What happened
Shares of outdoor equipment business The Toro Company (TTC 0.90%) plunged on Thursday after management noted a sharp decline in demand during its fiscal third quarter of 2023. As of 3 p.m. ET, Toro stock was down almost 14%.
So what
In Q3, net sales for Toro fell 7% year over year to $1.08 billion. The decline was entirely attributable to the company's residential business segment, which saw a massive 35% pullback in net sales. Net sales for its larger professional segment were up 1%.
On the bottom line, Toro disappointed as well. In Q3, the company had a net loss of $15 million -- its first quarterly net loss in more than a decade. However, this is due to a huge $151 million impairment charge related to its acquisition of Intimidator Group.
Toro acquired Intimidator Group in early 2022 for $400 million. It looked like a decent deal at the time, considering Intimidator had net sales of $200 million in 2021. However, the slowdown in the residential lawn-care space undoubtedly played a part in this one-time write-down of $151 million.
Now what
The good news for Toro's shareholders is that the impairment charge is a one-time expense. Moreover, the company is struggling in residential now, but a partnership with Lowe's, announced today, could help. Previously, consumers could find Toro's equipment at The Home Depot. But now Toro's products will roll out to all Lowe's locations as well starting in early 2024. This could help get Toro's residential sales back on track.
With Toro's long history as a strong operator, I wouldn't be too worried about it -- sales will likely recover along with profits. That said, financial results could remain challenged until the economic headwinds that are affecting homeowners' budgets abate.
