Tanger Factory Outlet Centers Inc. (NYSE:SKT) announced underwhelming first-quarter 2018 results and reduced its full-year guidance late Tuesday, leaving shares of the outlet mall real estate investment trust (REIT) down nearly 9% on Wednesday in response.

To be sure, Tanger Outlets' results were punctuated by modest growth in both net operating income (NOI) and funds from operations (FFO), but also a notable decline in the company's portfolio occupancy rate.

Let's dig in, then, to see what Tanger had to say, and what investors should expect from the company in the coming quarters.

A Tanger Outlets Mall with sign in the foreground.

Image source: Tanger Factory Outlet Centers.

Tanger Factory Outlets results: The raw numbers


Q1 2018

Q1 2018

Year-Over-Year Growth


$123.5 million

$121.4 million


Net income available to Tanger common shareholders

$22.6 million

$22.0 million


Net income per diluted share




Data source: Tanger Factory Outlet Centers.

What happened with Tanger Factory Outlets this quarter?

  • Adjusted FFO -- a real-estate industry metric that essentially measures Tanger's cash flow from operations -- grew 1.8% year over year to $59.3 million, or $0.60 per diluted share.
  • Trailing 12-month blended average rental rates grew 13.5% (excluding the impact of strategic remerchandising projects).
  • Consolidated portfolio occupancy was 95.9%, down from 97.3% at the end of last quarter, and down from 96.2% this time last year.
  • Same-center tenant sales increased 1.7% for the trailing 12 months ended March 31, 2018.
  • Commenced 277 leases totaling 1.3 million square feet for the trailing 12 months ended March 31, 2018 that were renewed or released for a term of 12 months or more.
  • Recaptured 37,000 square feet related to bankruptcies and brandwide restructurings by retailers. Tanger further expects to recapture 72,000 square feet in the second quarter of 2018, of which 41,000 square feet has already closed.

What management had to say

Tanger CEO Steven Tanger stated:

Our outlet centers continue to perform well, as demonstrated by consistent traffic and strong sales, and a long and successful record of delivering steady NOI growth over Tanger's extensive history. One of the keys to our success is maintaining highly occupied outlet centers. A proven and successful strategy we have deployed to support this initiative is to selectively utilize leases of 12 months or less throughout various retail cycles in order to preserve potential revenue upside. The percentage of leases in this category today remains within our historical average. Based on our ongoing discussions with tenants and prospects, we remain confident in our growth opportunities for future years. With an unwavering emphasis on creating long-term value for shareholders, we are committed to keeping our centers vibrant and allocating our capital prudently, with the intent to continue to grow our dividend while maintaining a strong payout ratio, execute our share repurchase program, and continue to reduce variable rate debt.

Looking forward

Even so, Tanger Factory Outlets reduced its full-year 2018 guidance to call for net income per diluted share in the range of $0.95 to $1.01 (down from $1.02 to $1.08 previously), and for FFO per diluted share of $2.40 to $2.46 (down from $2.43 to $2.49 before).

In particular, the company blamed a combination of higher-than-expected store closures caused by tenant bankruptcies, adverse weather in the first quarter, and certain rent adjustments to maintain high occupancy.

So while this certainly wasn't a terrible quarter from Tanger Factory Outlets, it's hard to blame Wall Street for taking a step back given that freshly reduced outlook.

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