Are outlet centers immune to the ills of regional malls?
Tanger Factory Outlet Centers’ traffic equaled 90 percent of prior year levels during the fourth quarter, then further improved to more than 99 percent in January for domestic centers. Fourth-quarter results, however, also revealed that outlet malls still face some challenges similar to enclosed malls.
Tanger’s 37 open-air outlet centers were expected to benefit over the last year by being more conducive to social distancing.
Many of Tanger’s centers are also positioned near “American tourist locations,” which have seen more traffic during the pandemic as foreign travel was restricted. On an investor call, Stephen Yalof, Tanger’s newly-elected CEO, said these areas are typically second-home locations that families have been visiting more or relocating to during the pandemic.
Other factors long supporting the popularity of outlet centers — including their value proposition and positioning as destinations for all-day family excursions — have also helped the traffic revival. For tenants, the comparatively lean rent structure is a major benefit.
“Outlets are an important component of the omnichannel retail strategy, given the low cost structure and access to an incremental consumer that is both value-oriented and aspirational,” Mr. Yalof said in a statement.
Like regional malls, however, outlet malls have heavy exposure to apparel, an underperforming category during the pandemic. Over 2020, Tanger lost almost eight percent of the square footage in its portfolio due to bankruptcies and restructurings.
Tanger’s occupancy rate was 91.9 percent at 2020’s end, down from 97.0 percent a year ago.
Like regional malls, Tanger also continues to diversify its tenant mix and “augment [its] merchandising with best-in-market food, entertainment and experiential retailers,” according to Mr. Yalof. Simon Property Group has reportedly been more aggressive in adding restaurants, hotels and grocers to some outlet centers.
Some of the newer first-time tenants at Tanger include Tory Burch, Lululemon, Victoria’s Secret, Hugo Boss, Nantucket Meat & Fish Market and Dick’s Sporting Goods Warehouse.
Mr. Yalof said Tanger is empowering local field management teams and partnering with brokers in key markets to broaden its focus in finding tenants. He said, “Given the level of vacancy going into 2021, it’s going to take time to rebuild our occupancy.”
- Tanger Reports Fourth Quarter And Full Year Results – Tanger Factory Outlet Centers
- Tanger Factory Outlet Centers Inc (SKT) Q4 2020 Earnings Call Transcript – The Motley Fool
- Outlet malls including Tanger and Simon properties rebound ahead of holidays in an otherwise dismal year – Tampa Bay Business Journal
- How Risky Is Tanger Factory Outlet Centers Stock? – The Motley Fool
- Simon Property Group Reports Fourth Quarter and Full Year 2020 Results – Simon Property Group
DISCUSSION QUESTIONS: Should outlet malls, similar to regional malls, reduce their exposure to apparel and further diversify their mix to continue to prosper? Has the pandemic significantly affected their long-term growth prospects?