Tanger Outlets Gain as Shoppers Evolve
Tanger Factory Outlet Centers Inc. is flexing with the times.
“The customer profile since COVID-[19] has completely changed,” said Stephen Yalof, president and chief executive officer, in an interview with WWD after the outlet center operator reported stronger first-quarter results.
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“A lot of people have gotten a little bit more online-savvy,” Yalof said. “That has actually worked to our advantage.”
Where people used to take more “window-shopping” trips, he said they are now on a mission, having gone online to research the products they want and the stores they plan to visit.
Yalof said traffic has grown slower than sales recently, but that sales productivity is up more than 15 percent since 2019.
“We’re producing more value on a per-unit basis than we had pre-COVID[-19],” he said.
Occupancy stood at 96.5 percent at the end of the first quarter on March 31 and average tenant sales for the past 12 months increased 0.4 percent to $447 a square foot.
That’s up from sales per square foot of less than $400 before the pandemic.
“Our customer, we like to say, is aspirational — a shopper that wants brands, they’re not looking for a commodity at the best price,” Yalof said. “They’re not looking for sneakers for a dollar, they’re looking for their favorite brand, Nikes, for the best price they can get, Ralph Lauren for the best price they can get.”
Brands each have their own aims in the outlet channel. Some are looking to clear through excess inventory while maintaining their brand image.
“The best way to control the positioning of your product and the price of your product is to do it in an environment where you control all four walls,” Yalof said.
Others are looking to bring more customers into their brand, to grab some of those aspirational customers.
It’s a multipronged approach that seems to be working for Tanger and its tenants, who lately have been willing to renew their leases with better than 13 percent price increases, a figure the CEO said provides “validation that the channel is working.”
Investors seemed to agree and sent shares of Tanger up 6.9 percent to $19.61 on Friday, giving it a market capitalization of $2.1 billion.
Tanger’s net income for the quarter increased to $23.3 million from $20.3 million a year earlier. And funds from operations — a standard yardstick in retail real estate — advanced to $52 million from $49.4 million.
The company owns or manages 36 centers totaling roughly 13.9 million square feet, leased to more than 2,700 stores. The portfolio expanded recently with the addition of Shake Shack and Dave & Buster’s.
Tanger broke ground nearly a year ago on a new center in Nashville that will open within a couple months.
Yalof said the apparel business is Tanger’s “most cyclical.”
“You can rely on home, you can rely on athletic footwear,” he said. “Certain brands [in apparel] are hot and they’re hot, hot, hot and other brands go through a little cooling-off period.”
With inflation still high and fears of recession cropping back up, those cooling-off periods could last longer as customers are needing that little extra push to spend.
“Brands that have chosen a more promotional strategy in the past four months have seen far better results than those who have not,” Yalof said.
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