Tanger Inc. (SKT) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session reveal a generally positive outlook. Key positives include a strong occupancy rate, strategic acquisitions, a dividend increase, and optimistic guidance for Core FFO and same-center NOI growth. Additionally, the company is actively engaging with new retailers and has a plan for re-tenanting former spaces, which should drive future growth. The market cap indicates a moderate reaction to these factors, leading to a positive stock price prediction of 2% to 8% over the next two weeks.
Key Financial Performance
Core FFO per share $0.58, a 9.4% increase year-over-year, driven by robust same-center NOI growth of 5.3%.
Same-center NOI Increased by 5.3% year-over-year, driven by higher rental revenues from strong leasing activity, leading to higher base rents and tenant reimbursements.
Occupancy Increased sequentially to 96.6%, reflecting strong operational performance.
Blended leasing spreads 12% over the trailing 12 months, indicating strong leasing activity.
Tenant sales Up 6.2% to $465 per square foot on a trailing 12-month basis, driven by effective leasing, marketing, and operational strategies.
Traffic to centers Increased compared to last year, attributed to marketing initiatives and loyalty programs.
Net debt to adjusted EBITDA 5x, benefiting from strong EBITDA growth and retention of free cash flow after dividends.
Liquidity Approximately $614 million at quarter end, including $17 million in cash, $528 million available on lines of credit, and $70 million from forward equity.
Debt structure 95% of debt at fixed rates with a weighted average interest rate of 4% and a weighted average term to maturity of 3.4 years.
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Operating Highlights
Merchandising strategy: Open-air outlet and newly acquired lifestyle centers are attracting new brands and retail categories, expanding store counts with productive tenants, and appealing to a younger demographic.
Digital capabilities and marketing initiatives: Enhanced loyalty program (TangerClub) and targeted marketing campaigns like 'Summer of Savings' and 'Black Friday everyday' are driving traffic and sales.
AI technology: Leveraged to optimize customer service, enhance predictive analytics, and improve resource efficiency.
Population shifts and residential densification: Core markets are seeing increased demand for restaurants, service uses, health clubs, and entertainment venues, leveraging adjacent land for business expansion.
Recent acquisitions and Nashville development: New properties have integrated into the portfolio, engaging new retailers and expanding offerings in grocery, restaurants, and entertainment.
Occupancy and leasing spreads: Occupancy increased to 96.6%, and blended leasing spreads rose 12% over the trailing 12 months.
Tenant sales and traffic: Tenant sales increased by 6.2% to $465 per square foot, and traffic to centers grew compared to last year.
Financial performance: Core FFO grew by 9.4% to $0.58 per share, and same-center NOI increased by 5.3%.
Capital allocation and balance sheet: Focused on long-term shareholder value with low leverage, ample liquidity ($614 million), and a largely fixed-rate debt structure.
Guidance update: Raised full-year core FFO guidance to $2.24-$2.31 per share, reflecting growth of 5.2%-8.5%.
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Risk or Challenges
Macroeconomic Environment: Persistent inflation and shifting consumer sentiment could impact consumer spending and retailer performance, potentially affecting Tanger's revenue and operational stability.
Debt Maturity and Interest Rates: Upcoming debt maturities in September 2026 and reliance on interest rate swaps expose the company to refinancing risks and potential cost increases if interest rates rise.
Retailer Performance: The company's reliance on retailer partners for its loyalty programs and marketing initiatives means that underperformance or financial instability of these partners could negatively impact Tanger's operations.
Consumer Behavior: Changes in consumer shopping habits, including preferences for online shopping over physical retail, could reduce traffic and sales at Tanger's centers.
Economic Uncertainty: Uncertain macroeconomic conditions could lead to reduced consumer spending and retailer demand for leasing space, impacting Tanger's financial performance.
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Guidance & Outlook
Core FFO per share: Raised full year guidance to $2.24 to $2.31, representing growth of 5.2% to 8.5%.
Same-center NOI growth: Increased guidance to 2.5% to 4%, up from 2% to 4% previously.
Operational execution: Guidance reflects strong operational execution and does not assume additional acquisitions, dispositions, or financing activities.
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Shareholder Return Plan
Dividend Payout Ratio: The growing dividend represents about 60% of the funds available for distribution (FAD).
Dividend Growth: The company has a growing dividend, supported by strong financial performance.
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Key Q&A
Q:Can you talk about the merchandising strategy and how it ties to the improvement in sales per square foot?
A:Stephen J. Yalof explained that the company is focusing on upgrading tenancy and bringing in a different mix of retailers. This includes attracting new brands like Sephora, which has brought in younger consumers, and increasing food and beverage options as populations shift. These efforts have led to higher traffic and frequency, particularly from local customers, ultimately boosting sales.
Q:Did starting back-to-school early help in the quarter, and how are you thinking about inventory for back-to-school and the holiday season?
A:Stephen J. Yalof stated that the early back-to-school initiative resonated with consumers, especially in tax-free days in the South. The strategy helped mitigate uncertainty around tariffs and macroeconomic impacts. Retailers are well-stocked, and pricing remains compelling. The company continues to focus on promotions like the 'Every Day of November is Black Friday' sale.
Q:How far along is Tanger in the remerchandising process, and what is the long-term outlook?
A:Stephen J. Yalof noted that remerchandising is an ongoing process. The company is constantly engaging with new brands, such as Sephora, to bring them into the outlet space. The goal is to ensure brands see value in outlets and attract the 125 million customers visiting Tanger Centers annually. This process will continue for many years.
Q:Have tenants or potential tenants become hesitant to sign leases due to tariff uncertainties?
A:Stephen J. Yalof stated that there has been no significant hesitation. Tanger has done over 2.8 million square feet of leasing this year, and long-term leasing decisions remain unaffected. Retail space is becoming more valuable due to limited new retail development.
Q:Can you provide insights into the growth algorithm and AFFO growth over the next few years?
A:Stephen J. Yalof highlighted 14-15 quarters of positive rent spreads, indicating upside in rent. Michael Jason Bilerman added that internal and external growth activities, along with a strong balance sheet, will drive long-term growth. The company is leveraging its assets and peripheral land to create value.
Q:What is the leasing status and economic impact of the Huntsville asset?
A:Justin C. Stein mentioned recent leasing activity, including brands like Apple, Warby Parker, Starbucks, Madewell, LL Bean, and Crocs. These tenants will open later this year, with financial impacts annualizing in 2026.
Q:Is the occupancy number quoted as leased or commenced occupancy?
A:Doug M. McDonald clarified that the 96.6% occupancy figure represents physical occupancy, including tenants like Main Event, which are building out their spaces.
Q:What is the demand from regional and local tenants, and how are tariffs affecting them?
A:Stephen J. Yalof noted that regional and local tenants represent a small portion of NOI but are important for community engagement. He has not observed significant tariff-related impacts, as inventory for Q3 and Q4 is already in the U.S.
Q:Have you seen a shift in customer demographics at your centers?
A:Stephen J. Yalof observed new customers visiting outlet centers, partly due to population shifts post-COVID. The company is focusing on bringing diverse uses to shopping centers to attract more customers.
Q:What are your thoughts on renewals versus retenanting for 2025 expirations?
A:Doug M. McDonald stated that 65% of 2025 expirations have been renewed, and including retenanting, 80% of the expiring population is addressed. Active conversations are ongoing for the remaining 20%.
Q:How competitive is the acquisition market, and what is your strategy?
A:Stephen J. Yalof mentioned that the company is active in both marketed and off-market transactions. The focus is on assets where Tanger can add value, leveraging its geographical footprint and strong balance sheet.
Q:What is the trajectory of base rent growth for the remainder of the year?
A:Stephen J. Yalof explained that base rent growth is influenced by leasing activity and the timing of tenant openings. The signed-not-open pipeline is small, with Main Event being a significant component.
Q:Was there any nonrecurring impact on straight-line rent in the quarter?
A:Stephen J. Yalof noted that straight-line rent typically increases in Q2 and Q3 due to the cadence of occupancy and tenant build-outs. This is expected to normalize in Q4.
Q:How many centers fit into the localization bucket, and are others considered noncore?
A:Stephen J. Yalof stated that all centers are core but are marketed differently based on their customer base. Centers originally built for tourism are now benefiting from growing permanent populations.
Q:What are the drivers of same-store NOI growth in the second half of the year?
A:Stephen J. Yalof mentioned that the guidance range accounts for variables like occupancy, tenant credit, and operational expenses. The company is pleased to have raised its full-year guidance.
Q:What is the plan for the $70 million of forward equity?
A:Stephen J. Yalof stated that the forward equity will be used for internal or external investments as needed, with no immediate requirement to pull it down.
Q:What is the internal growth potential from temporary tenancy and fixed CAM?
A:Michael Jason Bilerman explained that the focus is on total rent growth rather than just fixed CAM. Temporary tenancy provides flexibility and potential upside, with historical temp tenancy levels at 5-6%.
Q:What is the demand from new retailers for outlet space?
A:Stephen J. Yalof highlighted strong interest from new brands like Sephora and Mark Jacobs. The company is actively engaging with brands that have not yet discovered the outlet space.
Q:Are there any significant move-outs or move-ins affecting occupancy in the second half?
A:Stephen J. Yalof identified Forever 21 as a significant factor. The company has already leased five of the former Forever 21 spaces and expects to lease the rest by year-end.
Q:What is the long-term runway for double-digit leasing spreads?
A:Stephen J. Yalof believes the runway is strong due to ongoing demand and limited new retail space. The company is focused on bringing in productive retailers to drive traffic and rents.
Q:What is the near-term outparcel opportunity in the portfolio?
A:Stephen J. Yalof estimated the value of outparcels to be equivalent to one of Tanger's top shopping centers. The company focuses on leasing rather than selling outparcels, with high returns expected.
Q:What are the re-tenanting economics and NOI upside from former Forever 21 spaces?
A:Stephen J. Yalof stated that temporary leasing has maintained or grown rents. Decisions on redemising or replacing spaces will be based on maximizing rent and attracting traffic.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical details on the long-term growth potential from new retailers entering the outlet space and the exact financial impact of remerchandising efforts. Additionally, they did not quantify the expected NOI contribution from outparcel developments or provide a detailed breakdown of the signed-not-open pipeline.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AG Research
AI technology
Advisors LLC
Alan Spector
Allen Hightower
Allen Mailman
Anderson Griffin
Bank AG
Bank PLC
Banking Markets
Barclays Bank
BofA Securities
Burrows Goldman
CEO Director
Caitlin Burrows
Chase Co
Citigroup Inc
Co Inc
Co Research
Craig Allen
Dijkum Ladenburg
Director Caitlin
Division Allen
Inc Research
Research Division
VP
approach
campaign
land
leasing marketing
loyalty program
service
traffic center
SKT Transcript
Tanger Inc. (SKT) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call summary indicates strong operational execution and strategic initiatives like 'Every Day is Black Friday' and F&B enhancements. Guidance is raised for Core FFO and NOI growth, indicating optimism. The Q&A reveals positive sentiment from analysts, despite some vague responses on ROI metrics. Institutional interest and strategic acquisitions support growth. No negative catalysts were highlighted, suggesting a positive stock reaction, especially given the company's market cap.
Tanger Inc. (SKT) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call summary and Q&A session reveal a generally positive outlook. Key positives include a strong occupancy rate, strategic acquisitions, a dividend increase, and optimistic guidance for Core FFO and same-center NOI growth. Additionally, the company is actively engaging with new retailers and has a plan for re-tenanting former spaces, which should drive future growth. The market cap indicates a moderate reaction to these factors, leading to a positive stock price prediction of 2% to 8% over the next two weeks.
Tanger Inc. (SKT) Q1 2025 Earnings Call Transcript
Neutral5-1
Tanger Inc. (SKT) CEO Stephen Yalof Presents at Citi's 30th Annual Global Property CEO Conference (Transcript)
Neutral3-3
SKT Slides
SKT Report
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