The Toro Company (TTC): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at a company navigating a real split in its market, and honestly, the competitive forces are pulling The Toro Company in different directions as we hit late 2025. While the professional side is holding up-even expanding margins by 250 basis points in Q3 2025-the residential caution is real, projecting a mid-teens sales decline for FY2025. You need to see how high supplier leverage is, given that commodity risk impacted their adjusted gross margin at 34.4% that same quarter, and how fast battery substitutes are growing at 12.7% annually. I've broken down the five forces below so you can see exactly where the pressure points are for The Toro Company right now.

The Toro Company (TTC) - Porter's Five Forces: Bargaining power of suppliers

You're assessing the supplier landscape for The Toro Company, and honestly, it presents a clear area of potential pressure. The power of suppliers is elevated because the company's cost structure is directly tied to external commodity markets and specialized technology providers.

The Toro Company has a high reliance on key inputs for its manufacturing base. Their risk disclosures consistently point to the vulnerability associated with the cost and availability of core materials and parts, specifically naming steel, engines, hydraulics, and resins. When these foundational components become scarce or expensive, it immediately compresses profitability.

This exposure to raw material costs is clearly visible in recent financial performance. For instance, the adjusted gross margin in the third quarter of fiscal 2025 was 34.4%. The pressure on this margin was explicitly attributed, in part, to higher material and manufacturing costs. Furthermore, The Toro Company is actively managing external cost shocks; management updated the estimated incremental tariff impact for fiscal 2025 to $45 million, noting this impact is driven mainly by steel and aluminum tariffs.

The complex global supply chain magnifies these commodity risks, exposing The Toro Company to transportation volatility and broader inflation. Industry-wide analysis for 2025 confirms that inflation, driven by rising procurement and transport costs, is a top supply chain risk for many businesses. The company is fighting this head-on with its AMP (Amplifying Maximum Productivity) initiative, which is on track to deliver run rate savings of at least $100 million by 2027, aiming to offset these external pressures.

A growing source of leverage for certain suppliers comes from The Toro Company's push into advanced equipment. The introduction of autonomous products like the Turf Pro™ mower and Range Pro™ ball collector in early 2025 signals a need for specialized electronic and sensor components. Suppliers providing these high-tech, proprietary systems for autonomous and connected products hold significant leverage, as these inputs are not easily substituted and are critical for future product differentiation and growth in the Professional segment.

Here's a quick look at the financial and operational context influencing supplier power:

The power dynamic is further shaped by The Toro Company's strategic responses:

• Net price realization is being used to offset cost inflation.
• Productivity gains from the AMP program are essential.
• Strong demand in the Professional segment allows for some price absorption.
• Tariff mitigation strategies are actively being deployed.
• The need for specialized tech suppliers is increasing.

Finance: draft the Q4 2025 cost of goods sold variance analysis by next Tuesday.

The Toro Company (TTC) - Porter's Five Forces: Bargaining power of customers

When you look at The Toro Company's customer base right now, you see two very different worlds, and that really dictates their bargaining power. For the residential customer, power is definitely up, but for the professional customer, it's still pretty low in the short term.

Residential customers are definitely showing increased caution, which is hitting the top line hard. Management is projecting a mid-teens sales decline for the Residential segment in the full fiscal year 2025. To give you a concrete example of that pressure, the Residential segment net sales for the second quarter of fiscal 2025 were down 11.4% year-over-year, falling to $297.4 million from $335.6 million the prior year. Honestly, this caution stems from broader macro factors, and it forces The Toro Company to use more promotions to move product.

The power of large retail buyers, like mass merchandisers, is also increasing because they represent a huge volume channel. The strategic retail partnership with Lowe's Companies, Inc., which started for the spring 2024 selling season, gives that retailer significant leverage in negotiations for products like zero-turn riding mowers and snow blowers. We know The Toro Company's Zero-Turn share grew to 25% there in 2024, which shows how important that channel is, even if it comes with higher buyer power.

Switching costs for those residential customers are low; it's not like they are locked into a proprietary ecosystem for a simple walk-behind mower. If a homeowner is unhappy with the service or price, they can easily pivot to a competitor's gas or battery-powered equipment. That ease of switching keeps the pressure on The Toro Company's pricing and service promises.

Now, flip the coin to the Professional segment-golf, construction, and infrastructure. Here, customer power is limited because demand remains robust. These customers are often buying mission-critical equipment, and the secular trends in golf and infrastructure remain intact with multiyear visibility. For instance, in the third quarter of fiscal 2025, the Professional segment net sales actually increased 5.7% year-over-year to $930.8 million, and their segment earnings margin expanded by 250 basis points to 21.3%. That kind of performance shows that when a professional customer needs a new underground drill or a grounds maintenance machine, they are buying now, which limits their ability to demand steep concessions.

Here's a quick look at how the segments performed in Q3 FY2025, which really illustrates this customer dynamic:

The contrast is stark. The professional side, driven by continued strong demand, is protecting margins, while the residential side is seeing margins collapse to 1.9% in Q3 FY2025, largely due to lower volume and higher sales promotions needed to drive demand.

To summarize the customer power dynamics:

• Residential segment customers have defintely increased caution, leading to a projected mid-teens sales decline in FY2025.
• Mass retailers like Lowe's gain power; The Toro Company's Zero-Turn share grew to 25% there in 2024.
• Professional customers (golf, construction) show continued robust demand, limiting their short-term power.
• Low switching costs for residential customers between competing equipment brands.

Finance: draft 13-week cash view by Friday.

The Toro Company (TTC) - Porter's Five Forces: Competitive rivalry

You're looking at a battleground where The Toro Company fights global giants like Deere & Company and Kubota Corporation for every acre of turf. This rivalry is fierce because the Commercial Lawn Mower Market itself only grew from $7.48 billion in 2024 to $8.07 billion in 2025. That's a relatively modest jump, meaning market share gains are definitely a zero-sum game right now.

Competition is forcing The Toro Company to push hard on new tech. You see this drive in the industry's shift toward advanced battery chemistries and hybrid drive architectures. Robotic and zero-turn systems with adaptive mapping are moving from testing to actual deployment, which means The Toro Company has to keep pace or risk being left behind on efficiency mandates.

The market's maturity shows up clearly in the performance split between your segments. While the Professional segment is showing strength, the Residential segment is struggling badly with consumer caution. This divergence suggests that price sensitivity and demand cycles are hitting different customer bases in very different ways.

The Professional segment margin expanded by 250 basis points in Q3 2025 due to execution and cost controls. That's a significant operational win in a tough environment. Here's how the key professional numbers looked for the third quarter ended August 1, 2025:

Still, the cost structure remains under pressure from external factors. You have to factor in the impact of tariffs, which The Toro Company estimated at approximately $70 million for fiscal 2025. To fight back against these costs and competitive pricing, The Toro Company is leaning hard on internal efficiency.

The competitive pressure is being met with internal cost-saving actions:

• AMP program run rate savings target by 2027: at least $100 million.
• Annualized savings achieved from AMP as of Q3 2025: $75 million.
• Residential segment sales decline in Q3 2025: 27.9%.
• Residential segment margin collapse in Q3 2025: from 12.2% to 1.9%.

The Toro Company is using net price realization and productivity improvements to defend its margins in the professional space. Finance: draft 13-week cash view by Friday.

The Toro Company (TTC) - Porter's Five Forces: Threat of substitutes

The threat from substitute products and services remains a significant factor for The Toro Company, particularly as technology shifts power sources and ownership models change. You see this pressure most clearly in the move away from traditional gas-powered equipment.

The substitution threat from battery-powered equipment is high. This segment held a 31.5% market share in 2023, and the segment is growing fast, at an annual rate of 12.7%. To put this in context against the broader market, the global Outdoor Power Equipment Market size is estimated at USD 46.64 billion in 2025, with the electric segment being the fastest-growing power source. For a specific regional example, battery-powered tools are expected to account for 30% of total sales in Japan in 2025.

The shift is not just about power source; it is also about automation. Professional customers are adopting autonomous machinery for labor and cost savings. The Robotic Lawn Mower Market, a key area of automation, is projected to grow from USD 1.2 billion in 2025 to USD 3.7 billion by 2035, showing a compound annual growth rate (CAGR) of 11.9%. Specifically for commercial users, robotic installations are set to expand at a 17.2% CAGR through 2030. The Toro Company is actively responding, having showcased its Toro® Turf Pro™ autonomous mower and Toro® Range Pro™ golf ball picking robot during the first quarter of fiscal 2025.

Another form of substitution comes from changing ownership models. Rental market services substitute for direct equipment purchases, especially for specialty construction, which is a segment The Toro Company serves with brands like Ditch Witch. This trend is noted as a key driver in the overall market, with expanding rental services fueling Outdoor Power Equipment Market growth through 2030. This dynamic is reflected in The Toro Company's own business structure, which includes rental and specialty construction solutions.

The impact of these substitutes is visible in The Toro Company's own segment performance. For instance, in the third quarter of fiscal 2025, Residential segment net sales were $192.8 million, a decrease of 27.9% year-over-year, driven by lower demand from homeowners. Conversely, the Professional segment, which includes equipment facing direct robotic competition on golf courses, saw earnings margins expand to 21.3% in Q3 FY2025, up from 18.8% in the prior-year period.

Here is a quick comparison of key market dynamics:

The company's full-year fiscal 2025 guidance projects total company net sales to be flat to down 3%.

You should track the commercial adoption rate for autonomous machinery closely. Finance: draft 13-week cash view by Friday.

The Toro Company (TTC) - Porter's Five Forces: Threat of new entrants

You're looking at The Toro Company's defenses against fresh competition, and honestly, the barriers to entry here are pretty substantial, though not insurmountable. New players face steep initial hurdles, especially in established product lines.

High capital expenditure is required for manufacturing and a comprehensive service network. For instance, The Toro Company's planned capital expenditures for the full fiscal 2025 year are budgeted at about $90 million. Think about that scale; a newcomer needs to match that kind of investment just to keep pace on the production and maintenance side of things.

Established brand loyalty and an extensive dealer/distributor network create a major barrier. The Toro Company's family of brands reaches customers in over 125 countries through a strong network of distributors, dealers, retailers, and rental stores. To give you a concrete example of brand trust, Exmark mowers, one of their brands, are trusted 2-to-1 over the next best-selling brand of zero-turn mowers by landscape professionals. That kind of channel penetration and customer trust takes decades to build.

Regulatory shifts toward zero-emission equipment lower the barrier for specialized electric-only entrants. This is where the dynamic shifts a bit. California Air Resources Board (CARB) already required most new small off-road engines, like those in lawn mowers, to be zero emission starting in Model Year (MY) 2024. Plus, some states are actively incentivizing the switch; Washington State, for example, dedicated $5,000,000 per year from calendar year 2025 through 2029 for grants to replace fossil fuel equipment with zero-emission alternatives. A specialized, well-funded electric-only startup might find a regulatory wedge here, bypassing some of the legacy ICE (internal combustion engine) infrastructure costs.

The company's AMP initiative aims to deliver $100 million in savings, raising the efficiency bar for newcomers. This productivity drive is a direct countermeasure to margin pressure from potential new entrants. As of September 2025, The Toro Company was already delivering $75 million in annualized savings from the AMP program, which targets at least $100 million in run-rate savings by fiscal 2027. This efficiency gain makes it harder for a new competitor to price aggressively while maintaining a healthy margin, especially when The Toro Company's TTM revenue was $4.52 billion as of July 2025.

Here's a quick look at how these forces stack up against a potential new entrant:

The existing scale is definitely a deterrent. You'd need significant venture backing to challenge the established footprint. Still, the push toward electrification means a smaller, nimbler competitor focused solely on battery technology might find an opening, especially in markets with strong zero-emission incentives like the $5,000,000 annual grant program in Washington starting in 2025.

Finance: draft a sensitivity analysis on the impact of a 10% drop in gross margin versus the $100 million AMP savings target by Q4 2026.