Conference Call Notes (paraphrased, and parentheses are mine)
Closings for the first few months of the year have totaled 396, which is down from 477 last year. The primary reason our closings are down year-over-year is our inventory of completed homes was not as high as we would’ve liked. When we have better than expected closings in a certain community, there is a finite number of houses that we can sell before the next section needs to be ready, and we fell behind.
So not having inventory in our top performing communities in Texas in November and December had the greatest impact on January and February closings. We could have pulled forward some closings but the next sections of development just weren’t ready yet. We have five really high performing communities in Texas that literally had almost no closings in January and February. Over the next couple of months they will be ramping up and producing 8 to 10 closings per month on average. (8 closings per month, times 5 communities = an improvement of 40 closings per month in just those 5 communities)
So we recognize that sales were down year-over-year in November. However, sales over the last 90 days have been solid. December through February, net sales were up approximately 19% over last year. As we have previously stated, our goal is to close more than 4,700 homes in 2017. We believe we will close 375 to 425 homes in March, surpassing last year’s March closing number of 367 and gaining momentum to reach our closing goal in 2017. (If they hit 396 in March, that will be up 100% from the Jan / Feb average - Saul).
We ended February with 65 active communities and we believe we’ll have between 75 and 80 active selling communities by the end of 2017.
Here is one interpretation, what they are telling is, to meet our 2016 numbers we pulled forward some demand that left us with no inventory that we can sell in Jan and Feb. Remember LGI typically closes in 30 days, and for them not to have houses to sell in 2 months means they pulled forward the demand. That’s my reading. That doesn’t take away anything in the long run.
This is somewhat reflective when they talked about Jan sales being down by 14% which rebounded in Feb with 24% up. So basically the company pulled forward the sales to December and then instead of letting the closings fall on Jan they burned their inventory and left with no inventory.
Also note in Feb3rd press release on Jan closings the company said sales were off to a strong start but the numbers were actually down that month. No the company was not misleading the investors rather they might have deliberately throttled sales in some communities because they know they have nothing to sell. However rest of their markets trend is positive.
As we have previously stated, our goal is to close more than 4,700 homes in 2017.
I wasn’t able to listen to the actual conference call. Did they use any words that sounded more confident than that this is their “goal”? I know they cannot make any promises, and that you are paraphrasing what was said, but this doesn’t inspire a significant amount of confidence, in my view.
For the year, we expect to close more than 4,700 homes (Bold emphasis mine)
“We expect to close” is much more confident than “our goal is to close”.
Thanks Foodles…I did see that in the conference call MisterFungi was kind enough to post the link to.
I agree is it much more confident than “our goal is to close.”
I agree is it much more confident than “our goal is to close.”
The actual quote is “assuming a continuation of today’s housing market conditions for the remainder of the year, we offer the following guidance. As previously mentioned, we expect to close more than 4,700 homes in 2017”
The rate hike in March is now more or less certain and there is a possibility of 2 more hikes this year… are you still confident?
The rate hike in March is now more or less certain and there is a possibility of 2 more hikes this year… are you still confident?
I wasn’t saying that I am more confident…I was saying that that statement is more confident; to me, at least, an expectation sounds more confident than a goal.
As far as the actual quote you included in your post, CM001, a similar statement by LGI was discussed earlier this week or late last week, and some of us, including myself, took note that it appeared to be an “out” for LGI if they do not, in fact close more than 4700 homes this year. I am actually not very confident that LGI will close that many homes this year, but I am a bit more confident than I was several days ago. At this juncture, I am taking it a month at a time.
got it. I don’t know why, but somehow I am not able to get myself bullish on this name. Sometimes I guess I just have to buy some minimum stake and ignore myself.
One more tidbit from the CEO on the conference call: “Last week was the best sales week we’ve had in LGI history. So, we’re feeling confident that the closing number will catch-up to where sales are and we’ll close more than 4700 this year.”
We’ll see soon enough how this plays into March sales.
sales over the last 90 days are up approximately 19% year-over-year. So, it feels really good. Last week was the best sales week we’ve had in LGI history. So, we’re feeling confident that the closing number will catch-up to where sales are and we’ll close more than 4700 this year.
So it seems pretty clear that they EXPECT over 4700 closings this year. No-one totally KNOWS what the future will bring, but it’s pretty clear that they EXPECT over 4700 closings.