Tanger Factory Outlet Centers ((SKT)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Tanger Factory Outlet Centers painted a picture of cautious optimism. The company demonstrated robust financial performance, highlighted by increased core funds from operations (FFO) and improved same-center net operating income (NOI). However, the call also acknowledged challenges such as higher expenses, a non-cash impairment charge, and occupancy declines. The overall sentiment was one of strategic growth, balanced by a recognition of existing uncertainties.
Core FFO Growth
Tanger reported an increase in core FFO to $0.53 per share, up from $0.52 per share in the first quarter of the previous year. This growth underscores the company’s ability to enhance its financial performance despite a challenging economic environment.
Same-Center NOI Increase
The company saw a 2.3% rise in same-center NOI for the quarter. This increase was primarily driven by higher rental revenues and strong retailer demand, signaling a healthy operational performance.
Strong Leasing Activity
Tanger executed 2.5 million square feet of leases over the trailing 12-month period, encompassing nearly 550 transactions. This marks 13 consecutive quarters of positive rent spreads, highlighting the company’s successful leasing strategy.
Occupancy and Portfolio Strategy
The quarter ended with an occupancy rate of 95.8%, reflecting Tanger’s strategic re-merchandising and expansion into new categories. This approach aims to optimize the portfolio and enhance long-term growth prospects.
Acquisition and Portfolio Improvement
Tanger acquired Pinecrest in Cleveland for $167 million, utilizing cash on hand and a line of credit. This acquisition is part of the company’s strategy to improve its portfolio and drive future growth.
Dividend Increase
The Board of Directors approved a 6.4% increase in the dividend, raising it from $1.10 to $1.17 per share on an annualized basis. This decision reflects confidence in the company’s financial health and commitment to returning value to shareholders.
Higher Snow Expenses
The first quarter’s same-center NOI growth was impacted by higher snow expenses, which presented an operational challenge during the period.
Non-Cash Impairment Charge
A non-cash impairment charge of $4.2 million was recognized in relation to the sale of a non-core center in Howell, Michigan. This charge reflects the company’s ongoing efforts to streamline its portfolio.
Seasonal Occupancy Decline
Occupancy rates experienced an anticipated seasonal decline, attributed to the timing between old tenants vacating and new tenants taking possession.
Challenges in Re-Merchandising
The re-merchandising strategy led to temporarily lower occupancy rates. However, this approach is expected to position the company for future growth as new categories are introduced.
Impact of Tariff Uncertainty
Concerns were raised regarding the potential impacts of tariff uncertainty on foot traffic and consumer confidence, which could affect future performance.
Forward-Looking Guidance
Tanger reaffirmed its full-year guidance, projecting same-center NOI growth between 2% and 4% and core FFO of $2.22 to $2.30 per share, reflecting a growth of 4% to 8%. Despite challenges like higher snow expenses, the company remains confident in its strategic initiatives, including strong leasing activity and the acquisition of Pinecrest.
In conclusion, Tanger Factory Outlet Centers’ earnings call highlighted a cautiously optimistic outlook, with strong financial performance and strategic growth initiatives. Despite facing some challenges, the company is well-positioned to leverage its assets for future growth, maintaining a robust balance sheet and reaffirming its commitment to shareholder value.