Sacked by market headwinds and competition from rivals “who seem fine with losing money,” Realogy lost $99 million during 2019’s first quarter — nearly 48 percent more than last year’s loss of $67 million.
On Thursday, the New Jersey-based conglomerate reported overall revenue of $1.1 billion for the quarter, a 9 percent decline. Transaction volume also dropped 9 percent, compared to an industry-wide drop of 4 percent, according to the National Association of Realtors.
During an earnings call, CEO Ryan Schneider cited competitive and marketing pressure in key geographies like California, where sales volume was lower than the national average and where more than 25 percent of NRT’s business comes from.
And he specifically cited pressure on agent commissions in a few cities, namely Chicago, San Francisco, San Diego and Los Angeles, where competitors got more aggressive as the market slowed.
“When the markets got really tough, we saw people make even more aggressive offers to agents,” he said. “Who knows if people have a path to make money in the future? Some have said they don’t. We compete in all these places and we have to deal with all of them.”
Schneider said Realogy would double down on investments in technology and other tools to improve its value proposition to attract and retain agents. “We need to do more and we need to do it rapidly,” he said. He described a new “Fast Track” tool designed to accelerate the pace of deals from months to weeks. “Many talk about changing the transaction process, we actually have the business components to do it.”
During the first quarter, Realogy reported sales volume of $91 billion — $31 million from its NRT division, which includes the Corcoran Group and Sotheby’s International Realty, plus $60 billion from its franchise division, known as RFG. NRT’s transactions dropped 9 percent with average sale prices down 2 percent.
Schneider said he’s encouraged by emerging macroeconomic trends — including low mortgage rates, higher inventory, strong GDP and low unemployment. “Anecdotally, we’re hearing more positive feedback from our agents and franchisees than we have in a while,” he said.
Last year, Realogy said it was looking for $70 million in annual cost savings. In March, Realogy tapped a new CFO, Charlotte Simonelli, to execute those plans. “We’re looking to be even more aggressive streamlining operations,” Schneider said Thursday.
During the call, Schneider said he still remains “skeptical” about making brokerage acquisitions, because M&A deals tend to add to the top line but not help the bottom line. “But there could be a model where it’s not about the revenue side, but where it’s about the cost takeout side,” he said. “For now, we’re sticking with the organic growth thing.”