Toll Brothers Misses on Orders as Luxury-Home Sales Falter

25 Aug 2021, 04:27 AM IST

(Bloomberg) -- Toll Brothers Inc. reported weaker-than-expected order growth as soaring home prices started giving buyers sticker shock.

Purchase contracts for the three months through July climbed 11% from a year earlier to 3,154, the Fort Washington, Pennsylvania-based builder said in a statement Tuesday. That missed the average estimate of analysts surveyed by Bloomberg of 3,217.

Analysts expected a bigger jump in orders for Toll, which, along with other U.S. builders, has been benefiting from the pandemic-driven rush to buy spacious homes in the suburbs. While the company missed the consensus estimate, orders reached a record for Toll’s fiscal third quarter, according to the statement.
In value, orders jumped 35% from a year earlier, reflecting the company’s ability to push prices higher. The company’s adjusted gross margin on home sales in the quarter was 22.7%, up from 21% a year earlier.
Toll’s wealthy customer base isn’t as constrained by the shortage of homes to buy in the U.S. Supplies are tightest at the entry level, where first-time buyers are competing with investors. And while sales of higher-end properties are soaring, more listings are available.
With more demand than they could handle, Toll and other builders have limited orders so they could catch up. In a sign the crunch may be easing, new-home sales in July rose for the first time in four months, government data showed Tuesday.

The shares fell as much as 5% in late trading before turning positive. They had climbed 40% this year through Tuesday’s close, compared with a 33% gain for an S&P index of homebuilder stocks.