An investment in boring Toro has done better than most
The Bloomington-based firm that got its start building tractor engines has been one of the best-performing Minnesota stocks of the last decade beating out the likes of Best Buy Target Wells Fargo and Toro has treated its long-term investors to annual returns averaging almost percent since September significantly outpacing gains chalked up by General Electric Procter Gamble the and most other major indexes.That a year old manufacturing company could leave some of the mostly widely held and closely followed stocks in the dust should be a comfort to anyone who doubts the long-term competitiveness of Americas factories.
Yes American manufacturers can compete without having to shift most of the work to foreign factories. The secret to being able to do so may lie in the sustained commitment Toro has made to acquiring and developing new technologies that help make their customers more productive.Toro may be a decidedly Old Economy company but more than a decade ago,fashion wholesale, management concluded that adopting a New Economy mind-set was the only way to revive its moribund stock price.
Among other things this has meant a succession of progressively more aggressive profit and revenue goals better processes to manage inventory and working capital and an accelerated new product cycle which was supported by a significant boost in research and development spending, from percent of annual revenue to percent. In recent years it has been as high as percent of sales or more than million.Adopting these more stringent objectives really marked the transformation in our performance said Michael Hoffman a year Toro veteran who became its CEO in Toro initially scrutinized its costs particularly its manufacturing operations with the goal of becoming leaner and more efficient. Not that anybody would mistake Toro for a company that was fat and happy. The corporate headquarters has been at its current location since
Today, Toro employs about the same number of people as it did in even though sales are about percent higher How has Toro managed this Not by shifting all the work abroad. As Toros international sales have grown so too have the number of foreign factories including the latest in Romania But Toro still makes things in Minnesota Wisconsin California and Texas and percent of its workforce is unionized down only slightly in the past decade.The recession forced Toro to make painful cuts across the company including offering early retirement buyouts and instituting layoffs that reduced headcount by almost percent. But it didnt close any factories and it resisted the temptation to slash spending.
It would have been really easy to reduce our spending from percent to percent and take back those dollars Hoffman said.But that would have hurt new product development at precisely the time Toros customers were looking for equipment such as zero-turn radius and stand-on mowers that would allow them to do their jobs better