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
Cineworld Group CEO Mooky Greidinger and Regal Cinema (Photo via Getty; Wikipedia)

Regal Cinemas scores financial rescue package

Regal Cinemas scores financial rescue package
(iStock)

What doom-and-gloom forecasts miss about the office market

What doom-and-gloom forecasts miss about the office market
Union Square Hospitality Group CEO Danny Meyer and the Union Square Cafe (Photos via Getty; Wikipedia Commons)

Danny Meyer’s Union Square Hospitality halts indoor, outdoor dining

Danny Meyer’s Union Square Hospitality halts indoor, outdoor dining
A recent study that found 1 in 10 Black homeowners returned to renting between 1984 and 2017 (iStock)

Black homeowners twice as likely to lose homes and return to renting: Report

Black homeowners twice as likely to lose homes and return to renting: Report
(iStock)

Ski resorts gear up for tough season in the shadow of pandemic

Ski resorts gear up for tough season in the shadow of pandemic
Palermo, Italy (iStock)

For some employees, WFH now includes a view of the Mediterranean

For some employees, WFH now includes a view of the Mediterranean
(Simone Golob/Getty)

Workers in prime earning years are struggling to pay rent: Survey

Workers in prime earning years are struggling to pay rent: Survey
Mayor Bill de Blasio and Governor Andrew Cuomo (Getty)

Real estate braces for new restrictions as virus cases surge

Real estate braces for new restrictions as virus cases surge
arrow_forward_ios

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

Loading...