Tanger’s Open-Air Outlet Malls Recover 90 Pct Of Q4 Customer Traffic

After contending with a “year like no other,” Tanger Factory Outlet Centers said customer levels at its three-dozen upscale open-air shopping campuses hit 90 percent of pre-pandemic traffic levels in the fourth quarter, and 99 percent for the month of January.

In announcing the traffic figures and its Q4 and full-year results, the Greensboro, N.C.-based firm said the appeal of fresh air, combined with an excellent value proposition for both retailers and shoppers, was a combination that could not be duplicated by eCommerce or other brick-and-mortar formats.

“2020 was a year like no other,” said Executive Chairman Steven Tanger, who stepped down from the CEO role Jan. 1 after 35 years with the company. He added that virtually all of the company’s 500 brand name tenants in 2,600 different stores across 20 states and Canada faced COVID mandates forcing them to close down or operate at reduced capacity.

In addition, there were also several retail bankruptcies for Tanger to contend with, as well as countless other retail cutbacks and store count and space realignments throughout the year that led to higher than normal vacancy levels.

“[It also] provided us with opportunities to further diversify and upgrade our tenant mix,” Tanger told investors and analysts on the company’s conference call.

Working Through It

Like many commercial landlords, Tanger was forced to make sweeping concessions and rent deferral plans with its many different tenants.

To that point, the company said its rent collections for the quarter improved to 95 percent of billed lease amounts as of the end of January, noting that it had already collected 57 percent of the payments it allowed retailers to defer until 2021.

“Our business continues to improve, with the consumer embracing open-air outlet centers as a preferred venue for shopping and entertainment. Traffic was approximately 90% of prior year levels during the fourth quarter and in January, improved to more than 99% for domestic centers,” new CEO Stephen Yalof said.

While noting the last 11 months have been challenging, the company said positive traffic, rent collections and liquidity trends seen in Q4 and year to date in 2021 were all indicators that Tanger’s business was stabilizing and shoppers were returning to its open-air outlet shopping centers.

The Year To Come

With rent collections and traffic up, and a better than expected break-even fourth quarter officially in the book, Tanger is now focused on managing the recovery for the rest of 2021, as it is still currently operating with about a 20 percent reduction in what would be considered historically normal hours.

While the company looks forward to returning to that day of full operation, management told analysts that the additional hours will add some general and administrative expense.

As much as things have improved and COVID vaccines are being administered, the company’s forecast is still clouded by many variables including additional store closures and lease adjustments due to recent tenant bankruptcy filings, and the expectation that there will be no further government-mandated retail shutdowns.

In addition, as part of the company’s projection that it can deliver $0.30 to $0.40 per share of diluted net income for the year, Tanger said it was expecting an 80 percent or $10 million decline in the fees it collects for early lease terminations.

“Outlets are an important component of the omnichannel retail strategy, given their low cost structure and access to an incremental consumer that is both value-oriented and aspirational,” Yalof said.