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    SHW
    Earnings call· Jun 2025(Q2 FY25)

    SHERWIN WILLIAMS Q2 FY25 earnings call SHW

    Jul 22, 2025 Source

    Executive summary

    Sherwin-Williams Q2 FY25 — Strategic Investments Drive Market Share Gains Amidst Choppy Demand

    Sherwin-Williams navigated a choppy Q2 FY25 by aggressively pursuing market share gains through strategic investments in its Paint Stores Group, capitalizing on a unique competitive environment. Despite softer demand in several end markets and a reduction in full-year EPS guidance, the company doubled its restructuring initiatives and maintained disciplined capital allocation, positioning for long-term outperformance. Management expressed confidence in their strategy to expand their competitive moat.

    Highlights

    5

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

    • Gross margin expanded for the 12th consecutive quarter, up 60 basis points year-over-year.

    • The company returned $716 million to shareholders through share repurchases and dividends.

    • Paint Stores Group sales increased by a low single-digit percentage, with residential repaint sales growing mid-single digits and outperforming in new residential and commercial.

    • Restructuring initiatives were more than doubled to approximately $105 million, expected to result in $80 million in annual savings.

    Concerns

    5

    • Adjusted earnings per share decreased due to anticipated higher nonoperating costs, sooner-than-expected new building expenses, and targeted growth investments.

    • Full-year adjusted EPS guidance was reduced by $0.50 due to softer architectural sales volumes and supply chain inefficiencies.

    • Demand momentum remained stalled and deteriorated further in new residential, DIY, and Coil Coatings end markets.

    • CapEx spending for the year was reduced by $170 million, or approximately 20%, from $900 million to $730 million.

    • Consumer Brands Group sales were below expectations, with volume, price/mix, and FX all down by similar low single-digit percentages.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year 2025 SG&A increase
    low single-digit percentage increase
    medium materiality
    High
    Full-year 2025 restructuring initiatives
    approximately $105 million
    high materiality
    High
    Annual savings from restructuring initiatives
    approximately $80 million
    high materiality
    High
    Full-year 2025 raw material basket cost
    flattish full year costs
    medium materiality
    High
    Full-year 2025 CapEx spending
    $730 million
    high materiality
    High
    Full-year 2025 new building investment
    $115 million
    medium materiality
    High
    Full-year 2025 Paint Stores Group sales guidance
    minimally adjusting downward
    medium materiality
    Medium
    Full-year 2025 Consumer Brands segment sales guidance
    revising our full year sales expectations downward
    high materiality
    High
    Full-year 2025 Performance Coatings segment sales guidance
    maintaining our Performance Coatings segment sales guidance
    medium materiality
    High
    Full-year 2025 diluted EPS guidance
    revising our diluted earnings per share guidance downward
    high materiality
    High
    Suvinil acquisition closing
    before the end of the year
    medium materiality
    High
    New store openings (FY25)
    80 to 100 stores
    medium materiality
    High
    Second half SG&A increase
    up only low single digits in 1% to 2% range
    medium materiality
    High
    CapEx as percentage of sales
    2% of sales
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Paint Stores Group
    Sales growth was driven by price/mix, with volume slightly down. Outperformed the market in residential repaint, new residential, and commercial. Segment profit increased despite heightened growth investments, though margin decreased slightly.
    Price/mix growth: mid-single digitsVolume growth: down low single digitsProtective & Marine growth: high single digitsResidential repaint growth: mid-single digitsNew residential sales growth: low single digitsCommercial sales growth: low single digitsNet new stores opened (quarter): 20Net new stores opened (YTD): 38
    		increased by a low single-digit percentagelow single-digit percentage—segment profit increased and segment margin decreased only slightly
    Consumer Brands Group
    Sales reflect continued softness in North America DIY and unfavorable FX in Latin America, partially offset by growth in Europe. SG&A decreased due to cost discipline. Margin decreased primarily due to lower sales and impact of lower production volumes.
    Volume growth: down low single digitsPrice/mix growth: down low single digitsFX impact: down low single digitsSG&A decrease: low single digits
    		below expectationsdown by similar low single-digit percentages—Adjusted segment margin decreased
    Performance Coatings Group
    Segment growth in Europe, Asia, and Latin America was offset by a decrease in North America. Packaging was a bright spot. Segment profit and margin decreased due to increased costs to support sales, higher foreign currency transaction losses, and a non-repeating prior-year gain on asset sale.
    Volume growth: up low single digitsAcquisitions impact: up low single digitsFX impact: up low single digitsPrice/mix impact: slightly offset by unfavorablePackaging growth: double-digit (inclusive of acquisition)Coil sales growth: low single digits (inclusive of acquisition)Auto Refinish sales: down slightlySeverance and other restructuring expenses impact on margin: 50 basis points
    		in line with expectationsup by low single-digit percentages—segment profit and margin decreased

    Operational metrics

    15
    Adjusted SG&A increase (Q2)
    $108 million
    Q2 FY25

    Adjusted SG&A was up a little over $108 million in Q2, including about $40 million in new building costs. Overall SG&A in the quarter was up 3.8%.

    Adjusted SG&A increase percentage (Q2)
    3.8%
    Q2 FY25

    Adjusted SG&A in the quarter was up 3.8%, with all of it being incremental increase in Paint Stores Group.

    Administrative SG&A decrease (excluding restructuring and new building)
    high single-digit percentage
    Q2 FY25

    Excluding the corporate portion of restructuring costs and the new building costs, administrative SG&A was down by a high single-digit percentage in the quarter.

    Full-year EPS guide reduction
    $0.50
    FY25

    Part of the $0.50 reduction in full-year EPS guide was due to lowering production volumes for the year to match reduced architectural sales volume.

    Production volumes reduction (full year)
    low single-digit percentage
    FY25

    Lowering our production volumes for the year by a low single-digit percentage to match up with the reduced architectural sales volume.

    Gross profit reduction drivers (full year)
    —
    FY25

    80% of the full-year gross profit reduction is due to lower sales volumes (partially offset by better price effectiveness in PSG), and 20% is due to unfavorable impact on the global supply chain.

    Factory cost structure
    40% variable
    Current

    Our sites are probably 60% fixed, 40% variable, so losing absorption on production gallons impacts gross margin.

    PCG segment margin reduction from restructuring
    50 basis points
    Q2 FY25

    Severance and other restructuring expenses reduced PCG segment margin by 50 basis points.

    Paint Stores Group 6-year volume CAGR
    low single digits
    2019-2025 (forecast)

    The 6-year compounded average growth rate for Paint Stores Group volume, including the 2025 forecast, is up low single digits.

    Industry volume trend
    down consistently year-over-year
    since 2020

    Industry volume (ACA and others) has been down consistently year-over-year since 2020.

    Paint Stores Group sales growth
    low double-digit percentage
    2010-2020

    From 2010 to 2020, Paint Stores Group sales grew at a low double-digit percentage.

    New building SG&A costs (H2)
    less than $60 millioncompared to $80 million originally estimated
    H2 FY25

    New building SG&A costs are expected to be a little less than $60 million in the second half, compared to the original $80 million estimate for the full second half.

    New building SG&A costs H2 impact on total SG&A
    about 1.5%
    H2 FY25

    The new building costs add about 1.5% to SG&A in the second half, indicating tight control on other segments' SG&A.

    Restructuring savings (annual)
    $80 million
    Annual

    Restructuring activities completed to date are expected to provide about $80 million in annual savings, with a good portion realized in the second half of 2025 and annualizing into 2026.

    Restructuring charges (gross profit portion)
    20%
    FY25

    About 20% of the $105 million restructuring charges are in gross profit, related to previously announced plant consolidations, with savings flowing through later this year and into next year.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitVolume down low single digits, price/mix up mid-single digits%
    Productivity cost savings program$105 millionUSD

    Deals & partnerships

    1
    SuvinilAcquisition of a company

    The acquisition of Suvinil is expected to close before the end of the year, accelerating the company's strategy.

    Risks & headwinds

    8
    Softer-for-longer demand environmentRemainder of 2025

    Continued turbulence and a slowdown in demand across various segments, businesses and regions over the remainder of 2025.

    Mitigation: Aggressive operational and commercial actions, increased restructuring initiatives, CapEx reduction, relentless focus on market share gains.

    Softer architectural sales volumesFull year 2025

    Requiring a reduction in full year production gallons in the supply chain, pressuring bottom line results. Contributes to $0.50 EPS reduction.

    Mitigation: Adjusting production schedules to account for lower sales volumes, managing inventories tightly.

    Supply chain inefficienciesFull year 2025

    Due to reduction in production gallons within the global supply chain. Contributes 20% to the full-year gross profit reduction.

    Mitigation: Managing inventories tightly, building more flexibility into the organization, maintaining staffing at factories and distribution centers where possible.

    Higher nonoperating costsQ2 FY25 and ongoing

    Anticipated higher nonoperating costs year-over-year, contributing to EPS decrease.

    Mitigation: General G&A discipline, realizing benefits from restructuring charges.

    Sooner-than-expected new building expensesQ2 FY25, H2 FY25

    Incurred costs in Q2 that were expected in H2. $40 million in Q2 SG&A. Total investment for the year estimated at $115 million.

    Mitigation: Accelerating completion and transition to new buildings to begin getting a return on the project.

    Deterioration in specific end marketsQ2 FY25 and remainder of 2025

    Demand momentum stalled and deteriorated in new residential, DIY, and Coil Coatings end markets. Coil sales outlook 'murkier with uncertainty related to steel tariffs.'

    Mitigation: Focus on market share gains, new account wins, demonstrating value to contractors, staying close to strategic partners.

    TariffsOngoing

    Remain a variable in the outlook, pressuring certain pigments and extenders.

    Mitigation: Not explicitly stated, but implies monitoring and adapting to tariff impacts.

    Higher interest ratesOngoing

    Impacting property maintenance and new residential builders, putting projects on pause.

    Mitigation: Helping contractors find new opportunities, focusing on value proposition, launching products to increase surface area for bids.

    What to watch in Q3 FY25

    5

    Restructuring savings realization

    H2 FY25 and annualizing into 2026
    Current$80 million annual savings expected from $105 million program.
    TargetAcceleration of savings flow-through.

    Why it matters

    Critical for offsetting demand headwinds and improving overall profitability.

    we do expect to see annually about $80 million in savings related to the restructuring activities that we have completed thus far. I think you'll start seeing a good portion of that in our second half and will annualize into 2026.

    Q&A highlights

    6

    Where does management expect to see demand deterioration in the back half of the year?

    Heidi Petz identified new residential, coil coatings (due to tariff uncertainty), and DIY markets as key areas for potential deterioration, noting that no segment is immune to volatility. She emphasized staying close to these markets through stores and strategic partners.

    “I would point to new residential becomes -- continues to be choppier, if not a bit more challenging. We're seeing a bit of evidence in coil as well. And as you see, some good wins there continues to be a challenging environment, especially as it relates to the tariffs and the uncertainty around that. And I would also point to the DIY market.”

    asked by David Begleiter · answered by Heidi Petz

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Response to Market Conditions

    Sherwin-Williams is taking aggressive and deliberate actions in response to a 'softer-for-longer' demand environment and a 'rapidly changing and opportune competitive environment.' This includes more than doubling restructuring initiatives to approximately $105 million, expected to yield $80 million in annual savings, and reducing full-year CapEx by 20% to $730 million. The company aims to accelerate strategic intensity to favor long-term outperformance and pivot in uncertain times.

    02

    Competitive Landscape and Market Share Gains

    Management highlighted recent and significant reductions in customer-facing positions and assets among competitors, alongside a competitor implementing a high single-digit minimum price increase. Sherwin-Williams views this as a 'once-in-a-career opportunity' to expand its competitive moat, particularly in the Paint Stores Group, by investing aggressively in customer-facing growth initiatives while maintaining G&A discipline. They believe their stable and predictable approach differentiates them in a volatile market.

    03

    New Global Headquarters and R&D Center Progress

    Progress on the new global headquarters and R&D center accelerated faster than expected in the quarter, leading to certain costs being incurred sooner than anticipated. The total estimated investment for the year is now $115 million, which includes $95 million in SG&A and $20 million in interest expense, with approximately 50% of the SG&A expenses being non-repeatable. The company is accelerating completion and transition to these new facilities to begin realizing returns on the project.

    04

    Raw Material and Supply Chain Dynamics

    The softer demand environment is resulting in a more favorable commodity backdrop, with expectations for slight deflation in the raw material basket in the second half of the year, leading to flattish full-year costs. However, lower architectural sales volumes necessitate a reduction in full-year production gallons within the supply chain, which is creating inefficiencies and pressuring gross margins. Management is tightly managing inventories and adjusting production schedules to align with sales volumes.

    05

    Capital Allocation and Growth Investments

    In Q2, the company returned $716 million to shareholders through share repurchases and dividends, demonstrating a disciplined capital allocation strategy. They plan to continue opportunistic share repurchases and pursue targeted acquisitions, with the Suvinil acquisition expected to close by year-end. Investments in new stores (80-100 this year) and additional sales representatives are ongoing, reflecting a commitment to driving above-market growth despite near-term market turbulence.

    06

    End-Market Performance and Outlook

    Demand remained choppy, with deterioration noted in new residential, DIY, and Coil Coatings end markets. Residential repaint sales grew mid-single digits, significantly outpacing the market, while new residential and commercial sales also saw low single-digit growth despite double-digit declines in completions. The company expects no market assistance for the remainder of the year and is intensely focused on market share gains across all businesses and segments.

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