The Toro Co TTC shares are trading lower by around 13% after the company reported worse-than-expected Q3 results and cut its FY23 guidance.
The company reported a sales decline of 7% Y/Y to $1.08 billion, missing the consensus of $1.22 billion.
Adjusted EPS of $0.95 (-20% Y/Y) missed the consensus of $1.24.
"The softness in homeowner demand was driven by 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...Macro factors drove reduced demand from homeowners, including purchase deferrals and trade-downs, as well as a reduction in orders by our dealer channel and an acceleration of destocking by our mass channel," said Richard M. Olson, chairman and CEO.
Sales by segments: Professional $896.3 million (+1.1% Y/Y), and Residential $175.3 million (-35.1% Y/Y).
Adjusted gross margin contracted to 34.4% from 34.5% a year ago. Adjusted operating margin expanded to 12.2% from 14.1% the prior year.
As of August 4, 2023, cash and equivalents stood at $147.93 million.
FY23 Outlook: Toro cut its outlook for adjusted EPS to $4.05-$4.10 (vs. $4.70-$4.80 earlier) vs. the consensus of $4.79 and now expects net sales similar to slightly higher than the prior fiscal year (vs. growth of 7%-8% earlier).
"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," added the CEO.
Apart from this, the company penned a strategic deal with Lowe's Companies Inc LOW, as per which Toro's product lineup will be available at all Lowe's stores for the Spring 2024 season.
Price Action: TTC shares are down by 13.6% at $86.14 on the last check Thursday.
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