For the quarter ended Aug. 4, the Toro Company recorded a net loss of $15 million, or 14 cents a share, compared to a profit of $125.2 million in the same quarter last year. In a separate news release, the company also announced a new strategic partnership with Lowe’s (LINK TO THIS).
“During the third quarter, we experienced a sharp and accelerated reduction in homeowner demand for residential and professional segment lawn care products,” said Richard M. Olson, chairman and chief executive officer in a prepared statement. “This drove the underperformance versus our expectations, and also led to the Intimidator Group non-cash impairment charges. Demand was strong across the rest of our end customer base, and with that, the other businesses in our diverse portfolio delivered excellent growth in the quarter.”
Olson pointed to “a combination of macro factors, including economic uncertainty, higher interest rates, and consumer spending preferences following a period of exceptional demand during the pandemic, along with unusually unfavorable weather patterns.” He said these factors drove reduced demand from homeowners, and reduced dealers orders. He added, “Dry conditions in key regions persisted throughout June and into July, which delayed replacement needs and slowed mid-season channel replenishment orders.”
Olson said that Toro sees strong demand within the professional segment for underground and specialty construction, as well as golf and grounds solutions products. He added, “Importantly, with improved supply and our team’s operational execution, volumes were up significantly for those businesses on a year-over-year basis, as lead times continued to improve.”
“As we look ahead, we have and are taking appropriate actions to further align costs and production to demand trends that we expect will continue into fiscal 2024,” said Olson. “We believe the combination of macro dynamics and weather patterns this year has exacerbated the rebalancing of homeowner demand for lawn care solutions in both of our residential and professional segments, which has resulted in elevated dealer field inventories of those products, along with higher floorplanning expense than originally anticipated.
“We believe our market leadership and business fundamentals remain strong. We have a proven ability to manage through economic cycles and seasonal variations, as evidenced by our long history of delivering positive results. We continue to prioritize investments that we expect will drive long-term profitable growth, supported by our empowered and resilient team of employees and channel partners. We believe we remain well-positioned to grow share and profitability in each of our attractive end markets with our strong brands, innovative new product pipeline and extensive distribution networks,” concluded Olson.
For the fiscal year ending October 31, 2023, the company now expects net sales similar to slightly higher than the prior fiscal year, and adjusted diluted EPS in the range of $4.05 to $4.10. The updated full-year outlook is based on management’s current visibility, and assumes continued supply chain stabilization, incremental manufacturing inefficiencies as production is further aligned to demand, and a continuation of the macro factors that affected third quarter results.
Q3 2023 Fiscal Segment Results
Toro’s Professional Segment
Professional segment net sales for the third quarter were $896.3 million, up 1.1% from $886.2 million in the same period last year. The increase was primarily driven by higher shipments of underground and specialty construction, and golf and grounds products, and net price realization, partially offset by lower shipments of lawn care equipment.
Professional segment earnings for the third quarter were $13.0 million, down 92.1% from $166.2 million in the same period last year, and when expressed as a percentage of net sales, 1.5%, down from 18.8% in the prior-year period. The decrease was primarily due to gross non-cash impairment charges of $151.3 million, and higher material and manufacturing costs, partially offset by productivity improvements and net price realization.
Toro’s Residential Segment
Residential segment net sales for the third quarter were $175.3 million, down 35.1% from $270.0 million in the same period last year. The decrease was primarily driven by lower shipments of products broadly across the segment.
Residential segment earnings for the third quarter were $3.8 million, down 85.4% from $26.3 million in the same period last year, and when expressed as a percentage of net sales, 2.2%, down from 9.8% in the prior-year period. The decrease was primarily driven by lower volume and unfavorable product mix, partially offset by lower material costs.