Outdoor power equipment manufacturer The Toro Co.’s joint financing venture Red Iron increased originations volume during the first six months of fiscal 2025 despite a drop in net sales for the second consecutive quarter at the parent company.
Red Iron, owned 45% by Toro and 55% by Huntington Distribution Finance, saw declines in net sales and residential segments sales, which overshadowed slight growth in the professional segment during the second quarter of Toro’s fiscal 2025, which ended May 2, according to Toro’s 10-Q filing with the Securities and Exchange Commission.
Sales fall as confidence remains weak
Toro had net sales of $1.3 billion, down 2.3% year over year, driven by a double-digit percentage decline in residential sales, according to the company’s earnings release. Toro had its modest growth in the professional segment offset by declining shipments in professional, while residential segment shipments also fell, Richard OIson, chairman and chief executive, said during today’s earnings call.
Professional segment sales were “partially offset by lower shipments of underground products, largely due to the divestitures of construction equipment dealers and lower shipments of specialty construction equipment, more specifically, compact utility loaders,” he said.
Meanwhile, the residential sales decline “was primarily driven by lower shipments of walk power mowers, zero-turn mowers and portable power products and the pump products divestiture last year,” he said.
While farmer sentiment hit a four-year high in May, farm capital investment and equipment lenders’ confidence remain limited. As a result, it is unlikely that Toro will recover sales lost during the spring, so the company is lowering 2025 guidance to between flat and down 3% after previously forecasting slight growth, Olson said.
“We’re not going to get those sales back from a later spring, especially in an environment where confidence is lower for those customers,” he said. “It shows up in residential directly, and it shows up in professional by virtue of the products that are purchased by homeowners in that landscape contractor category.”
Noteworthy
Similar to other OEMs like John Deere and Komatsu look to manage tariffs with price increases, Toro expects a slight price increase over the course of the rest of 2025, Angela Drake, vice president and chief financial officer, said on the call.
“If we look forward to Q3, we haven’t guided, but our price should be up based on the implemented tariff price actions that we have taken,” she said. “Overall, for the full year, we expect our price to be slightly higher than our normal 1% to 2%, but we’d also expect to see higher costs.
By the numbers
Originations at Red Iron and third-party financial institutions rose in the first six months of fiscal 2025, as demand for financing increased due to challenging financial conditions. According to the 10-Q:
- Net receivables financed for dealers and distributors under Red Iron for the first six months of fiscal 2025 totaled $1.3 billion, up 15.5% YoY;
- Total Red Iron outstandings landed at $1 billion, up 2.9 basis points YoY;
- Total receivables due from Red Iron to Toro were $19.3 million, down 45% YoY;
- Net receivables financed for dealers and distributors by third-party financial institutions reached $319.2 million, up 5% YoY;
- Total third-party financial institution outstandings finished at $253.5 million, up 33% YoY;
- Toro’s total investment in Red Iron as of May 2 reached $51.2 million, down 1% YoY;
- Professional segment net sales rose to $1 billion in Q2, up 0.8% YoY; and
- Residential segment net sales fell to $297.4 million in Q2, down 11.4% YoY; and
MARKET REACTION: Shares of The Toro Co. (NYSE: TTC) were down 3% or $2.28 from market open to $73.30 as of market close today. The company has a market capitalization of $7.65 billion.
