Taubman Centers, Inc. ( TCO)

Q2 2011 Earnings Call

July 20, 2011, 10:00 AM ET

Executives

Barbara Baker – VP, IR

Robert Taubman – Chairman, President and CEO

Lisa Payne – VP and CFO

Analysts

Alexander Goldfarb – Sandler O’Neill

Jay Habermann – Goldman Sachs

Craig Schmidt – Bank of America Merrill Lynch

Christy McElroy – UBS

Quentin Velleley – Citi

Michael Bilerman – Citi

Benjamin Yang – Keefe, Bruyette & Woods, Inc.

Todd Thomas – KeyBanc Capital Markets

Michael Mueller – JPMorgan

Tayo Okusanya – Jefferies & Co.

Cedrik Lachance – Green Street Advisors, Inc.

Paul Morgan – Morgan Stanley

Mark Gifford – Bloomberg Research

Presentation

Operator

Thank you for holding and welcome to the Taubman Centers Second Quarter Earnings Conference Call. The call will begin with prepared remarks and then we will open the line to questions.

On the call today will be Robert Taubman, Taubman Centers’ Chairman, President and Chief Executive Officer; Lisa Payne, Vice Chairman and Chief Financial Officer; and Barbara Baker, Vice President of Investor Relations.

Now, I’ll turn the call over to Barbara for opening remarks.

Barbara Baker

Thank you, operator, and welcome everyone to our second quarter conference call. Joining me today on the call are Robert Taubman, our Chairman, President and CEO and Lisa Payne, our Vice Chairman and Chief Financial Officer. Yesterday, we released our results for the quarter and our supplemental information package. Both are available on our website, www.taubman.com. And if you would like to have them sent to you automatically each quarter, please sign up under Request Information on our website.

As you know, during this conference call, we’ll be making forward-looking statements within the meaning of the federal securities laws. These statements reflect our current views with respect to future events and financial performance, although actual results may differ materially. Please see our SEC filings, including our latest Form 10-K and subsequent reports for a discussion of the various risks and uncertainties underlying our forward-looking statements.

During this call, we’ll also be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and in our supplemental information. In addition, a replay of the call is provided through a link on the Investor Relations section of our website.

For our agenda today, first, Bobby will be providing an overview of the quarter, followed by a discussion of the company’s operating statistics and external growth. Then Lisa will discuss our financial performance and our balance sheet. Bobby will return to discuss guidance and provide closing comments, and then we’ll be available for your questions.

We ask that you limit your questions to two, and then if you have more, queue up again. That way everyone will have the opportunity to ask a question.

And with that, let me turn the call over to Bobby.

Robert Taubman

Thanks, Barbara, and welcome everyone to our call. We’re delighted with the continued strength in our core, led by the unprecedented growth in tenant sales; now six quarters in row are double-digit increases. This is especially satisfying considering the slow pace of the economic recovery.

Sales per square foot for the quarter was up 14%. This is on top of an over 12% increase in the second quarter of last year. We believe we will once again lead our industry, both in trend and in absolute sales productivity. Our trailing 12-month sales per square foot is $600. This is a significant milestone for our company and is likely at least a $100 greater than any other public regional mall portfolio. Once again, all of our centers showed growth in the quarter with luxury and value centers leading the way. The rebound of tourism is also a major factor since so many of our centers are located in gateway cities.

Now let’s look at specific sales categories. Luxury’s performance is outstanding. Gucci, Louis Vuitton, Burberry and Dior are world top performers. Jewelry was our leading category, selling across all price points. Tiffany, Cartier and (inaudible), all had double-digit increases for the quarter. Women’s apparel continues to improve. Chico, J. Jill, and bebe are doing well. Junior and unisex apparel were also strong. Among the leaders were Forever 21, Abercrombie & Fitch, Hollister, PacSun and H&M.

Victoria’s Secret continuous to be an outstanding performer, clearly one of the most successful of all retailers. Shoes are also doing very well. Foot Locker is showing some real strength. Electronics continue to rise, led this quarter by Sony. And finally the home category was up significantly. Restoration Hardware was a standout.

These sales increases are driving retailer expectations especially in high quality properties. For the first six months of 2011 we signed substantially more leases than in the first six months of 2010. There are several reasons for this. First is the substantial turn off space related to our 2001 openings; second is the new space related to the opening of Salt Lake City. Third, as sales began to improve in 2010, we’ve made the strategic decision to focus on rents more than occupancy as we sense the market was improving and our patience would be rewarded with better pricing. And fourth is simply the momentum from these very strong retailer sales. All of it is good news.

For example, at Beverly, we keep growing our critical mass of luxury tenants. Gucci just signed a significantly expanded store to accommodate designer ready-to-wear. Montblanc tripled the size of its store and Louis Vuitton opened its second expansion. These were all indications the tremendous volume being done in luxury category at Beverly.

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