A Builder of Luxury Homes Reports a 19% Drop in Profit
By THE ASSOCIATED PRESS
PHILADELPHIA, Aug. 22 (AP) — The luxury home builder Toll Brothers said Tuesday that its third-quarter profit fell by 19 percent as the housing market malaise weighed on sales and caused the company to abandon some building locations.
The company also cut its earnings estimate for the full year, signaling that it did not expect the housing market to stabilize soon. Investors have given up on flipping properties for a quick profit and builders have reduced prices to move homes, especially on the luxury end.
Robert I. Toll, the chief executive, told analysts in a conference call that he did not yet see signs of improvement nationwide.
“I don’t see a turnaround in any of the markets,” he said. “I don’t see any forming a bottom.”
The housing market has been weakening faster than expected, said Alex Barron, senior housing analyst with JMP Securities in San Francisco. Toll Brothers’ vulnerability is its luxury niche.
“What’s hurting Toll is just the fact that they build luxury homes. Luxury homes are very discretionary,” he said. “People who want to live on the golf course, they can do so today or they can wait a year. There’s no hurry.”
Mr. Barron said Toll Brothers’ strategy of not cutting prices hurt its sales, because many of its competitors did cut prices.
In the quarter, Toll Brothers said sales headed lower in the Middle Atlantic, Midwest and California markets, while revenue rose in the Northeast, Southeast and Southwest.
As of July 31, the number of signed contracts was cut nearly in half from a year earlier, to 1,473. The contracts’ value fell by 46 percent, to $1.1 billion.
Toll Brothers reported profit of $174.6 million, or $1.07 a share, compared with $215.5 million, or $1.27 a share, a year earlier.
Earnings were hurt by $23.9 million in write-downs, most of which represented the costs of optioning properties as the company abandoned plans to build homes on them. Toll Brothers cut the number of lots it controlled to about 82,900, down from 91,200 at the end of the second quarter.
Revenue fell 1 percent, to $1.53 billion, from $1.55 billion.
Stock in Toll Brothers, which is based in Horsham, Pa., rose 43 cents, to $25.20 a share.