Tanger Inc. Financial Report Analysis: Insights and Recommendations

Key Financial Snapshot

• Fiscal Year Ended December 31, 2024:
• Total Revenue: $516.4 million
• Net Income: $102.8 million
• Earnings per Share: $0.89 (Basic), $0.88 (Diluted)
• Net Operating Income (NOI): $365.5 million
• Occupancy Rate: 98%

Overview

Tanger Inc. (Ticker: SKT), a retail real estate investment trust (REIT), has released its financial results for the fiscal year ending December 31, 2024. The report highlights a robust operational performance marked by an increase in revenues, net income, and rental revenues, alongside effective management of operating expenses and lease liabilities. This analysis will delve into the key metrics, trends, and comparisons to previous periods and industry competitors, providing insights into Tanger's financial health and strategic position.

Revenue Analysis

Tanger reported total revenues of $516.4 million for 2024, reflecting a growth of 13.3% from $455.7 million in 2023 and 18.6% from $435.5 million in 2022. The growth in rental revenues, which climbed to $497.5 million (up from $438.9 million in 2023), underscores the company's ability to attract and retain tenants in a competitive retail environment.

Breakdown of Rental Revenue:

• Fixed Rental Revenues: $397.1 million
• Variable Rental Revenues: $100.4 million

This significant increase in rental income is indicative of Tanger's effective leasing strategy and strong demand for its retail spaces, likely driven by an improving consumer sentiment and foot traffic post-pandemic.

Profitability Metrics

Tanger's net income for 2024 stood at $102.8 million, a slight decrease from $103.9 million in 2023 but a notable increase from $85.8 million in 2022. This translates into basic and diluted earnings per share of $0.89 and $0.88, respectively. The marginal dip in net income year-over-year can be attributed to increased operating expenses, which rose to $150.9 million in 2024 compared to $135.5 million in 2023.

Operating Performance: Net Operating Income (NOI)

The company's Net Operating Income (NOI) increased to $365.5 million in 2024, marking an 14.1% increase from $320.3 million in 2023. NOI is a critical metric for REITs, representing the profitability of their operational performance without the impact of financing and capital expenditures.

Balance Sheet and Capital Structure

Tanger's total assets remain robust, supported by a significant total debt of approximately $1.434 billion. Importantly, the company maintains a manageable level of debt relative to its cash flows and earnings, with a debt-to-EBITDA ratio that remains within industry standards. The presence of $226.9 million in total lease payments and $84.5 million in lease liabilities suggests ongoing obligations but also reflects the company's strategy to leverage its real estate holdings.

Market and Competitor Comparison

Tanger operates in a competitive landscape, primarily against other retail REITs such as Simon Property Group (SPG) and Brookfield Property Partners (BPY). Compared to its peers, Tanger's occupancy rates (98%) are competitive, suggesting strong management and tenant retention strategies.

Macroeconomic Considerations

Tanger's performance is influenced by macroeconomic factors, including interest rates, consumer spending, and retail market dynamics. The gradual recovery of the retail sector post-pandemic, coupled with demographic trends favoring out-of-town retail locations, positions Tanger favorably for future growth. However, potential economic downturns or shifts in consumer behavior due to inflation could pose risks.

Recommendations

Investment Recommendation: Hold

• Rationale: While Tanger has demonstrated solid revenue and NOI growth, the slight decline in net income and the increasing operating expenses warrant a cautious approach. Investors should monitor the company's ability to manage costs and maintain occupancy rates amid a potentially volatile economic environment. The consistent dividend payments also provide a steady income stream for investors.

Conclusion

Tanger Inc. has shown resilience and growth in its financial performance for the fiscal year 2024, with increasing revenues and strong occupancy rates. However, the company must remain vigilant in managing expenses and navigating the competitive retail landscape. Investors should consider holding their positions while observing the company's ability to sustain growth and profitability in the coming quarters.