at home are showing a willingness to get out and shop, fueling optimism about recovery for spending at brick-and-mortar stores.
  • Customer traffic is back to 80% of pre-COVID-19 levels at Tanger Factory Outlet Center's properties in South Carolina.
  • Other retail REIT executives also indicated that shoppers are coming back quickly, giving a substantial boost to mall stocks.
  • It is positive that Tanger's properties are open-air (helps with social-distancing) and offer reduced prices (in tough times like these, people need a bargain).
  • Tanger has sufficient liquidity to survive for two years even under the most catastrophic rent collection scenario of not receiving any rent for ~2 years.

Tanger Factory Outlet Centers (NYSE:SKT), along with many other retail REITs, is going through a very rough time. This is reflected in the share price performance, down by almost 50% on a YTD basis (versus declines of ~8% and ~3.3% for the Dow and S&P 500, respectively).

To be fair, SKT was facing challenges prior to the coronavirus, primarily due to certain retailer bankruptcies. 2020 guidance was terrible. Among others, it included:

  • Negative Same Center NOI for the consolidated portfolio between -8.25% and -6.75%.
  • Projected average occupancy for the year expected to be between 92% and 93%. The long track record of occupancy always exceeding 95%, for more than 25 years in a row, will be broken.

Again, this guidance was issued prior to the coronavirus. This led me to sell most of my SKT position in late January, booking a small gain. The key reasons for my bullish stance in the past included:

  • constituent of the S&P High Yield Dividend Aristocrat Index (very well-covered dividend; ~60% FFO payout ratio)
  • stable occupancy; always exceeding 95% for more than 25 years
  • low debt; strong and flexible investment-grade balance sheet with manageable maturities
  • stable sales PSF despite the so-called 'retail apocalypse'
  • attractive tenant occupancy cost (~10%)
  • efficient capital allocation including a progressive dividend, share repurchases, and deleveraging, while pursuing selective growth opportunities

The financial crisis of 2007-08 didn't interrupt SKT's dividend, but the coronavirus did. During the peak of the lockdown, Tanger collected just 12% of April rent and May is not looking much better. As a result, the dividend was suspended in order to save ~$35M in cash per quarter and preserve balance sheet strength/flexibility. In addition to suspending the dividend, SKT took many decisive actions to navigate COVID-19, including:

  • reduced based salaries for most employees

This article was written by

Marel profile picture
Value-oriented investor focusing on marketable securities, real estate as well as early-stage companies.

Analyst’s Disclosure: I am/we are long SKT. 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.

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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Comments (48)

MotorD1212 profile picture
Very nice article. I rolled the dice believing in SKT an they are open air not a mall an mostly located in high traffic areas, many vacation spots an when people are on vacation it isn't a good one unless they spend all of the money that they brought with them. People are staying in the US to vacation so that adds people an money to shopping outlets near or on the way to vacation spots. I bought a big hand full on 4-2-20 at $4.61 enough to bring my base cost down to 10.01. I am just going to wait now, we will see what the back to school shopping season does for them this year. Amazon is making a ton of money with people being locked in but I feel even the biggest on line shoppers are wanting to just get out of the house and get some fresh air an shop, walk around, get lunch, but an ice cream. I also feel people feel a whole lot safer in an open air shopping plaza.
Fad idea whose time has come...and gone.
arcticfoxman profile picture
Went to the mall the other day. Fantastic to get out and realise the world didn't end. Any brave souls out there who bought this at $4.50 for a 30% yield has my respect. However at nearly 10 does it still have upside to reach pre-Christmas levels?
Marel profile picture
@arcticfoxman thanks. I wrote this article mid of last week but only got published yesterday. It has gone up a lot the past few trading sessions so I took the opportunity yesterday to book some gains.
The short interest on SKT should be at least 50%, any bit of good news should cause it to shoot up

Take profits when you can though, squeezes are not sustainable
Marel profile picture
I agree, take profits when you can. I don't intend to hold SKT for very long,
I prefer SPG which I view as a core holding
pat45 profile picture
my shops do not seem busy
Marel profile picture
@pat45 thanks. Which ones are you referring to ? Useful to gather this info here.
hotmix profile picture
I can tell you Tanger in Pigion Forge Tn is packed
tonor profile picture
Can anybody share Steve Tanger's exact language on the 80% figure? What are the two periods being compared?

Comparing traffic using a period of just a few weeks could be misleading. For example, the weather could have been different during the two periods. Or one of the periods could have included 3 weekends versus the other period with 2 weekends.

Tanger should have accurate traffic counts as the company uses car counters at its entrances, and counting cars is more accurate than counting people.
garro profile picture
New Daytona Mall very atctive with shoppers! Lon SKT!
Great pick
Data from one mall in South Carolina is nothing to get excited about. The Tanger Outlet just North of Phoenix was practically empty this past week...
Marel profile picture
Thanks for sharing your take on the Phoenix outlet @HOOVER1027
The busy shopping season in PHX is Oct thru April or, didn't you know that? I have been there several times during this period and the mall seems to do very well. I doubt that an outdoor mall anywhere will do well when temps climb above 100 degrees.
Overall, this is not much of an article. Very lightweight.
Brad Kenagy profile picture
Add on GAP getting sued by SPG for not paying their rent (GAP is Tanger's largest tenant) and the potential for Ascena to file bankruptcy this summer and Ascena is Tanger's #2 tenant.

Just remember, Tanger was at $12.60 on February 19th (Market high pre-covid), and there is no reason for Tanger to trade above that when fundamentals have not improved at all since then, they have gotten worse. If I had cash available, I would have purchased puts earlier today when the stock was over $10. Stock is overbought using technical metrics, this is nothing more than a technical/relief rally. Long-term downtrend is still in place.
@Brad Kenagy

I don't necessarily disagree, but doesn't that assume the valuation on the 19th of February at $12.60 was correct?"
ASNA is not going to file BK. Fake news by Bloomberg.
I appreciate your analysis and the explaination.
SKT price has declined for 4 years.
Maybe this is the end of the 4 year decline. Or maybe it is not.
Marel profile picture
Thanks @corvid , lets see what happens. I prefer SPG as a longer term holding
jack kreg profile picture
Tanger shorts are getting heads handed to them.
How high will SKT rally by year end? 10-15 my take.
The consumer economy is poised to strongly rebound, consumers have been saving their gov checks, next they will start spending into the strengthening economy!
Bullish on SKT! And yes, I have owned SKT for some time, holding with average cost of 12.
Looking for a many years of income production, starting in 2021.
Open air retail is more
Popular today then 3 months ago shorts r screwed
At the heightened scary time with prices keeping falling, i built a nice position with SKT because I believe consumers like treasure hunting experience with outlet stores, and covid cannot change that no matter what happens with vaccines. The figures are showing we are back to rationality and back to normalcy.

Same here with dividend income for long run.
Gary Kime profile picture
Jack Kreg, they can afford it after making 300% watching it crash!
Todd Kenyon, CFA profile picture
Enjoyed the article. Agree things are looking up for SKT
Tanger Outlet near Texas Motor Speedway not anywhere near 80% this weekend. Just another data point.
Marel profile picture
Thanks for sharing your take on the Texas outlet @WoozyTrend . Important to share of experiences here
kaplanassetmgt profile picture
If the comapny declared any cash quarterly dividend, the stock price would probably go to $20. There are a number of shorts sellers who are already in trouble. The sooner SKT returns the debt takedown, the less interest the comapny has to pay. Too bad our advise of buyjng back stock in the $6.00 area was no followed. We can understand way but still....
jack kreg profile picture
What if Tanger declares a special dividend, say $1. Do shorts have to pay a special dividend? thanks!
Ojemine profile picture
Unbelievable, I can hardly believe it... I'm glad!
Let the dividends come.
Good for the TCO acquisition; SPG should close it soon enough
Encouraging report.
Red Pill Investing profile picture
80% is still not good a 20% decline in revenue can whip put stores fcf. people forget most retailers are capital intensive businesses like the food court.
when a closed bottle of soda is shaken and then opened,
the exploding of the fizz is enormous. lets see how great things look a month
or so from now. whatever disposable income people have will be but
a memory.
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