KB Home Quarterly Loss Is Wider Than Expected (in other words UNexpected)

Housing Zone ^ | 23 March 2010 | Matt Phair

[Lorianne]

KB Home posted a wider-than-expected quarterly loss on Tuesday as prices and demand for its houses sagged and expenses climbed. The top-five U.S. builder, said its loss narrowed to $54.7 million for the first quarter ended February 28, from $58.1 million a year earlier.

Revenue slumped 14 percent to $264 million and selling, general and administrative expenses rose 18 percent to $72.2 million. But Chief Executive Jeff Mezger said the company is positioned to make a profit in the second half ofthe year as higher-margin homes on cheaper land make up an increasingly bigger percentage of its sales.

In the past 6 months, as some housing markets have stabilized and government supports like the homebuyer tax credit have bolstered demand, KB and its rivals have reversed their downturn-era strategy of selling land inventory and hoarding the proceeds.

KB's orders rose 5 percent to 1,913, but some analysts had expected more, despite a tough comparison with the year-earlier period, when orders rose 26 percent. KB has slashed home sizes and prices and launched a new brand, the Open Series, designed to offer a relatively high degree of customization and to compete with foreclosures on price.

But building to order makes it difficult to have homes ready on short notice, which builders need as the federal homebuyer tax credit nears its expiration on April 30. In the fourth quarter of 2009, the company posted its first profit in almost three years due to a tax benefit generated after the extension of a federal law allowing companies to apply losses to prior income.