KB Home said Thursday it swung to a loss in the fiscal second quarter, as the homebuilder booked a major charge to write down inventory amid declining demand and lower prices for homes.
KB reported a loss of $148.7 million, or $1.93 per share, for the period ended May 31. A year ago, the company posted net income of $205.4 million, or $2.45 per share. The latest period included a pretax charge of $308.2 million to reflect the decreased value of unsold homes on its books, and walking away from deposits on land it no longer wants to buy.
“Our second-quarter results reflect the current oversupply of new and resale housing inventory, a difficult situation compounded by aggressive competition and continued weak demand,” said Chief Executive Jeffrey Mezger in a statement.
In May, KB announced it would sell its stake in a French subsidiary. That deal is expected to close in the third quarter, so the company classified the French operations, which were profitable in the latest period, as discontinued.
Excluding the French operations, KB’s loss from continuing operations came in at $174.2 million, or $2.26 per share, versus profit of $184.4 million, or $2.20 per share, a year ago.
Wall Street expected profit of 7 cents per share. The estimates of the nine analysts polled by Thomson Financial ranged widely, from a loss of $1.46 per share to profit of 47 cents per share.
Revenue fell 36 percent to $1.41 billion from $2.2 billion last year, missing Wall Street’s consensus estimate of $1.74 billion. Housing revenue plunged 41 percent to $1.3 billion, as unit deliveries slipped 36 percent to 4,776. The average selling price per home was $271,600, down 8 percent.
Mezger said he could not predict when the market would improve, but that if the sale of the French operation goes through as planned, the company will book a profit for the year, despite the first-half charges.
“However, given current market conditions, we are not able to provide an earnings estimate for the year,” he said.