Pandemic takes a Toll: Builder’s profits drop 42%

Contracts plunged 79% in hard-hit markets, but Toll Brothers has $5.5B backlog

National /
May.May 28, 2020 01:35 PM
Toll Brothers CEO Douglas C. Yearley Jr. (Credit: iStock)

Toll Brothers CEO Douglas C. Yearley Jr. (Credit: iStock)

As coronavirus battered the residential market, Toll Brothers said its second-quarter profits dropped nearly 42 percent from a year ago, to $75.7 million.

The luxury home builder reported that signed contracts dipped 22 percent as buyers complied with stay-home orders. Home sale revenue was $1.52 billion, down 11 percent from $1.71 billion in the second quarter of 2019.

The results were a reflection of “complex and challenging” circumstances sparked by the pandemic, CEO Douglas Yearley said during an earnings call. “Our second quarter was bifurcated by the effect of Covid-19,” he added.

For the six weeks ended March 13, Toll’s net signed contracts were up 43 percent year-over-year. That activity ground to a halt when sales centers were shut.

From March 16 to April 30, Toll said its net contracts plummeted 64 percent. In the most affected markets, including New York City, Seattle and California, net contracts declined 79 percent.

In New York City, properties still can’t be shown. “You can’t get by the doorman,” Yearley said.

Elsewhere, he said, buyers began to reappear in May. Deposits rose 13 percent over the past three weeks, compared to the prior year. Last week’s contracts were the most since 2005. And the CEO says homes have taken on more importance to people since the pandemic hit.

“I feel strongly that people are nesting, and this is not short-term,” Yearley said. “There is no place like home. Home is your sanctuary today.”

Toll finished the quarter with a backlog of 6,428 homes representing $5.5 billion in pending sales. Cancellations have remained low, around 3.1 percent, compared to 3 percent in the first quarter.

Toll said its luxury business was flat in the second quarter and business from empty-nesters was down, as expected. “That client was more inclined to shelter and be careful,” Yearley said.

Toll ended the quarter with $2 billion in liquidity as it pulled back on land acquisitions and enacted sweeping cuts, including furloughs. Toll said those measures generated $50 million in savings.

Earlier this year Toll withdrew its full-year guidance as the coronavirus created vast uncertainty. Many companies did the same, including competitor Lennar Corp. The Miami-based builder reported strong first-quarter earnings in March, when it said net earnings were $398.5 million, up from $239.9 million. But sales largely reflected the pre-pandemic environment.

Last month, Toll sold the Parkland Golf & Country Club in South Florida for $15 million.


Related Articles

arrow_forward_ios
Photo Illustration of Airbnb CEO Brian Chesky and Vrbo CEO Jeff Hurst (Getty)
Home invasion: Vrbo aims to poach listings from Airbnb as summer heats up
Home invasion: Vrbo aims to poach listings from Airbnb as summer heats up
Confidence is lowest in the Northeast and Midwest, at 73 and 70. (iStock)
Homebuilder sentiment slides to 10-month low in June
Homebuilder sentiment slides to 10-month low in June
The Savoy Hotel in London, UK in 1980 (Getty)
UK hospitality employers could cut half a million jobs
UK hospitality employers could cut half a million jobs
The commercial market was hit hard by the pandemic, and property tax revenue is expected to fall 5 percent. (iStock)
Tax bills show how much Covid devalued NYC real estate
Tax bills show how much Covid devalued NYC real estate
Employers project 62 percent of workers will come back to Manhattan offices in September (iStock)
Over 60% of Manhattan office workers will return in September: survey
Over 60% of Manhattan office workers will return in September: survey
(iStock)
NY’s rent relief program launches, with glitches
NY’s rent relief program launches, with glitches
The colorful Prizm Outlet in Nevada. (Prizm Outlet via Facebook)
Mall short-sellers see a big payout from Nevada mall auction
Mall short-sellers see a big payout from Nevada mall auction
What is the future of Times Square?
What is the future of Times Square?
What is the future of Times Square?
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...