Description

1. Tanger is more exposed to apparel than its mall counterparts who have a more diversified mix of tenants (restaurants, gyms/fitness, services, movie theaters, etc).  Apparel has been weaker than other categories over the past 12-18 months.  This will remain the case as outlet malls are a place to purchase rather than hang out/dine.  
2. Tanger has higher tenant concentration with Gap and Ascena representing 7.7 and 7% of square footage (and a similar % of rent) respectively.  The top 10 tenants represent 36% of square footage.  
3. Ascena (Ann Taylor, Lane Bryant, Justice, Dress Barn, among others) is a challenged retailer as evidenced by the 80% decline in its stock over the past year.  
4. Tanger has seen YoY declines in sales per square foot (whereas top operators like SGP, GGP, MAC, and TCO have continued to show growth in sale/sq foot), an uptick in vacancy (occupancy sats at 96.1% at 6/30/17, the uptick is more or less in line with what we have seen in other malls) and stagnation in rental growth (the aforementioned other malls have seen continued rental growth). 

1. I think the outlet concept is an important and economical channel for manufacturers/retailers to move excess inventory.  While retailers will continue to shrink their footprint, I don’t see closing outlet stores as being high on their list of priorities.  Outlet stores are distinct from regular stores insofar as they are located 20+ miles out of town and allow manufs/retailers to sell merchandise at a discount without fear of cannibalizing in-town locations.  As a percentage of sales, occupancy costs at Tanger are ~10% (vs. 12-14% at traditional malls).  
2. I think consumers will continue to visit outlet malls.  The most successful retail concepts over the past several decades have been off price concepts like TJ Maxx, Ross Stores, etc.  I think there is something ingrained in people that makes them enjoy hunting for perceived bargains and think that outlets will remain relevant despite ecommerce taking over the world.  
3. I see the decline in sales/sq foot and rental growth stagnation as being caused by the weak apparel environment (which seems like it could potentially be magnified at the outlet level to the extent that discounting increases).  With traditional malls decreasing their space dedicated to apparel, it seems that this could benefit outlet mall operators at some point in the future.  
4. I don’t know what will happen with Ascena - it is entirely possible that the company goes bankrupt in the next 24 months.  However, even should Ascena go bust, I think successor entities will retain at least a portion of its leases (some of its concepts will remain viable, company suffers from a $1.6 billion debt load).  While ugly, I think Tanger will be able to work through the increase in vacancy from a potential bankruptcy.  
5. Outlets remain a small percentage of retail in North America and after we work through this ugly patch, I think we could see Tanger reaccelerate new mall openings (nothing in the pipeline beyond two centers slated to open later this year).  A resumption of 1-2 new center openings coupled with 1-2% NOI growth should drive ~5% AFFO/share growth which would seem to warrant at least a 12x AFFO multiple.
6. Strong balance sheet - discussed below.  
7. There is an outside chance that Simon Property could bid for the company.  Simon the largest REIT in the world, is the largest owner/operator of outlet malls in the world.  There would be considerable synergies as Simon could effectively eliminate nearly all of Tanger’s SG&A (it already has leasing and management capabilities).  It may also be able to improve occupancy/rent given its larger scope.  

Catalyst

-Market takes a moderately less negative view on retail

-Company announces new development