Tanger Outlets(US:SKT)2022-03-08 03:32Financial Data and Key Metrics Changes - The fourth quarter of 2021 marked a year of continued improvement, with strong sales productivity and low occupancy costs for tenants, leading to a positive outlook for 2022 [4][5] - The blended 12-month spreads turned positive, with in-place rents representing an occupancy cost ratio of approximately 8%, significantly lower than other retail distribution channels [5] - Non-store revenues increased over 70% in 2021 compared to 2020 and almost 40% compared to 2019, contributing to earnings growth [6] Business Line Data and Key Metrics Changes - Leasing activity is accelerating, with 19% of space coming up for renewal, providing an opportunity to increase rents [5][9] - Non-store revenue initiatives are expected to grow significantly over time, currently representing about 3% of total revenues [6] - The company is diversifying its tenant mix, adding home goods and experiential brands to reduce dependence on traditional apparel retailers [31] Market Data and Key Metrics Changes - Tenant interest in new projects, such as the Nashville project, remains strong, with plans to break ground in the first half of 2022 [9] - Traffic growth in shopping centers has outpaced 2019 levels, indicating a positive trend in consumer engagement [17] - Despite challenges in the broader retail environment, the company has not seen a material reduction in product availability during Q4 [22] Company Strategy and Development Direction - The company is focused on organic growth strategies, including accelerating leasing, reshaping operations, and commercializing marketing strategies [4] - Investments in sustainability initiatives, such as solar energy and electric vehicle charging stations, are part of the company's long-term strategy [8] - The management team is committed to enhancing the customer experience through digital transformation and loyalty programs [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about consumer spending in 2022, particularly in the outlet channel, which is expected to perform well in inflationary times [14][26] - The company is aware of economic uncertainties, particularly related to global events, but remains optimistic about new deals and leasing momentum [29] - Management highlighted the importance of maintaining commercial vibrancy in shopping centers through temporary leasing strategies [12] Other Important Information - The company has a well-positioned balance sheet with low leverage and ample liquidity, allowing it to pursue growth opportunities [9][61] - The company reported a record $25 million in overage rent revenue in 2021, indicating strong sales performance [39] Q&A Session Summary Question: What are the top three reasons why investors should buy your stock today over other property REITs? - The company is undervalued, has a low occupancy cost ratio, and possesses a strong management team and balance sheet [10] Question: What do you think the market is penalizing your stock for the most today? - The impact of taking back a million square feet during the pandemic and the perception of temporary leasing as a negative [12] Question: Do you think the consumer spending environment will continue to be as strong as last year? - Yes, there is optimism based on discussions with retail partners and the value proposition of outlet shopping [14] Question: How have tenant or customer conversion rates evolved coming out of the pandemic? - Traffic growth has outpaced 2019 levels, indicating improved conversion rates [17] Question: Why do you think traffic in your outlets will remain strong despite increases in e-commerce? - People enjoy live shopping experiences, and the company is focused on enhancing the in-store experience [20] Question: What is the biggest risk to your tenant base over the next 12 to 24 months? - Economic uncertainties, particularly related to global events, but there is still optimism for new deals [29] Question: What types of tenants are driving most of the leasing demand for new ground-up outlet development? - Apparel remains important, but there is a focus on diversifying the tenant mix to include home goods and experiential retailers [53] Question: What steps are you taking to protect your balance sheet in a rising rate environment? - The company has reduced leverage and maintained liquidity through proactive financial management [61]