Chattanooga-based CBL & Associates' shares fall on lower earnings

Chattanooga-based CBL & Associates' shares fall on lower earnings

February 9th, 2018 by Staff Report in Business Around the Region

People come and go from the food court of Hamilton Place mall in Chattanooga last year.

Photo by Erin O. Smith

Chattanooga-based CBL & Associates Properties Inc. on Thursday reported lower fourth quarter and annual results, citing retailer bankruptcies, store closings and rent adjustments.

Funds from operations per diluted share, as adjusted, equaled 56 cents in the fourth quarter compared to 68 cents in the prior year period, down 17.6 percent, according to the company that owns and operates Hamilton Place and Northgate malls in Chattanooga.

The results were 2 cents per share below the average estimate of nine analysts surveyed by Zacks Investment Research.

CBL's stock fell in trading this morning after the earnings announcement by another 15 percent, following a 4.6 percent decline in the stock on Thursday. CBL shares today fell to as low as $4.21 per share this morning. down by more than 60 percent from the company's common share price of a year ago as investors worry about rising interest rates and cutbacks by many conventional mall retailers.

For the year, FFO per diluted share, as adjusted, was $2.08 compared with $2.41 in the prior-year period, off 13.7 percent, the company reported.

Major items impacting annual results, as adjusted, include about 15 cents per share of dilution from asset sales, 9 cents per share lower property net operating income primarily due to retail bankruptcies, 9 cents per share higher interest expense and 2 cents per share lower gains on outparcel sales.

Stephen D. Lebovitz, CBL's chief executive, said in a statement that despite the bankruptcies and closings, company officials are encouraged by stronger holiday results compared to 2016 and a generally more optimistic retail sentiment.

"We are also focused on effectively executing our property transformation strategy by diversifying the offerings at our centers," he said. "We are adding dining, entertainment, value retail, fitness, service and other new uses to generate additional traffic."

Lebovitz said CBL's balance sheet is well-positioned to support the strategy with a longer maturity profile and minimal near-term maturities.

"Looking forward, we expect some continued headwinds from retailers. However, we are encouraged that many of these companies are adopting new technologies that are driving increased store traffic and sales," he said.

Net income attributable to common shareholders for the fourth quarter was $25.2 million, or 15 cents per diluted share. That's compared with net income of $57.6 million, or 34 cents per diluted share for the fourth quarter a year ago.

Net income attributable to common shareholders for all of 2017 was $76 million, or 44 cents per diluted share, compared with net income of $128 million, or 75 cents per diluted share, for 2016.

For 2018, CBL provided guidance in the range of $1.70 to $1.80 per diluted share. Guidance incorporates a full-year budgeted impact of loss in rent related to 2017 tenant bankruptcies, store closures and rent adjustments net of expected new leasing.

Also, guidance includes a reserve in the range of $10 million to $20 million for potential future unbudgeted loss in rent from tenant bankruptcies, store closures or lease modifications that may occur in 2018.