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HORSHAM — Toll Brothers Inc., the nation's largest builder of luxury homes, reported on Wednesday it cut its loss in the fiscal first quarter by slashing expenses, but saw sales drop by half despite creative incentives for buyers.
The company's exclusive offer of a 3.99 percent mortgage interest rate has spurred interest, but would-be buyers remained reluctant to purchase a home amid growing worries over the economy.
"We have not yet seen a pickup in activity at our communities other than ordinary seasonal increases for this time of year," said Robert Toll, chief executive.
The $8,000 tax credit for first-time homebuyers included in the recent housing stimulus package hasn't lured buyers off the fence. He urged Congress and the Obama administration to roll out another round of tax credits for all homebuyers.
"Right now the consumer is under the lock, in a fox hole, scared about their job and with good reason," said Toll, whose own company has laid off about 3,000 workers over the past two years. "If we can motivate the buyer in the short period with an incentive, we can perhaps halt the recessionary spiral we find ourselves in."
For the quarter ended in January, the Horsham, Pa.-based builder lost $89 million, or 55 cents a share, compared with a year-ago loss of $96 million, or 61 cents a share.
Pretax write-downs totaled $156.6 million in the most recent quarter, down from $245.5 million the prior year.
Excluding the write-downs, earnings fell to $9.6 million, or 6 cents per share, from $57.3 million, or 35 cents per share, a year ago.
Revenue declined by half to $409 million.
Wall Street had been expecting a loss of 52 cents a share, on average, on revenue of $425.3 million.
Investors apparently liked the numbers and pushed Toll's stock up 50 cents to close at $14.89.
The protracted housing downturn, rising foreclosures and a deepening U.S. recession have battered homebuilders and scared off many potential buyers.
In response, Toll and its rivals have slashed costs and streamline operations to help conserve cash.
The builder has stashed aside $1.53 billion in cash, up from $956.6 million a year ago.
The builder signed 266 contracts during the quarter (including cancellations), a drop of almost 60 percent from the prior-year quarter. The value of homes ordered but not yet finished fell 56 percent to $1.04 billion.
The company said it expects to deliver 2,000 to 3,000 homes this year, and declined to give more specific earnings guidance.
As the traditional spring selling season gets under way, Toll said buyers are more fickle.
Buyer traffic picked up in the Washington D.C. area, generating more deposits, for example. But in many cases the same buyers changed their minds and demanded their deposits back after a few days.
"We see more activity but we also see higher cancelations," Toll said.
A lot higher — 37 percent of buyers canceled, up from 29 percent in the prior-year period.
He explained, "There will be a psychological impediment that we have to overcome."
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On the Net:
Toll Brothers: http://www.tollbrothers.com/
