Tanger CEO explains why tenant vacancies are an important part of the business

Tanger CEO Stephen Yalof told CNBC’s Jim Cramer why tenant vacancies help keep business fresh for the the outlet chain.

“Vacancy is critical, and we try to fill it with temporary leases,” Yalof said. “When we have a temporary tenant in the space, that gives us control. It gives us the opportunity to get that space back if we want to remerchandise and bring in another tenant.”

Yalof explained that these vacancies allow Tanger to issue short-term or temporary leases. This gives the company the opportunity to grow its portfolio, bring in new brands, perhaps finding ones that bring in younger customers who may shop more frequently and be inclined to spend more.

He added that there are some barriers for stores to enter the retail outlet space — not all brands know whether they have several weeks worth of excess inventory to sell or several years. Shorter leases give tenants the opportunity to test the waters before signing on for a more permanent arrangement. According to Yalof, many of Tanger’s “pop-ups” have lead to spots across the chain’s locations, including Ugg, Lululemon and Vineyard Vines.

Despite inflation and a tough economic atmosphere for the consumer, Yalof said outlets always have an edge.

“We’re on sale every day,” he said. “Regardless of the economic headwinds, there’s always a customer that’s always willing to shop outlet.”