Toro's Record Third Quarter Has Downside

Sales up just a tad (0.6%), but Q3 still Toro’s best ever; economic slowdown and drought hamper additional growth, leading to increase in field inventory.

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Toro’s fiscal third-quarter sales (ending August 3) increased 0.6% compared to the third quarter last year. Sales were $504.1 million compared to $501 million in Q3-2011.

For the first nine months of its fiscal year, Toro’s net sales are up 6.8% to roughly $1.6 billion.

May hits harder than anticipated. “In May, we anticipated a slowdown in the second half of our fiscal year due to a more challenging economic environment and the impact the early start to spring had on the business. What we didn’t predict was the worst drought in over 50 years,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We were still able to deliver favorable third-quarter results in comparison to last year, but the combined impact of economic and weather conditions resulted in additional slowing of retail momentum and an increase in field inventory.

“Despite the recent drought conditions, there continues to be many positives in our businesses. Our market positions remain strong, benefitting from a strong portfolio of new products. Year-to-date retail continues to be ahead of last year for many of our businesses including golf and micro irrigation. Even walk power mower sales are ahead of last year. And our internal focus on quality, cost and productivity helped deliver improved operating performance.

“Given the effects of recent weather conditions, the ongoing economic struggles in Europe, and the desire to right size field inventory levels, we are adjusting our fourth quarter guidance as we prepare the company for a successful 2013.”

Final-year forecast downgraded. The company now expects revenue growth for fiscal 2012 to be about 4-5%. Toro’s Q2 outlook called for 7-8% growth for the year.

Professional Segment

  • Net sales for Q3 totaled $361.1 million, up 4.4% from the prior-year period.
  • Sales of landscape maintenance equipment increased on the strength of new products and continued demand in markets not impacted by drought.
  • Domestic sales of golf equipment and irrigation were up on new products and continued golf industry confidence.
  • Micro irrigation sales increased domestically as demand continues for better solutions for agricultural irrigation.
  • Recent acquisitions – including Astec Underground, Stone Construction Equipment and Unique Lighting Systems – also contributed to sales.
  • International economic issues and unfavorable currency exchange negatively impacted the sales of all professional businesses.
  • For the first nine months, professional segment net sales were roughly $1.1 billion, up 7.7% percent from the comparable fiscal 2011 period.

Residential Segment

  • Net sales for Q3 totaled $135.9 million, down 7.9% percent from the prior-year period.
  • Snowblower sales were lower for the quarter due to anticipated soft preseason demand.
  • Shipments of walk power mowers were up slightly for the quarter, while sales of residential riding products were down.
  • Sales of Toro’s new string and hedgetrimmers also contributed incrementally to the quarter.
  • For the first nine months, residential segment net sales were $505.4 million, up 5.2% percent from the comparable fiscal 2011 period.
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