Toll's hard-times strategy: Sell fancy homes cheaper

Toll Bros. Inc. is down $1.35 to $18.14 in early p.m. trading, after posting a fiscal-year loss of $756 million today. Boss Bob Toll tells investors there are "some signs of recovery." Report here.

"Toll is not building homes at break-even," warns veteran financial analyst Merrill Ross, now at BGB Securities.in Virginia. The company keeps cutting prices. It's also paid down debt, reducing pricing pressure. It's working: Toll's lower prices (around $540,000 for next year, down from over $700,000 two years ago) are successfully "capturing market share of luxury home buyers," Ross told clients in a report today.

But those buyers are still "few and far between," and Ross expects "sales will continue to be depressed through 2010." She cut her price target to $20, from $23.

Can Toll preserve its brand? What'll it take to boost the stock? The "key" is being able to market "luxury homes as an investment to build individual wealth."  Not just a place to live. Nostalgia for the 1990s and the mid-2000s.