The company whose mowers cut grass on the PGA tour is looking for ways to get its equipment into more homes.
Deere & Co.'s — whose name is practically synonymous with farm equipment — is struggling with sliding sales of lawn tractors, leaf blowers and other machinery to consumers and businesses.
Sales in the company's commercial and consumer equipment division fell 6 percent to $1.23 billion in the second quarter ended April 30. Deere blamed poor weather, while analysts say rising interest rates may also be curbing demand.
Now the Moline, Illinois-based company is trying to hold its ground for the rest of the year while looking for future growth in a sales alliance with the Lowe's home-improvement chain and by using builders to showcase its products.
Deere Tuesday repeated its forecast of flat to 3 percent sales growth at the division for the fiscal year.
"You had big purchases last year," said analyst Eli Lustgarten of Longbow Securities, who puts the sales growth figure at 1 percent. "Comparisons are tough."
Lustgarten has a "sell" rating on Deere shares, based on a downturn he expects in the company's farm business.
Deere's problems are not unique to the company, as the industry is seeing softer demand from customers like golf courses, Lustgarten said.
"The consumer markets are not exactly robust," he added.
Division President John Jenkins agreed that his business is following the same trends as the rest of the industry.
From a market share standpoint, "we service the same pie; it's just a smaller pie to service," Jenkins said.
Deere, which already sells its lawn tractors through Home Depot Inc. and other retailers, said this week that Lowe's Cos. will begin carrying them in January.
The move is part of Deere's drive to attract high-end consumers. "Most of our product is geared at the middle and upper end of the marketplace, and we tend to ... be very careful in positioning ourselves," Jenkins said. "You aren't going to find us to be the lowest-priced machines."
In a research note, analyst Mark Koznarek of FTN Midwest Securities said sales at Lowes should add 10 cents to Deere's 2006 earnings. Koznarek, who has a "neutral" rating on the stock, forecast profit of $6.70 per share, up from $6.25 this fiscal year.
In another attempt to increase sales, Deere is starting a pilot program with St. Lawrence Homes.
The builder will develop the first John Deere Signature Community. Deere will supply landscaping equipment and services, included in the purchase price of the houses, which range from $300,000 to $500,000.
Home buyers in the Trenton community in Durham, North Carolina, can choose a Deere landscaping service plan or a package of tools that includes a $2,700 riding mower, a $219 handheld blower and other high-end products.
"We'd be interested in talking with other builders in areas throughout the U.S.," Jenkins said.
Longbow analyst Lustgarten called the signature community concept an interesting way to stimulate growth at the division.
"In order to foster more stable, predictable growth," he said, "you want to partner in new development."
