High income consumers enjoy the flexibility to design their new homes, and are ready to pay more to incorporate their personal choices. In order to keep pace with the varied requirements of homeowners, KB Home (KBH) is opening more design studios, expanding the size of its existing stores and introducing new displays, all of which contribute to its revenues.
KB Home recently unveiled a KB Home Design Studio in Daytona Beach, FL. KB Home is presently offering homes at five Daytona-area locations. The homebuyers at these locations can choose from one- and two-story home designs and these homes are priced from the high $100,000s. The new KB Home Design Studio will help homeowners to customize their new homes according to their preferences.
Customers can take their pick from various designs and latest home automation technologies. Buyers can also choose from a host of flooring and lighting options, cabinetry and energy-efficient appliances. KB Home customers will be assisted by trained professionals to help them choose from the various options available.
Homebuyers will be given the required information along with demonstration of various Energy Star certified appliances like tankless water heater and recessed LED lighting, which help reduce utility bills considerably.
Earlier this year, this homebuilding company opened new stores in Roseville, CA, Jacksonville, FL. and Washington, D.C. metropolitan area.
The introduction of KB Home Design Studios is in sync with the company’s fundamental operating model KBnxt. In order to drive profit per unit, KB Home operates through its operational business model – KBnxt – where construction is initiated only after a purchase agreement is executed.
KBnxt offers both revenue growth and cost efficiencies. KBnxt also helps the company turn over its inventory more quickly than its peers, thereby supplying capital for reinvestment. Over the long run, this reduces the risk of unsold inventory, leading to higher returns on invested capital. The company also enjoys cost efficiencies through inflow production and larger scale, which offsets labor and material cost pressures.
In fact, KB Home, a Zacks Rank #3 (Hold) company, surpassed the Zacks Consensus Estimate for both earnings and revenues in the second quarter of 2014, the results of which were released in June, on the back of solid revenues, strong housing gross margins, and better operating leverage. We expect opening of such studios to further boost its results.
Another homebuilding company, Lennar Corp. (LEN) beat expectations for both earnings and revenues in the second quarter of 2014, the results of which were released in June. However, other homebuilding companies like PulteGroup, Inc. (PHM) and D.R. Horton Inc.’s (DHI), missed earnings in the last reported quarter on soft orders. The results of both the companies were released in July.
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