NEW YORK (Reuters) - PulteGroup Inc (PHM.N), the second-largest U.S. homebuilder, says its margins lag many of its peers but will improve in the second half of the year.
The company is making improvements based on painful lessons learned during the downturn, Chief Executive Officer Richard Dugas told the Reuters Global Real Estate and Infrastructure Summit.
“Success is a terrible teacher,” Dugas said, quoting Microsoft Corp (MSFT.O) founder Bill Gates.
To boost margins, which the company said were 16.9 percent when it reported first-quarter earnings in late April, the company plans to place more authority in the hands of regional and local managers.
The move contrasts with the trend of centralizing power and standardizing operations which prevailed during the housing boom, Dugas said.
“If a local vendor for a product is more aggressive than a national vendor, we’ll go with the local one,” Dugas said.
Making more features of Pulte’s homes optional instead of part of a standard plan set at corporate headquarters will also enhance margins, Dugas said, because when customers actively choose an upgrade like fancy cabinets, the company tends to make more money.
Pulte has also learned how to put its homes together more efficiently, from truss layouts to climate control.
“We’re projecting margin growth,” Dugas said. “But part of the reason is catch-up to where we should be.”
Reporting by Helen Chernikoff, editing by Matthew Lewis