A Shot Across The Bow: Simon Property Goes Online

Simon Property Group (SPG) tends to have the finest-quality outlet malls with some of the best names in retail as lessees in its properties. It can afford this experiment, although by doing so, it will be letting a genie out of the bottle it may one day wish it hadn't.

While SPG is getting all the press about this, I think the real story is yet to be told: what will its competitors just a cut under it in quality of experience do to keep and grow their own walk-in traffic?

Take Tanger Factory Outlet Centers, Inc. (SKT) for instance. SKT is a favorite of many contributors on Seeking Alpha, some labeling it a strong buy or a huge bargain, etc. The company owns 39 outlet malls, mostly in the eastern half of the US. During what is supposed to be a great year for the US economy and a year led by consumer spending, Tanger had a 0.3% decline in net operating income in the first half of 2019.

There were a number of retailer bankruptcies among their lessees, some others chose to relocate their stores to other outlets, and still, others renegotiated their leases on more favorable terms.

While Tanger still enjoys a 96% occupancy rate, that is merely running in place during what is dubbed the year of the consumer. It is not a particularly vibrant example of a healthy business. Clearly many shoppers are still willing to make the drive to outlet malls to spend the day enjoying their shopping experience. They do so both because it is fun for them and they perceive they will enjoy bargain prices on the same products the retailers sell for more money in their brick-and-mortar stores physically closer to where most shoppers live.

The goods these outlet malls sell, often a previous year's offering or an item produced expressly for sale at an outlet mall, have not been available online. Bargain hunters until now have had a choice of the "regular" retail store or the outlet mall. If Simon's experiment works, there will be one more way to save on outlet merchandise without making the trip: the website shoppremiumoutlets.com, which will take you to "Simon - Shop Premium Outlets".

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SPG over the next 72 hours.

Disclaimer: I do not know your personal financial situation, so ...

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