Bear of the Day: Tanger Factory Outlet (SKT)

Tanger Factory Outlet Centers, Inc. (SKT) has been at ground zero during the coronavirus pandemic as malls have closed throughout the country. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall over 30% in 2020.

Tanger Factory Outlet Centers is a REIT that owns and operates 39 upscale outlet shopping centers in 20 states and Canada.

It has leased out over 2,700 stores.

Business Update for August

On Sep 14, Tanger provided a liquidity and operational update for August.

Its operations saw positive cash flow in August, following positive cash flow in July. It repaid its unsecured lines of credit in full during August using internally generated cash flow.

Its total liquidity at the end of August was about $606.6 million with $6.6 million in cash and $600 million of unused capacity under its lines of credit.

The improvement in the business continued as rent collections rose to 85% of billed rents, excluding variable rents and lease termination fees. July came in at 81% of rents billed.

As of Sep 13, 98% of total occupied stores in the portfolio were open.

Traffic over the last 6 weeks has averaged 89% of prior year levels. That is up from its second quarter earnings report on Aug 5, which said that traffic was at 85% of its prior year levels over the prior 6 weeks in June and July.

A Big Miss in Q2

On Aug 5, Tanger reported its second quarter results and missed by $0.28. It reported earnings of $0.10 versus the Zacks Consensus of $0.38.

The company has instituted new offerings to attract customers including Tanger Virtual ShopperTM and curbside pick-up programs. Those programs have been popular and will be continued even post-COVID.

Most of Tanger's malls are open-air, which also gives them an advantage.

However, some challenges it faces are the financial problems of its tenants, including bankruptcy, and recapturing space from underperforming tenants.

Brick and mortar isn't going to go away and retailers still see opportunities at outlet malls.

2020 Estimates Cut

Tanger previously withdrew its full year guidance and is not issuing a new one at this time.

Zacks has one analyst in the Zacks Consensus and that was cut in the last 60 days. The 2020 Zacks Consensus has fallen to $1.57 from $1.64 during that time.

That's an earnings decline of 30.8% as Tanger made $2.27 last year.

Revenue is also expected to decline 13.7% for the year as well.

Shares Still Near the Lows

It's been a tough year for Tanger. Shares are still down 55.9% as investors have steered clear of malls and retail.

But it's cheap, with a forward P/E of 4.1.

Two larger retail mall competitors Macerich (MAC) and Simon Property Group (SPG) also have challenging Zacks Ranks as they are both Rank #4 (Sells).

Investors considering the mall operators might want to continue to be on the sidelines.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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