What happened
Shares of CBL & Associates Properties (CBLQ), a real estate investment trust (REIT) focused on shopping malls, declined 14.1% (including dividends) last month, according to data from S&P Global Market Intelligence. The stock is down 52.9% (including dividends) over the one-year period through Friday, March 8.
For some context, the S&P 500 index returned 3.2% in February and has returned 2.2% over the past 12 months.
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So what
CBL & Associates Properties stock entered February with downward momentum. The company has been struggling for several years because consumers are increasingly doing their retail shopping online, largely at the expense of shopping malls. This secular trend is driving down the company's rental income due to store closures and rent concessions related to tenants in bankruptcy.
That said, the bulk of the stock's poor performance last month could probably be attributed to CBL's Feb. 7 release of its fourth-quarter and full-year 2018 results. Quarterly revenue and adjusted funds from operations (AFFO) -- a key profitability metric for REITs that's the primary driver of dividend changes -- met Wall Street's (low) expectations. So it was likely that the company's weak 2019 guidance was the catalyst for the market sending shares tumbling 7.4% after results were released. Shares continued to drift lower throughout the month.
Check out the latest earnings call transcript for CBL & Associates Properties.
Data by YCharts.
In the quarter, revenue declined 7.8% year over year to $216.9 million. The company posted a net loss of $0.39 per share, compared with net income of $0.15 per share in the year-ago period. AFFO declined 19.6% to $0.45 per share.
Below are the ugly one- and five-year charts for CBL & Associates Properties stock. Investors interested in a retail REIT should consider Realty Income, whose stock is a short- and long-term winner. It focuses on free-standing properties and "targets tenants that are resistant to economic downturns and direct competition from Amazon.com and other online entities, including retailers that sell low-price-point and/or non-discretionary products, such as dollar stores and pharmacies, and service-based operations, such as movie theaters and gyms," as I previously wrote.
Data by YCharts.
Data by YCharts.
Now what
For 2019, CBL & Associates guided for AFFO in the range of $1.41 per share to $1.46 per share. In 2018, AFFO was $1.73 per share, so the company's outlook represents a decline of 15.6% to 18.5% year over year.
"As our 2019 guidance indicates, we are still facing challenges in our business primarily as a result of the more than 40 anchor closures between the Bon-Ton and Sears bankruptcies," CEO Stephen Lebovitz said in the earnings release.
CBL is in the early stages of diversifying its portfolio away from struggling apparel-focused department stores. It's also selling off assets to strengthen its balance sheet. That said, its high debt load and another projected decline in AFFO this year make it seem likely that another dividend cut could be on the way.
