Toro had a strong spring quarter, but it would have been better if home owners had bought more lawn mowers.
Professional sales were still strong, but a cold spring paired with lower consumer spending, particularly for home and garden products, dampened the Bloomington-based company's second-quarter sales and led to narrowing its financial guidance for the rest of its fiscal year.
In the quarter ended May 5, residential sales were $265.8 million, down nearly 17% from the same period a year ago.
Toro's professional segment is bigger than the residential division and its strong quarter led Toro to report profits of $167.5 million, or $1.59 a share, a 28% increase over the same period a year ago.
Overall sales rose 7% to $1.3 billion.
Analysts were expecting profits of $1.52 a share. Sales missed expectations by 6.9%.
"In our residential segment, sales volume and earnings were pressured by unfavorable weather patterns and macroeconomic factors," said CEO Richard Olson in a news release. "Once again, the strength of our diversified portfolio, growing scale and disciplined team drove positive results overall."
While the professional segment saw broad growth, construction and golf course customers led the way to a 15.4% revenue gain. The segment's net income grew 37.6%.
Sales and earnings for Toro's residential segment had increased in the first quarter, but shipments of products across the segment slowed. Earnings of the residential segment were 8.6% of overall earnings down from 11.6% of overall earnings in their second quarter a year ago.
Toro tracks when spring arrives across North America and in other key markets. In Toro's first quarter the residential segment results were trending above the pace from a year ago when it looked like it would be an early spring.
"The biggest factor and the one that can trump other factors, including the economy, etc., is weather and seasonal timing," Olson told analysts regarding the decline on the residential side.. "So that's what shifted shortly after our last call."
Toro has tightened its guidance for the remainder of the year. After the first quarter the company said they expected overall sales to increase 7% to 10% for the year and adjusted EPS in the range of $4.70 to $4.90 a share.
Now the company is expecting sales growth in the 7% to 8% range and adjusted EPS in the range of $4.70 to $4.80 a share.
"The more subdued outlook appears to reflect the impact of macro uncertainty and consumer spending patterns on the residential segment," wrote Garrett Nelson, vice president and senior equity analyst at CFRA Research in a note to investors.
The company says it still has a strong backlog in its professional segment and that production and supply chains will continue to improve but that the residential segment will remain challenged for the rest of the year.
"For the residential segment, we expect sales volume in the second half to be challenged by macroeconomic uncertainty and consumer spending patterns, and to also reflect the impact of the unfavorable weather year to date," Olson said.
Shares of Toro closed Thursday at $97.03, down 7.3% on the day. Year to date, Toro's shares have had a negative 14% total return.