D.R. Horton logged the first year-over-year quarterly sales increase since March 2006 in its fourth quarter, and that, along with a few other signs, stirred CEO Donald Tomnitz to predict that the worst is over.
In 2010, Horton will be profitable again and close more homes than it did in its 2009 fiscal year, Tomnitz told investors during its quarter and year-end conference call Friday.
It wasn't profitable in its fourth quarter. The company lost $231.9 million, $0.73 a share, the company reported.
So confident is Tomnitz that a recovery is beginning that the company has launched its next strategy to prepare for it--market domination. "One of the things we continue to do is maintain our big footprint across the United States."
Horton, with its $1.9 billion in cash, has an opportunity to increase its already large market share, said Tomnitz. "We are competing almost exclusively with undercapitalized builders. We don't have to borrow a nickel from any bank to buy a lot."
During the call, there were several mentions of "planting flags," opening more communities in all of its markets in the next year. "I would be surprised if in each of our markets we didn't add 10 or so new flags over the course of 12 or 15 months," Tomnitz said. That process has already begun, with Horton tying up more than 200 land option deals, with 50 to 100 lots in each, over the last six months.
"We are not aggressive purchasers of land. We are an aggressive purchaser of option lot contracts," he said. "Yes, we would tie up the world if we could."
Horton is buying only land it can build on and sell in a year to 18 months and turn an 18% to 20% profit on, Tomnitz said.
He also gave a snapshot of how well different markets are performing for the company.
"Our strong markets include all our markets in Texas," said Tomnitz. "The other market that is doing extremely well for us is Seattle. I would call strengthened markets Southern California, Atlanta to a certain extent, and weaker Las Vegas, Chicago, and to a lesser extent, Florida and Phoenix."
"It's been a very long three years," Tomnitz said, summing up the trials and tribulations of the downturn. "We think we have properly positioned Horton going forward to take advantage [of the market opportunities]. Our motto is onward and upward."