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CBL & Associates shares stumble on earnings miss, lower guidance

CBL & Associates Properties Inc. shares traded down in morning trading Aug. 1, after the mall real estate investment trust missed consensus earnings estimates for the second quarter and lowered its guidance for the year.

By midday, the shares had recovered substantially.

The company reported second-quarter funds from operations per share of 34 cents, and the S&P Global Market Intelligence consensus estimate was 35 cents. Total portfolio same-store net operating income fell 5.7% year over year, as negative leasing spreads, lower occupancy and tenant concessions weighed on the company's operations. For 2019, the company now expects FFO per share to hit a range of $1.30 to $1.35. It had previously expected an FFO per share range of $1.41 to $1.46.

On the positive side, the REIT reported some improvement in lease spreads, and same-center tenant sales rose more than 4% during the quarter. On an Aug. 1 earnings call, CEO Stephen Lebovitz touted the company's progress with anchor redevelopments the company has logged 40 anchor closures in recent months and with steering properties toward entertainment and other non-apparel uses.

The mall REIT is actively working to manage general and administrative costs, but its progress has been offset by higher legal costs, the CEO said. During the second quarter "a number" of shareholder lawsuits were filed, which were ultimately consolidated into a single suit.

"We believe they are without merit and [we] will defend ourselves, including seeking dismissal," Lebovitz said. "We also maintain insurance coverage for these types of suits and have put our carriers on notice."

CBL & Associates is still reviewing reinstatement of the company's dividend, which it had to suspend earlier in 2019 as part of a class-action settlement with a tenant related to electricity billing.

Lebovitz said the company is in communication with the apparel retailer Forever 21 Inc., which is now reportedly in talks with landlords about its store fleet and possible rent reduction as it explores restructuring options. He would not go into the specifics of that conversation.

"There's still of a lot of uncertainty out there as far as what's going to happen with them," Lebovitz said. "We're watching it closely. We're talking to them."