The Toro Company reported results for its fiscal third quarter ended August 1, 2025 on Sept. 2, 2025. In a news release issued by the Bloomington, Minn.-based company, Toro reported that operating performance was driven by strength in the professional segment.
“We delivered third-quarter adjusted earnings that exceeded our expectations, with our professional segment achieving 6 percent growth and 250 basis points of margin expansion,” said Richard M. Olson, chairman and chief executive officer.
- Underground construction and golf and grounds were primary drivers of net sales and profitability for the quarter. Third-quarter net sales were $1.13 billion, down 2 percent from the same period in fiscal 2024, with approximately half of this difference due to prior year divestitures of non-core assets.
- Third-quarter reported diluted earnings per share were $0.54, including a non-cash impairment charge of ($0.62) per diluted share, or ($81) million pretax. The impairment reflects the impact of weak homeowner demand and a slower-than-expected market recovery for the Spartan business.
- Third-quarter *adjusted diluted earnings per share up 5 percent year-over-year to $1.24, as improved professional segment profits more than offset lower residential segment earnings.
- Deliberate actions to improve efficiency are delivering meaningful cost reductions, with the AMP program on track to deliver run rate savings of at least $100 million by 2027.
- The company continued to drive improvement in free cash flow through the third quarter due to net favorable working capital.
- Full-year fiscal 2025 net sales and earnings per share guidance remain within previously communicated ranges.
“Strong momentum in underground construction and golf and grounds, coupled with savings from our AMP productivity program, enabled us to exceed adjusted earnings expectations despite headwinds in our Residential segment,” says Olson. “Looking ahead, while we are taking a prudent approach, given challenges in Residential, our continued innovation leadership and focus on productivity, position us to further improve profitability and shareholder returns as markets recover.”
OUTLOOK
"We are taking decisive actions to strengthen our resilience and accelerate performance. Our AMP program, delivering $75 million in annualized savings today and targeting at least $100 million by 2027, combined with proactive tariff mitigation and strategic capacity alignment, positions us to deliver earnings growth independent of revenue expansion," concluded Olson.
For fiscal 2025, management expects total company net sales and adjusted diluted earnings per share to both be at the lower end of prior guidance ranges: net sales flat to down 3% and *adjusted diluted earnings per share of about $4.15.
This guidance is based on current visibility, inclusive of anticipated tariff impacts, and reflects: a reduction in volume from macro factors that have driven increased homeowner and channel caution, continued strong demand and stable supply for our underground construction and golf and grounds businesses, and weather patterns aligned with historical averages for the remainder of the year.
THIRD-QUARTER FISCAL 2025 SEGMENT RESULTS
Professional Segment
Professional segment net sales for the third quarter were $930.8 million, up 5.7% from $880.9 million in the same period last year. The increase was primarily driven by higher shipments of underground construction and golf and grounds products, as well as net price realization, partially offset by prior year divestitures.
Professional segment earnings for the third quarter were $198.5 million, up from $165.7 million in the same period last year, and when expressed as a percentage of net sales, 21.3%, up from 18.8% in the prior-year period. The increase in profitability was primarily due to productivity improvements, net price realization, net sales leverage, cost savings measures, and lower marketing costs, partially offset by higher material and manufacturing costs.
Residential Segment
Residential segment net sales for the third quarter were $192.8 million, down 27.9% from $267.5 million in the same period last year. The decrease was primarily driven by lower shipments across the segment due to lower demand from homeowners.
Residential segment earnings for the third quarter were $3.7 million, down from $32.6 million in the same period last year, and when expressed as a percentage of net sales, 1.9%, down from 12.2% in the prior-year period. The decrease was largely driven by lower net sales volume, higher material and manufacturing costs, inventory valuation adjustments, and higher sales promotions and incentives, partially offset by productivity improvements and cost savings measures.
OPERATING RESULTS
Gross margin and *adjusted gross margin for the third quarter were 33.7% and 34.4%, respectively, down from 34.8% and 35.4%, respectively, in the same prior-year period. The change in gross margin was primarily due to lower net sales volume, higher material and manufacturing costs and inventory valuation adjustments, partially offset by productivity improvements, net price realization, and product mix.
SG&A expense as a percentage of net sales for the third quarter was 20.8%, compared with 22.0% in the prior-year period, primarily driven by cost savings measures and lower marketing costs, partially offset by lower net sales volume.
Operating earnings as a percentage of net sales were 5.7% for the third quarter, compared with 12.8% in the same prior-year period. *Adjusted operating earnings as a percentage of net sales for the third quarter were 13.6%, compared with 13.7% in the same prior-year period.
Interest expense was $15.1 million for the third quarter, up $0.6 million from the same prior-year period. This increase was primarily due to higher average outstanding borrowings, partially offset by lower average interest rates.
The reported effective tax rate for the third quarter was 7.4%, compared with 17.3% in the same prior-year period, primarily due to the impact of the non-cash impairment charge and a more favorable geographic mix of earnings, partially offset by lower tax benefits recorded as excess tax deductions for stock-based compensation. The *adjusted effective tax rate for the third quarter was 17.3% compared with 18.0% in the same prior-year period, primarily due to a more favorable geographic mix of earnings.
