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KB Home's Built-to-Order Model Boosts Margins
25 Jun
Summary
- KB Home's revenue plunged 27% to $1.11 billion in fiscal Q2.
- The built-to-order model offers cost certainty and margin visibility.
- Full-year housing gross margin is projected to rise to 16.1-16.5%.
KB Home experienced a significant revenue drop of 27%, totaling $1.11 billion in its fiscal second quarter ending May 31, 2026. Home deliveries saw a 23% decrease year-over-year, and the average selling price declined by 5.5%. Net income also fell to $27.3 million from $107.9 million in the prior year.
Despite these headwinds, CEO Rob McGibney expressed optimism about the company's transition to a built-to-order operating model. This new approach provides clear visibility into buyer commitments, pricing, construction costs, and delivery timelines before building commences. This shift aims to reduce incentives and improve cancellation rates.
Management anticipates improved profitability, with full-year housing gross margins expected to increase to between 16.1% and 16.5%, up from 15.2% in Q2. The company projects sequentially higher delivery volumes and gross margins in the final two quarters of fiscal 2026.
