Toro Co.’s Red Iron originations rise as professional segment grows

Outdoor power equipment manufacturer The Toro Co.’s joint financing venture increased originations during the first nine months of fiscal 2025 as professional segment sales increased and residential sales dropped. 

Red Iron, owned 45% by Toro and 55% by Huntington Distribution Finance, increased its originations during the first nine months, but outstandings declined amid declining net sales during the third quarter of Toro’s fiscal 2025, which ended Aug. 1, according to Toro’s 10-Q filing with the SEC. 

Toro had net sales of $1.1 billion, down 2.2% year over year, driven by another double-digit percentage decline in residential sales, according to the company’s earnings release today.  Q3 net sales fell from divestitures and residential weakness, but strong professional demand and margin gains positioned the company for a stronger 2026, Richard OIson, Toro’s chairman and chief executive, said during today’s earnings call. 

“Channel inventory is clearing meaningfully, particularly in residential, setting up a cleaner foundation for the 2026 selling season, and our order books remain healthy in key professional categories as we continue to launch innovative products that resonate with our customers,” he said. “Most importantly, the secular trends driving our golf and infrastructure businesses remain intact with multiyear visibility that supports our growth investments.” 

Toro maintained market share, with recent retail strength helping offset slower big-ticket consumer demand, although inventory remains a concern for dealers, Olson said. 

“What you see is hesitancy, particularly by dealers, to restock at this point in the current environment, so that’s most of the dynamic, holding market share and seeing the benefit of longer retail in those channel partners,” he said. “The good news is, even though they’re not taking more stock, we are further adjusting the field inventory.” 

Tariff impact

Toro also updated its estimated incremental 2025 tariff impact to $45 million compared with $65 million estimated during the second quarter, with the impact now driven mainly by steel and aluminum tariffs. But the company expects to remain margin-neutral by yearend through pricing actions, productivity gains and continued margin recovery in professional segments, Angela Drake, vice president and chief financial officer at Toro, said on the call. 

“We’re getting the net price realization from the tariff mitigation efforts, pricing that we implemented, and also additional pricing and some lower marketing costs, but the piece of the homeowner that carries over into our professional segment is also impacting us somewhat there,” she said 

By the numbers

Originations at Red Iron and third-party financial institutions increased during the first nine months of Toro’s fiscal 2025, although challenging financial conditions and continued poor residential sales have resulted in declining outstandings. According to the 10-Q: 

• Net receivables financed for dealers and distributors by Red Iron for the first nine months of fiscal 2025 totaled $2 billion, up 7.3% YoY;  

• Total Red Iron outstandings landed at $821.1 billion, down 11.5 % YoY;  

• Total receivables due from Red Iron to Toro were $33.5 million, up 17.1% YoY;  

• Net receivables financed for dealers and distributors by third-party financial institutions reached $505.7 million, up 14.4% YoY;  

• Total third-party financial institution outstandings finished at $272.1 million, up 19.1% YoY;  

• Toro’s total investment in Red Iron as of Aug. 1 reached $41.3 million, down 11% YoY; 

• Professional segment net sales increased to $930.8 million in Q3, up 5.7% YoY; and 

• Residential segment net sales dropped to $192.8 million in Q3, down 27.9% YoY. 

MARKET REACTION: Shares of The Toro Co. (NYSE: TTC) were up XX% from market open to $XX as of market close today. The company has a market capitalization of $XX BILLION.