The Gen Z Effect: Why Younger Shoppers are Flocking to Outlets
The retail landscape is witnessing a significant demographic pivot, and Tanger is at the forefront of this evolution. Traditionally viewed as a destination for value-seeking families, outlet centers are increasingly becoming a playground for Gen Z and younger Millennials. This “vibe shift” is not accidental; it is the result of a deliberate strategy to align high-demand brands with a younger audience that prioritizes both style and value. Tanger’s recent quarterly performance proves that when the merchandising mix hits the mark, the “treasure hunt” experience of an outlet center remains a powerful draw for the 20-to-30-something demographic.
Curating the “Superpower” Merchandising Mix
Stephen Yalof, Tanger’s president and CEO, identifies the company’s core strength as its ability to act as a dynamic asset manager rather than just a landlord. By constantly auditing and refreshing the tenant lineup, Tanger ensures that each market’s specific needs are met. This “superpower” involves balancing traditional retail with entertainment and lifestyle categories to create a multifaceted customer experience. The goal is to drive foot traffic through variety, ensuring that a trip to a Tanger center offers more than just apparel—it offers a curated environment that resonates with the modern consumer’s lifestyle.
Brand Winners: From Coach to New Balance
The success of specific brands within the Tanger ecosystem highlights the current trends in youth culture. Coach has successfully reinvented its image to capture the attention of younger fashion enthusiasts, while Aerie continues to dominate the intersection of “athleisure” and intimates. Interestingly, heritage brands like Gap are seeing a resurgence in “cool” factor, and Ralph Lauren remains a staple for the younger set seeking preppy, aspirational aesthetics. In the footwear sector, New Balance and Adidas are leading the charge. New Balance, in particular, has mastered the art of rebranding for a younger audience, while Adidas is benefiting from the global hype surrounding major sporting events like the World Cup.
Financial Resilience and Real Estate Optimization
Tanger’s strategic maneuvers are clearly reflected in its financial health. For the first quarter, the company reported a notable increase in net income to $28.1 million, up from $19 million in the previous year. This growth, alongside a rise in funds from operations (FFO), has allowed the company to raise its annual profit outlook and increase its dividend by 6.8 percent. These figures suggest that the off-price sector is not only surviving but thriving in a volatile economic climate, fueled by high occupancy rates—currently sitting at a robust 97 percent—and increasing tenant productivity.
Navigating Macroeconomic Shifts and Gas Prices
While rising gas prices often spark concerns about destination shopping, Tanger’s leadership remains optimistic. The narrative that outlet centers are isolated hubs requiring long, expensive journeys is fading. In the post-pandemic era, residential growth in the geographic areas surrounding many Tanger centers has effectively brought the customer closer to the product. Furthermore, the inherent value proposition of the off-price business acts as a natural hedge against inflation. When consumers feel the pinch at the pump, they are even more likely to seek out the discounted premium brands that Tanger provides, effectively protecting the company’s “share of wallet.”
Strategic Re-merchandising: The Saks Off 5th Pivot
A key indicator of Tanger’s proactive management is its response to the closure of several Saks Off 5th outlets. Rather than viewing these vacancies as a loss, Tanger sees an opportunity to reclaim and “right-size” its real estate. By replacing underperforming large-box retailers with more productive, high-demand tenants, the company continues to evolve its portfolio. With 3.4 million square feet of leasing activity this year—the highest in the company’s history—the focus is firmly on maximizing sales per square foot, which has already climbed to an average of $482.
In summary, Tanger’s ability to attract a younger shopper through strategic brand curation and agile real estate management has positioned the company for sustained growth. By pivoting away from underperforming legacy formats and leaning into the brands that define current youth culture, Tanger is proving that the outlet model is more relevant today than ever before, offering a resilient alternative to traditional full-price retail environments.
