Toro looks to technology investment as earnings decline

Toro’s second-quarter earnings are declining and profit margins are declining due to inflation and supply chain costs.

However, its revenue calls and presentations were still bright, with a focus on how new technologies could help companies keep pace and outperform their competitors in several ways.

For example, earlier this year, a Bloomington-based company introduced an autonomous fairway lawn mower at a major golf industry trade fair, and last week unveiled a robotic lawn mower for the residential market in the spring 2023 season. Announced.

Richard Olson, Toro’s president and CEO, was too early to predict accurate sales of the new product, but the company’s second-quarter earnings announcement told analysts that the reaction to the new product was “overall. It ’s very nice. ”

Last year, Toro spent about $ 130 million on research and experimentation. The share of investment in net sales over the last decade has steadily increased from about 1.5% of net sales to over 3.5%.

Olson told analysts that he hopes the new technology will have a significant impact in the future.

“We are looking at what a stable flow of some really exciting products should be in the future, which also gives us confidence in the future,” Olson said.

Meanwhile, executives said global supply chain issues helped push Toro’s gross profit down from 35.1% in the second quarter of last year to 32.4%. Higher acquisition costs, higher raw material prices, and higher freight and production costs also contributed.

Margins have improved compared to Toro’s first quarter, but the company has made operational improvements, added price increases and relied on new products to boost future profits.

Revenue for the quarter was down 8% to $ 131.1 million, or $ 1.24 per share. Adjusted revenue of $ 1.25 per share also declined, but exceeded analysts’ expectations.

Sales of $ 1.25 billion increased by 8.7%, but missed analysts’ expectations. Toro shares closed at $ 85.44, up 5.5% on Thursday. Over the last 52 weeks, Toro shares have ranged from $ 74.29 to $ 115.68.

Higher prices and the acquisition of Intimidator Group, a manufacturer of zero-turn lawnmowers under the Spartan brand, increased sales in the professional segment by 12%. Sales in the housing business were up only 1.7%, and sales were down 19%, partly due to the delay in the arrival of spring.

Despite supply chain challenges, demand remains strong and Toro is raising guidance for the rest of the fiscal year, Olson said in a quarterly earnings announcement. The company currently expects fiscal year sales to increase 14-16% and adjusted earnings per share in the range of $ 4-4.15.

Olson pointed out that the Revolution series of battery-powered professional lawnmowers was announced last fall as evidence of how the new technology can help. This line will begin to contribute to the top line total later this year.

Along with strategic acquisitions, these technological advances to stay ahead of the competition in the market will continue to be a major driver of Toro’s quarterly results.

Last week’s announcement of the robot lawn mower “far exceeded our expectations in terms of interest and the number of social media and other retailers that covered it,” Olson said.

“By strategically investing in key technology areas of alternative power, smart connected and autonomous solutions, we will continue to bring new products to market that meet our customers’ current and future needs,” Olson said in the release.