Skip to content
    SHW
    Earnings call· Mar 2025(Q1 FY25)

    SHERWIN WILLIAMS Q1 FY25 earnings call SHW

    Apr 29, 2025 Source

    Executive summary

    Sherwin-Williams Q1 FY25 — Solid Results Amidst Choppy Demand

    Sherwin-Williams delivered solid Q1 FY25 results, navigating a challenging and choppy demand environment as anticipated. The company's strategic execution, including disciplined cost control and effective pricing, led to expanded gross and EBITDA margins and adjusted EPS growth. While the Paint Stores Group showed resilience and market share gains, other segments faced headwinds, particularly from soft DIY demand and FX. Management remains confident in its strategy and ability to adapt to market uncertainties, including potential tariff impacts, and is focused on operational efficiencies and targeted investments.

    Highlights

    8

    • Consolidated sales were within the guided range, with growth in Paint Stores Group.

    • Gross margin and gross profit dollars expanded.

    • EBITDA margin and dollars expanded.

    • Adjusted earnings per share grew by 3.7% to $2.25 per share.

    • Invested $352 million in share repurchases and increased dividend by 10%.

    • Paint Stores Group sales grew by a low single-digit percentage, with price/mix up mid-single digits.

    • Protective and Marine sales increased by a high single-digit percentage.

    • Adjusted segment margin expanded in Consumer Brands Group to 21.3%.

    Concerns

    7

    • Demand environment remained challenging as expected.

    • Volume was down low single digits in Paint Stores Group.

    • Consumer Brands Group sales decreased, mainly due to soft DIY demand in North America and unfavorable FX.

    • Performance Coatings Group sales were below expectations, with FX, price mix, and volume all decreasing low single-digits.

    • Adjusted segment margin in Performance Coatings Group decreased 60 basis points to 16.5% due to lower sales.

    • Commercial and property maintenance sales remained under pressure.

    • General industrial and auto refinish segments remained under pressure.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2025 Sales
    Reaffirmed
    high materiality
    High
    Full-year 2025 Adjusted EPS
    Reaffirmed
    high materiality
    High
    Q2 2025 Consolidated Sales
    Within guided range
    medium materiality
    Medium
    Full-year 2025 Raw Material Costs
    Higher end of low single-digit percentage increase
    medium materiality
    Medium
    Full-year 2025 Store Openings
    80 to 100
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Paint Stores Group
    Sales grew by low single-digit percentage, driven by price/mix, partially offset by volume decline. Protective and Marine, and Residential Repaint showed strong growth. Segment margin expanded by 120 basis points.
    Price/Mix Growth: Mid-single digitsVolume Growth: Down low single digitsProtective and Marine Growth: High single-digit percentageResidential Repaint Growth: Mid-single-digit percentageNew Residential Growth: Low single-digit percentageNew Stores Opened: 18
    		—Low single-digit percentage—18.4%
    Consumer Brands Group
    Sales decreased, primarily due to unfavorable FX and soft DIY demand in North America. Adjusted segment margin expanded due to supply chain efficiencies and cost discipline.
    FX Impact: More than half of decreaseDIY Demand: Soft in North America
    		—Decreased—21.3%
    Performance Coatings Group
    Sales were below expectations, impacted by negative FX, price mix, and volume, partially offset by acquisitions. Packaging was a bright spot with high single-digit growth. Adjusted segment margin decreased by 60 basis points due to lower sales.
    FX Impact: Low single-digit percentage decreasePrice Mix Impact: Low single-digit percentage decreaseVolume Impact: Low single-digit percentage decreaseAcquisition Contribution: Low single-digit percentageEurope & North America Growth: Decreased mid-single-digit percentagesAsia & Latin America Growth: Decreased low single-digit percentagesPackaging Growth: High single-digit percentage
    		—Decreased—16.5%

    Operational metrics

    15
    Adjusted EPS
    $2.25Up 3.7% YoY
    Q1 FY25

    Adjusted earnings per share for the first quarter.

    Share Repurchases
    $352 million
    Q1 FY25

    Amount invested in share repurchases during the quarter.

    Dividend Increase
    10%YoY
    Q1 FY25

    Increase in dividend per share.

    Administrative SG&A
    Mid-teens percentageDown YoY
    Q1 FY25

    Decrease in SG&A expense in the administrative function due to cost control, simplification, and digitization efforts.

    Consolidated Revenue Geographic Split
    80%
    Current

    Geographic split of consolidated revenue, highlighting low exposure to China.

    Raw Material Costs
    FlatYoY
    Q1 FY25

    Raw material costs were flat year-over-year in the first quarter.

    Raw Material Costs
    A little bit highervs. initial thought
    Q2 FY25

    Raw material costs for Q2 are expected to be a little higher than initially thought due to tariffs.

    Raw Material Costs
    Higher end of low single digitsvs. prior guidance
    FY25

    Full-year raw material costs are expected to be at the higher end of the low single-digit percentage increase range.

    Paint Stores Group Price Effectiveness
    0.5%Split evenly between price and volume
    Q1 FY24

    Reference to prior year's Q1 price effectiveness, which was slower than current year.

    Household Formations
    Over 1.25 million
    Recent

    Indication of underlying demand for housing.

    Mortgage Rates for Demand Recovery
    6% to 6.5%
    Current

    Management believes significant movement in demand was seen when mortgage rates were closer to 6%-6.5%, and a drop to 5%-5.5% is not necessary for demand to pick up.

    Residential Repaint Backlog Visibility
    4- to 6-week range
    Current

    Typical sight line for contractor backlogs in the residential repaint segment.

    Employee Turnover Rate
    7% to 9%Record low
    Current

    Low turnover rate in stores, indicating effective hiring and retention.

    DIY Market Share of Available Gallons
    Well over 30%, 35%
    Current

    DIY segment represents a significant portion of the available paint gallons.

    Non-operating Items Headwind
    $60 millionYoY
    Q2 FY25

    Significant headwind from non-operating items in Q2 FY25 that are not expected to repeat from Q2 FY24, making EPS growth difficult.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitMid-single digits (price/mix); Low single digits (volume)%
    Productivity cost savings programMid-teens percentage%

    Product announcements

    1
    ProductTypeDetails
    Gallery Seriesexpansion

    Deals & partnerships

    1
    BASFAcquisition of BASF's architectural business in Brazil, including the Suvinil brand.

    Acquisition of Suvinil, a market leader in Brazil, expected to close in H2 2025. It is not currently included in guidance. The deal is seen as a strong complement to Sherwin-Williams' existing Latin America business and aligns with the company's strategy for above-market growth.

    Risks & headwinds

    7
    Challenging demand environmentH1 2025, extending into 2026

    Choppy at least through the first half of 2025, some not likely to gain momentum until 2026

    Mitigation: Executing playbook, focusing on innovation, cost control, disciplined capital allocation, out-executing in the environment.

    Uncertainty related to tariffsOngoing, Q2 FY25 impact

    Raw material costs for FY25 more likely at the higher end of low single digits; impacts mainly applicators, pigment, industrial resins, packaging.

    Mitigation: Low exposure (80% revenue in US, <2% in China, most raws sourced regionally); evaluating additional price increases if tariffs are lasting; driving efficiencies.

    Soft DIY demand in North AmericaQ1 FY25, ongoing

    Main driver of Consumer Brands Group sales decrease (along with FX)

    Mitigation: Partnerships outside stores, stimulating demand, leveraging scale to offset softness.

    Weak commercial construction completion and delayed CapEx spendingQ1 FY25, expected to continue for 18-24 months for share gains to flow through

    Sales remained under pressure in Q1 FY25

    Mitigation: Continued focus on exclusive agreements, long-term share gains, not expecting conditions to worsen.

    Softness in heavy equipment and transportation demandQ1 FY25, expected to continue

    General industrial segment under pressure

    Mitigation: Team focused on demonstrating value proposition and new wins to offset softness.

    High 30-year mortgage ratesOngoing

    Staying in 6.5% to 7% range; impacting new residential and existing home sales

    Mitigation: Builders offering incentives, company partnering to simplify product offerings, focus on affordability; household formations still strong.

    Significant headwind from non-operating itemsQ2 FY25

    Roughly $60 million impact in Q2 FY25 from non-repeating environmental credits and asset sale gains from Q2 FY24

    Mitigation: Focus on improving adjusted operating margin through price, cost offsets, and efficiencies, but difficult to overcome this specific headwind for EPS growth.

    What to watch in Q2 FY25

    5

    Full-year Sales and EPS Guidance Update

    July
    CurrentReaffirmed
    TargetUpdated full year outlook

    Why it matters

    Management expects to provide a more comprehensive outlook after assessing the paint and coating season and global economic trajectory.

    As is typical, we'll be able to provide an updated full year outlook in July when we have a better view of how the paint and coating season is unfolding along with potentially greater clarity on the trajectory of the global economy overall.

    Q&A highlights

    6

    Ability to pass through price increases if raw materials rise due to tariffs, even during paint season.

    Raw materials were flat in Q1, but Q2 will be slightly higher due to tariffs, pushing FY25 raw costs to the higher end of low single-digit increase. Tariffs mainly impact applicators, pigment, industrial resins, and packaging. Management has levers to pull, including additional price increases if tariffs are lasting, even if it's not ideal during summer. They are also driving efficiencies in SG&A and CapEx.

    “if we believe the tariffs are lasting, we will go out and have -- had the discipline in the past to go out with additional price increases. To your point, it would not be ideal to go out in the summer. But if you go back a couple of years when we were seeing hyperinflation in 2020, 2021, 2022, we did go out during the summer.”

    asked by John McNulty · answered by Allen Mistysyn

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 Performance Overview

    Sherwin-Williams delivered solid Q1 FY25 results, with consolidated sales within the guided range. Growth in the Paint Stores Group was offset by softness in Consumer Brands Group and Performance Coatings Group. The company achieved expanded gross and EBITDA margins, and adjusted EPS grew by 3.7% to $2.25 per share, reflecting effective cost control and pricing strategies.

    02

    Strategic Response to Market Challenges

    Management acknowledged a bumpy and choppy demand environment, particularly in the first half of 2025, with some markets not gaining momentum until 2026. The company is executing its playbook by focusing on innovation, disciplined capital allocation, and operational efficiencies. Proactive measures, including SG&A control and investments in modernization, are yielding results, as seen in the mid-teens percentage decrease in administrative SG&A.

    03

    Tariff Impact and Raw Material Outlook

    The company has low exposure to tariffs, with approximately 80% of consolidated revenue in the US and less than 2% in China, and most raw materials sourced regionally. While Q1 raw material costs were flat year-over-year, Q2 is expected to see a slight increase due to tariffs, pushing the full-year raw material cost increase towards the higher end of low single digits. Management is evaluating potential pricing actions if tariffs persist.

    04

    Resilient Residential Repaint and New Residential Segments

    Residential repaint continued to be a bright spot, with mid-single-digit sales growth and volume increases, indicating market share gains in a flat to down market. New residential sales grew low single-digits, driven by securing incremental customer relationships despite high mortgage rates. The company emphasizes partnerships and productivity solutions for contractors in these segments.

    05

    Suvinil Acquisition and Latin America Strategy

    The acquisition of Suvinil, a market leader in Brazil, is expected to close in the second half of 2025 and is seen as a strong complement to Sherwin-Williams' existing Latin America business. The deal aligns with the company's appetite for investments in above-market growth businesses and leverages a successful integration playbook from prior acquisitions like Valspar.

    AI-generated summary of the company’s earnings call. Not investment advice.