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Toll Brothers posts contract growth while cutting incentives
In fiscal Q3, the builder delivered 2,662 homes and reported a 25.6% adjusted gross margin, with incentives falling to about 7.5% of gross sales price.
Toll Brothers said its fiscal third-quarter performance showed resilience in the luxury end of the market, with net signed contracts rising 5% year over year to 2,508 homes and $2.52 billion. The company also delivered 2,662 homes and generated $2.65 billion in home sales revenue, both above the midpoint of guidance, HousingWire reports.
Margin strength was supported by its upscale mix, as its luxury move-up business accounted for 61% of home sales revenue and delivered the highest margins. About one-quarter of buyers paid cash, and financed buyers contributed enough equity to bring the average loan-to-value ratio to 69% in the quarter.
Toll Brothers added average value to base homes through options, structural upgrades, and lot premiums worth about $207,000, or 24% of its average base home price. The builder also reduced incentives to about 7.5% of gross sales price, down from roughly 8% a year earlier, while reported adjusted gross margin was 25.6%, 35 basis points above guidance.
Despite the results, HousingWire highlighted that Toll Brothers remains exposed to broader market conditions tied to Treasury yields and equity volatility, which can affect the wealth effect for high-income buyers. The company reaffirmed full-year expectations of approximately $10.5 billion in home sales revenue and a 26.1% adjusted gross margin.