Sherwin Williams

Sherwin-Williams repeatedly told analysts it had boosted sales by hiking prices double digits

Sherwin Williams reported a record $6 billion in sales thanks to “double-digit” price increases.“JAMES R. JAYE, SVP OF IR & CORPORATE COMMUNICATIONS, THE SHERWIN-WILLIAMS COMPANY: Starting with the top line. Third quarter 2022 consolidated sales increased 17.5% to a record $6 billion. Pricing was in the low double-digit range. Consolidated gross margin increased to 42.8%. This was an improvement of 120 basis points year-over-year and 110 basis points sequentially, reflective of our pricing actions. Gross margin improved sequentially month-to-month in the quarter, with September increasing 650 basis points year-over-year. SG&A expense decreased to 25.3% of sales. Consolidated profit before tax increased $265.7 million or 43.5%.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin Williams told analysts it had increased prices from “high single digits” to “mid-teen” in its businesses.“JAMES R. JAYE, SVP OF IR & CORPORATE COMMUNICATIONS, THE SHERWIN-WILLIAMS COMPANY: Moving on to our operating segments. Sales in The Americas Group increased 21.4%, driven by double-digit volume growth across all architectural end markets and high single-digit price increases. Segment profit increased by $132.6 million and segment margin was 21.2%, which was about flat with last year and up 30 basis points sequentially. Sales in the Consumer Brands Group increased 8.5%, driven by a low double-digit price increase, which offset lower sales volumes primarily outside of North America. Continued tightness in alkyd resins impacted North America stain and aerosol sales. Adjusted segment margin was 16.2%, up 150 basis points year-over-year and 500 basis points sequentially. Sales in the Performance Coatings Group increased 13.7% and were driven by mid-teen price increases, partially offset by a less than 1% decrease in volume. Mid-single-digit sales from acquisitions were offset by a mid-single-digit unfavorable FX impact. Adjusted segment margin increased 590 basis points to 16.4% of sales due primarily to higher selling price increases. (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin William’s CEO: “Mid-teens volume growth and high single-digit pricing drove sales, which were up by a strong double-digit percentage in every end market we serve.” “JOHN G. MORIKIS, CHAIRMAN & CEO, THE SHERWIN-WILLIAMS COMPANY: Thank you, Jim, and good morning, everyone. As we’ve indicated since the start of the year, we expected 2022 would be a year of two contrasting halves, and that’s exactly what we’re seeing play out. We delivered strong results in the third quarter, and I want to thank our entire leadership team and all 61,000 employees for their focus, their determination and drive in what remains a challenging operating environment. We continue to have great confidence in our strategy. Before moving on to our outlook, let me provide some additional color on our third quarter. In The Americas Group segment, we delivered record sales and PBT. Mid-teens volume growth and high single-digit pricing drove sales, which were up by a strong double-digit percentage in every end market we serve. The sales growth was led by DIY, which was compared to an extremely soft quarter a year ago, where we prioritized our Pro customers given limited product availability. (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin Williams’ CEO: “Sales in North America increased by a double-digit percentage, driven largely by price.”“JOHN G. MORIKIS, CHAIRMAN & CEO, THE SHERWIN-WILLIAMS COMPANY: Our Consumer Brands Group had a much improved quarter led by sales that exceeded our guidance. Sales in North America increased by a double-digit percentage, driven largely by price. DIY paint demand remained sluggish as inflation continued to pressure consumers, while continued tightness in alkyd resins impacted our ability to produce stains and aerosols. On a positive note, the Pros Who Paint segment again grew by a strong double-digit percentage. Sales in China were down by a double-digit percentage due mainly to the COVID-related lockdowns. Europe was also down double digits due to the slowing macroeconomic environment. Segment margin improved significantly, primarily due to selling price increases and good cost control, partially offset by lower sales volume, increased raw material costs and higher supply chain costs. (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin-Williams hiked prices even while admitting their raw costs were actually decreasing

Despite raising prices to grow their profit margins, Sherwin Williams told analysts “we were encouraged by a modest sequential decrease in raw material costs.” “JAMES R. JAYE, SVP OF IR & CORPORATE COMMUNICATIONS, THE SHERWIN-WILLIAMS COMPANY: Thank you, and good morning to everyone. Sherwin-Williams had an excellent performance in the third quarter, including high teens sales growth resulting in the first $6 billion sales quarter in company history, significant sequential and year-over-year gross margin improvement, record adjusted diluted earnings per share and strong cash flow. Demand remains strong in pro-architectural and North American industrial end markets in contrast to continuing softness in Europe and China. While year-over-year cost inflation remained very significant in the quarter, we were encouraged by a modest sequential decrease in raw material costs. The industry supply chain also continued to stabilize though conditions remain tight with some previously noted specialty resins in particular remaining in limited supply. Throughout the quarter, our team continued to focus on growth initiatives, product innovation, customer solutions, pricing actions, cost control, supply chain improvements and business optimization activities while also taking actions and planning for a wide range of scenarios that could unfold next year.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin Williams CEO: “We expect to see further sequential decline of raw material costs in the fourth quarter…We expect the trajectory of raw material costs to continue trending favorably as we exit the year.”“JOHN G. MORIKIS, CHAIRMAN & CEO, THE SHERWIN-WILLIAMS COMPANY: On the cost side of the equation, our full year raw material inflation guidance remains in the high teens. We expect to see further sequential decline of raw material costs in the fourth quarter, though they will remain elevated year-over-year. We expect the trajectory of raw material costs to continue trending favorably as we exit the year, although the pace and level of potential relief next year is difficult to project. Additionally, along with the highest inflation rate we’ve seen in 40 years, we’re also experiencing significant higher costs and other elements of our cost basket, including labor, transportation and fuel and other costs. We will continue to monitor these costs, fight hard to offset them and respond with additional pricing, if necessary.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin-Williams admitted told analysts it plained to grow profit margins through price hikes

Sherwin Williams CEO: “We will continue implementing appropriate pricing actions across the company to offset persistently higher input costs with a focus on regaining our gross margins.” “JOHN G. MORIKIS, CHAIRMAN & CEO, THE SHERWIN-WILLIAMS COMPANY: We will continue implementing appropriate pricing actions across the company to offset persistently higher input costs with a focus on regaining our gross margins back to our long-term target range of 45% to 48%. We will continue investing in acquisitions that can accelerate our long-term strategy and top line growth and expand our operating margins, including our most recent announcement of European wood coatings leader, ICA Group. We will maintain our disciplined capital allocation philosophy. We will not hold cash while investing appropriately in CapEx, paying a dividend, targeting acquisitions that accelerate our strategy and absent M&A, buying back our stock.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin Williams CFO: “that price increase is going even a little better than what we had seen in the past.” “ALLEN J. MISTYSYN, SENIOR VP OF FINANCE & CFO, THE SHERWIN-WILLIAMS COMPANY: I would tell you, that price increase is going even a little better than what we had seen in the past, the fourth quarter sequential moderation of raw material costs and an easier comp. So you’re going to see bigger year-over-year improvement in our operating margin in the fourth quarter. And you’re going to see that SG&A growth into the first half of next year, and we’ll give you more color on that in January.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin-Williams CEO defended their price hikes by saying “ Every day, we earn the value that our customers are willing to pay us for our products and services”“JOHN G. MORIKIS, CEO : Well, it’s really simple. It’s not a 30-minute discussion. We don’t win or lose our price increase on how well we talk to them about the price increase in a pricing meeting. It’s everything that I just talked about. Every day, we earn the value that our customers are willing to pay us for our products and services. And so the fact that we’re out there, helping them to be more successful, more profitable, when our costs go up, they understand that we’re doing everything we can. Every customer that does business with Sherwin-Williams should know, we’re doing everything we can to drive our costs down in both raw material and every other item in that basket. But when we’re with them in a meeting to talk about pricing, it’s because we need it. We’ve done everything to offset it, but what’s most important is, we’re helping them to be successful and we’re partnering with them in their business. And so yes, we’re more effective now because we’re helping our customers to win. (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin-Williams CFO told an analyst their margins would growth primarily based on “double-digit pricing.”“GREGORY SCOTT MELICH: That’s great. And then my last is really a follow-up on gross margin. Could you help us — if gross margins end up being, I guess, they were up 110, 120 this quarter, and let’s say they’re up 300 or more in the fourth quarter, is that going to be more from price versus raws or more just from volume increases? I think last year, you called out that was hundreds of bps of help. Can you just help us on that? ALLEN J. MISTYSYN, CFO: Yes, I think it’s going to be the strong volume through TAG of double-digit pricing and then the raw moderation in that order.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)

Sherwin-Williams used the price hikes to fund $200 million in dividends and stock buybacks

Sherwin Williams spent $203 million on dividends and stock buybacks in the third quarter. “JOHN G. MORIKIS, CHAIRMAN & CEO, THE SHERWIN-WILLIAMS COMPANY: Before moving to our outlook, let me speak to capital allocation in the quarter. We returned approximately $203 million to our shareholders in the quarter in the form of dividends and share buybacks. We invested $48 million to purchase 200,000 shares at an average price of $237.81 per share. We distributed $155.8 million in dividends. We also invested $175 million in our business through capital expenditures, including $125 million in core CapEx and $50 million for our Building Our Future project. We closed 3 acquisitions in the third quarter for approximately $440 million. We ended the quarter with a net debt-to-EBITDA ratio of 3.1x as we increased short-term borrowings to fund our recent acquisitions. We’ll drive the ratio to our long-term target of 2 to 2.5x range in 2023. We will use cash in the fourth quarter of 2022 to manage debt and share buybacks will be done to offset option dilution.” (Q3 2022 SherwinWilliams Co Earnings Call, 10/25/2022)