Luxury home builder Toll Brothers on Tuesday said the slowing housing market contributed to a 19 percent drop in profit during its fiscal third quarter.
The company reported income of $174.6 million, or $1.07 per share, for the quarter ended July 31, compared with $215.5 million, or $1.27 a share, during the same period a year earlier.
Toll Brothers said write-downs related to land and an existing community in Detroit also contributed to the slide in quarterly earnings.
Third-quarter total revenues were $1.53 billion, down from $1.55 billion the previous fiscal year. Third-quarter backlog was $5.59 billion, compared with the record $6.43 billion in fiscal 2005, and signed contracts were $1.05 billion, down from $1.92 billion.
Robert I. Toll, chairman and CEO, said some of the market’s current softness in demand is due to speculative buyers of past years who are now sellers, and home builders who overbuilt and are now offering discounts to unload.
“The continuing malaise in the housing market, we believe, is the result of an oversupply of inventory and a decline in confidence: The speculative buyers of 2004 and 2005 are now sellers; builders that built speculative homes are trying to move them by offering large incentives and discounts; and some anxious buyers are canceling contracts for homes already being built,” Toll said.
“This overhang in supply and the aggressive discounting of many builders is undermining consumer confidence and keeping buyers on the sidelines as they continue to worry about the direction of home prices,” he said.
The company cut back on its land holdings due to current market conditions and believes it is “well prepared to weather this downturn,” Toll said.
The company also gave a revenue forecast for its upcoming fiscal year that analysts have said may be too optimistic, according to a Reuters report. Toll Brothers said it expects to deliver 7,000-8,000 homes in fiscal 2007, with revenues of $450 million-$550 million.
Toll Brothers stock (NYSE: TOL) fell 3.9 percent in Wednesday morning trading to $24.21 per share, on further news of a national housing slump. Existing single-family home sales dropped 11 percent nationwide in July, according to National Association of Realtors statistics released today.
