00:00Shopping center operator Tanger is seeing resilient spending with tenant sales up 6%.
00:05Joining us now is the CEO, Steve Vinalov.
00:08Steve, great to see you this morning.
00:09And Mike was just pointing this out in the break, that 19,000 jobs were lost in retail.
00:15Are you seeing anything to that degree in your centers?
00:18You know, we haven't seen the impact of that yet.
00:20We've reported a pretty strong quarter from both a sales and traffic point of view.
00:25So the customer is still spending.
00:27And, you know, what's interesting, in our business, you know, we always say that the retailers are going to put
00:34product in the stores where they see the most amount of customers.
00:37And I, over the past month or so, have been out in a number of our centers.
00:41We talked about Levis.
00:43We bought a new center.
00:44And the stores are packed with merchandise.
00:47And I think it's in advance of that very important back-to-school shopping season.
00:52Well, are they still reacting to tariffs?
00:55We noticed that the inventories are starting to rise again.
00:59Yeah.
01:00Well, look, I think that tariff pricing impact was last year.
01:05And I think the consumer accepted it.
01:08It was absorbed.
01:09And spending continued to rise.
01:13Now, what we're seeing is a reset in pricing.
01:16But yet, in our value channel, there's still a savings off of that new high in price.
01:21And I think our customers still feel pretty comfortable that they're getting the best possible value for their money.
01:26Well, kind of the big macro impacts on the consumer.
01:28One, what Mike mentioned with the tariffs.
01:30And two, is higher prices for oil.
01:31And some of the earnings that we've seen specifically among restaurants, a lot of the commentary is less traffic.
01:37But when they're coming in, they're spending more.
01:39And that might sort of relate to people making less trips.
01:41What about at your outlets?
01:42Are people making the trip less often but doing all their shopping at once and buying more when they go
01:48there?
01:48You know, that's not what we're seeing.
01:50So, what's interesting about the outlets, you know, the old narrative on outlets was, yeah, it was a specific shopping
01:57trip that maybe you made once a season.
02:00But we're finding that the population shift has brought more people, permanent population, to the markets where we have shopping
02:07centers.
02:08And in response to that, we've been re-merchandising these centers.
02:11We've been adding more food and beverage, more entertainment, things that are going to draw the customer, going to hold
02:15the customer,
02:16and ultimately get that multiple visit as opposed to that one seasonal specific visit to those centers.
02:23What are your tenants telling you about their expectations for the future?
02:27And I'm putting this in the context of weak consumer confidence, rising credit card delinquencies, pay falling behind the level
02:36of inflation, and the savings rate going down.
02:39It all seems to be adding up to more bad news ahead for retail.
02:44Yeah, you know, look, NRF predicts that this back-to-school shopping season is going to be the biggest of
02:50all time.
02:51And you're right.
02:52You know, we live season to season in the retail business.
02:54So, that headwind that we're facing that, you know, could be something that the customer might encounter going into the
03:02holiday selling season,
03:04and, you know, I think we'll see the retailers respond with better value, better opportunity,
03:11which is going to drive the customers into the stores and hopefully create more conversion.
03:16By the way, you are or were, I guess, in a lot of the World Cup cities, I think, eight
03:21out of the 11.
03:22Did that drive traffic at all?
03:24You know, it sure did.
03:25And it drove, not only did it drive domestic traffic, but international traffic.
03:30And there is nothing more fun than being out in one of these host cities, like Kansas City.
03:35We have a big shopping center in Kansas City.
03:37And just seeing those customers, the international customers, encounter Americana for the first time.
03:42You know, the things they see, you know, the Buc-ee's or the Chick-fil-A's or the movie theaters
03:48or the barbecue,
03:50the things that they're posting on Instagram.
03:52Did they drink the restaurant establishments dry as well?
03:55Did the Scots come in?
03:56I think the city of Kansas City was pretty dry.
03:59But, you know, they got it back pretty quick.
04:02You mentioned the holiday season.
04:06Is it too early to kind of predict?
04:08Well, I guess it's not, because the retailers have to be ordering now for the holidays.
04:14Yeah, you know, look, we anticipate, again, particularly in the outlet channel, you know,
04:18it's always, it always seems to us that the customer, macroeconomic headwind notwithstanding,
04:24we see a lot of traffic for the holiday season in our outlets.
04:27Because, you know, we're showcasing the best brands in America, from Polo to Coach to Tory Burch
04:34to Nike at the best possible price.
04:38So if you're looking to stretch that spend over the holiday season, they can do, the execution
04:46in an outlet is probably the best place where shoppers can come and get the most for their money.
04:51So historically, a landlord would probably just be collecting rent checks.
04:55But things have changed so much, especially with data now, AI-powered data.
04:58And I know you have a platform you're offering, too.
05:01What exactly are you doing there?
05:02Well, for me, well, first of all, we're not an AI company, but we use AI to optimize our business.
05:08I think that's really an important distinction.
05:10You know, there's so many use cases out there today that AI allows you to optimize and just
05:15make your people smarter, make your people more efficient, make your people better.
05:18But, you know, the biggest touchpoint for us is really in the marketing end, because what
05:23we find is that customers are far more likely to open up our SMS messaging, our text messaging,
05:29our email messaging, when those ads that we drop for them are personalized.
05:34So AI has allowed us to become far more personal.
05:38We understand who our customer is.
05:39If they've opted into our Tanger Club program and we have millions and millions of people
05:43in that program, we can then go back and we can reward them for their loyalty and we can
05:49hit them with advertising where they are, but more specifically with the brands that they want.
05:54So we're training them to open up the messaging as opposed to just deleting the message.
06:00Just really quickly, because there's this big debate happening now, like, does it replace
06:03legacy software?
06:04Could you see Tanger moving in a way that you get more native with AI and maybe other services
06:10you've used from other companies, enterprise services, you don't need and you can kind of
06:14bring it in-house with these tools?
06:15Well, we're in the early innings of that.
06:18So we've already, you know, we use a program called Yellow AI to handle our customer service
06:25at Chatbot that handles over 50% of the interactions with customers is done by Chatbot.
06:32Now, if a customer gets frustrated or has further questions, they'll go to a person.
06:37I think what happens is that AI platform allows us to take a lot of that day-to-day, real
06:45quick
06:45questions off our plate and then put them in the hands of the professionals once they get
06:49challenged to a place where they really want some customer service.
06:52I think that's, for us, that's the first entry point into it.
06:56We're seeing such great success with that that we know that the future for us is to interact
07:01far more than we are currently with.
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