Shares of Tanger Factory Outlet Centers (NYSE:SKT), a real estate investment trust (REIT), fell 10% within the first hour of trading on Wednesday. The update on first-quarter earnings came after the close on Monday, with the company discussing the results on Tuesday. The news wasn't very good, and the stock basically continued to lose ground a day after the release.
Tanger's first-quarter numbers weren't actually all that bad, with funds from operations (FFO), which are like earnings for an industrial company, coming in at $0.50 per share, down just $0.07 over the same quarter in 2019. But the government effort to slow the spread of COVID-19 was the bigger story, since it resulted in the shutdown of Tanger's outlet centers. Realizing that the hit to the retailers in its portfolio of properties would be severe, Tanger allowed its tenants to defer April and May rents. It announced that it collected just 12% of April rents and didn't provide any update on May.
The situation is so bad that the REIT suspended its dividend after more than a quarter-century of annual increases. It looks like Tanger is preparing for a long and difficult period as it deals with the fallout from the coronavirus pandemic. In fact, management noted that it had enough liquidity to go as long as two years without collecting rent. That's both comforting and unnerving, since it hints at the level of concern management may have about the future.
Investors are likely still absorbing the facts here, leading the market reaction to bleed over to a new day. That said, with the annual meeting happening on May 15, it's also possible that investors are dumping out of the stock before the bad news gets rehashed.
To be fair, the mall REIT sector was broadly lower in early trading today. So it's not like Tanger is the only name in the space that's getting hit. But it is falling more than many of its peers. So investors clearly appear to be thinking that the turnaround for this mall REIT will be weaker than those of its competitors.