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    SHW
    Earnings call· Dec 2025(Q4 FY25)

    SHERWIN WILLIAMS CO SHW

    Jan 29, 2026 Source

    Executive summary

    Sherwin-Williams Q4 FY25 — Strong Performance Amidst Challenging Demand

    The Sherwin-Williams Company delivered solid Q4 and full-year FY25 results, marked by strong adjusted earnings and cash generation, despite a persistently challenging demand environment. The company's strategy of aggressive share gains, cost control, and strategic investments allowed it to outperform the market. Management anticipates a "softer for longer" dynamic to continue into FY26 but remains confident in its ability to execute and grow.

    Highlights

    5

    • Consolidated sales increased by a mid-single-digit percentage in Q4 FY25.

    • Adjusted diluted net income per share increased by 6.7% in Q4 FY25.

    • Adjusted EBITDA grew 13.4% and expanded 120 basis points to 17.7% of sales in Q4 FY25.

    • Full-year net operating cash grew 9.4% to $3.5 billion, representing 14.6% of sales in FY25.

    • Returned $2.5 billion to shareholders through share repurchases and dividends in FY25.

    Concerns

    4

    • Consumer Brands Group adjusted segment margin decreased in Q4 FY25 due to Suvinil impact and lower production.

    • Underlying Consumer Brands sales decreased by low single digits in FY25 due to soft DIY demand and unfavorable FX.

    • Expects the new residential market to be down at least mid-single-digit range in FY26.

    • Raw material basket expected to be up a low single-digit percentage in FY26, driven by tariffs and select commodities.

    Guidance & targets

    15
    CategoryTargetConfidence
    Full-year 2026 consolidated sales growth
    up a low to mid-single-digit percentage
    high materiality
    Medium
    Full-year 2026 diluted net income per share
    $10.70 to $11.10 per share
    high materiality
    Medium
    Full-year 2026 adjusted diluted net income per share
    $11.50 to $11.90
    high materiality
    Medium
    Full-year 2026 raw material basket trend
    up a low single-digit percentage
    medium materiality
    Medium
    Full-year 2026 GAAP SG&A dollars growth
    grow by a low single-digit percentage
    medium materiality
    Medium
    Full-year 2026 interest expense increase (HQ lease)
    $40 million
    low materiality
    High
    Full-year 2026 interest expense increase (delayed draw term loan)
    $35 million
    low materiality
    High
    Full-year 2026 interest expense increase (refinancing)
    $15 million
    low materiality
    High
    End of FY26 net debt to adjusted EBITDA ratio
    within 2 to 2.5x
    medium materiality
    High
    Full-year 2026 net new stores (U.S. and Canada)
    80 to 100
    low materiality
    High
    Annual dividend increase
    1.3% to $3.20 per share
    medium materiality
    High
    Paint Stores Group price increase realization
    low single-digit range
    medium materiality
    Medium
    Paint Stores Group sales growth
    down single to up single
    medium materiality
    Medium
    Performance Coatings Group sales growth
    low single-digit sales growth
    medium materiality
    Medium
    Q1 2026 consolidated sales growth
    up low to mid-single-digit percentage
    high materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Paint Stores Group
    Sales increased as expected, with strong performance in Protective & Marine and solid residential repaint. Segment margin expanded 90 basis points.
    Protective & Marine growth: high single-digitResidential repaint growth: slightly below mid-single-digitPrice/mix: positive low single-digitVolume: low single-digit decrease
    		—mid-single-digit percentage—20.8%
    Consumer Brands Group
    Sales exceeded expectations, driven by Suvinil acquisition and positive FX. Adjusted segment margin decreased due to Suvinil impact and related costs, but increased excluding these impacts.
    Suvinil acquisition contribution: partially offset by price/mix and volumeUnderlying business sales (excluding Suvinil): essentially flatPrice/mix: down less than 1 percentage pointVolume: down less than 1 percentage pointFX: positive low single-digit
    		———decreased
    Performance Coatings Group
    Sales were at the high end of expectations, led by Packaging and Auto Refinish. Adjusted segment margin improved 150 basis points due to new business wins and SG&A control.
    Packaging growth: strengthAuto Refinish growth: strengthSG&A: down mid-single digits
    		———19%
    Paint Stores Group (Full Year FY25)
    Sales grew by a low single-digit percentage, with strong performance in Protective & Marine and residential repaint. Segment margin increased due to operating leverage and solid returns on investments.
    Protective and marine growth: high single digitsResidential repaint growth: mid-single digitsCommercial growth: low single-digitProperty maintenance: flattishNew residential: flattishNet new stores: 80Net new sales territories: 87
    		—low single-digit percentage—increased
    Consumer Brands Group (Full Year FY25)
    Sales grew by a low single-digit percentage, driven by the Suvinil acquisition. Underlying sales decreased due to soft DIY demand and unfavorable FX. Adjusted segment margin decreased due to Suvinil impact and lower production.
    Suvinil acquisition: driving growthUnderlying sales: decreased by low single digits
    		—low single-digit percentage—decreased
    Performance Coatings Group (Full Year FY25)
    Sales were flat overall, outpacing a challenging industrial demand backdrop. Adjusted segment margin was in the target range but impacted by unfavorable geographic mix.
    Acquisitions: low single-digit percentage addFX: slight tailwindPrice/mix: unfavorablePackaging growth: high end of high single digitsAuto Refinish growth: flat (mid-single digits in H2)Coil sales: low single digits decreaseIndustrial Wood sales: low single digits decreaseGeneral Industrial sales: low single digits decreaseEurope growth: mid-single digitsOther regions growth: down low single digits
    		—flat overall—in our high teens target range

    Operational metrics

    16
    Adjusted EBITDA
    13.4%up
    Q4 FY25

    Adjusted EBITDA grew 13.4% and expanded 120 basis points to 17.7% as a percent of sales in Q4 FY25.

    Free cash flow conversion
    90.1%
    Q4 FY25

    Free cash flow conversion in the quarter was 90.1%.

    SG&A as a percent of sales
    decreasedyear-over-year
    Q4 FY25

    SG&A as a percent of sales decreased year-over-year, including severance and other restructuring expenses and Suvinil, reflecting our disciplined ongoing cost control measures.

    Administrative SG&A growth
    low single-digit percentagedown
    Q4 FY25

    Administrative SG&A was down a low single-digit percentage in the quarter, including onetime restructuring costs of approximately $2 million.

    Administrative SG&A growth (excluding items)
    low teens percentagedown
    Q4 FY25

    Excluding these restructuring costs and the non-annualized new building operating costs, administrative SG&A was down by a low teens percentage.

    Net operating cash
    $3.5Bup 9.4%
    FY25

    Net operating cash growing 9.4% to $3.5 billion or 14.6% of sales.

    Free cash flow conversion
    59%
    FY25

    Free cash flow conversion for the year was 59%.

    Capital returned to shareholders
    $2.5B
    FY25

    We returned $2.5 billion to shareholders through share repurchases and our dividend.

    Net debt to adjusted EBITDA ratio
    2.3x
    FY25

    All in, we ended 2025 with a strong balance sheet and a net debt to adjusted EBITDA ratio of 2.3x.

    401(k) matching program
    reinstated
    FY26

    Reinstating our 401(k) matching program for eligible U.S. employees effective February 1. We'll also be restoring the matching contributions that have been paused since October 1, by the end of our first quarter.

    Cost savings
    $40M
    FY25

    We had about $40 million in savings in 2025.

    Paint Stores Group incremental margin
    almost 50%
    Q4 FY25

    If you look at what happened in the fourth quarter with volumes down low single digit with Stores Group, good cost control, we're able to generate almost a 50% incremental margin.

    Paint Stores Group incremental margin
    almost 40%
    FY25

    And if you look at the full year, I mean, it's almost 40%, again, in a volume challenging environment.

    Consumer Brands Group FX impact
    low single digitdown
    FY26

    We do have Consumer Brands Group down a low single digit because of FX. That's mainly going to come in the second half of the year, and that's mainly coming from headwinds that we anticipate in Latin America.

    Spray equipment sales
    flattish
    Q4 FY25

    Spray equipment sales have been flattish, reflecting the environment that we're in.

    DIY segment share of available gallons
    40%
    current

    The DIY segment represents about 40% of the available gallons out there.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitlow single-digit positive%
    Productivity cost savings program$46MUSD

    Product announcements

    1
    ProductTypeDetails
    Zero VOC plant-based interior coatinglaunch

    Deals & partnerships

    1
    SuvinilAcquisition of a paint company in Brazil.

    The acquisition of Suvinil was completed, and Q4 FY25 was its first full quarter of inclusion. The integration is ongoing with dedicated teams, focusing on leveraging technology and market leadership in Brazil.

    Capital programs

    1
    New global headquarters and global technology centercompleted

    Benefit: strengthen our culture of collaboration, innovation and winning together

    The new global headquarters and global technology center opened at the end of FY25. The move-in is going extremely well, and it is expected to strengthen culture, collaboration, and innovation.

    Risks & headwinds

    5
    Softer for longer demand environmentFY26

    Little support for any broad-based or accelerated recovery at this time; likely to persist well into 2026. New residential market expected to be down at least in the mid-single-digit range in FY26.

    Mitigation: Focus on share gains, new business wins, pricing discipline, and accelerating further cost reductions. Investments in residential repaint, new stores, and sales reps.

    Raw material cost inflationFY26

    Market basket of raw materials expected to be up a low single-digit percentage in 2026, driven by tariffs and select commodities (packaging, non-TiO2 pigments, extenders, industrial resins).

    Mitigation: Incremental 2026 pricing and accelerated simplification efforts across the supply chain are expected to overcome these headwinds and deliver full-year gross margin expansion.

    Increased interest expenseFY26

    Approximately $40 million related to new global headquarters lease payments, $35 million from a $1.1 billion 1-year delayed draw term loan, and $15 million from refinancing at higher rates.

    Mitigation: Company expects to end FY26 within its long-term target debt-to-EBITDA leverage ratio of 2 to 2.5x.

    Steel tariffs impactFY25, FY26

    Coil sales decreased by low single digits in FY25; expected flattish sales in Coil in FY26.

    Mitigation: New account wins in FY25 were not enough to offset the impact. No specific new mitigation mentioned for FY26 beyond expecting flattish sales.

    Unfavorable geographic mix in Performance CoatingsFY25

    Europe grew by mid-single digits, while other regions were down low single digits in FY25.

    Mitigation: Not explicitly stated, but new account wins and industry-leading non-BPA coatings are driving growth in the segment.

    What to watch in Q1 FY26

    5

    Consolidated Sales Growth

    Q1 FY26
    CurrentQ4 FY25 mid-single-digit increase
    TargetQ1 FY26 low to mid-single-digit increase

    Why it matters

    Verifies initial guidance for the seasonally smaller first quarter and sets the tone for full-year performance.

    The slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2026.

    Q&A highlights

    6

    What drove the very high incremental margins in the Performance Coatings Group in Q4 FY25?

    Management attributed the margin outperformance to strong discipline, aggressive focus on new business wins, market share gains, and significant efforts in simplification and complexity reduction. SG&A control was highlighted as key, demonstrating operating margin growth even with volume challenges.

    “Yes, Ghansham, I think what you're seeing there clearly is discipline on display. This is an organization led under Karl Jorgenrud, been in the industry for over 30 years. And I think this is an environment where we're in the fifth straight year of a challenging demand environment, the team stood tall and delivered.”

    asked by Ghansham Panjabi · answered by Heidi Petz

    2 min read6 chapters

    Detailed Narrative

    01

    FY25 Performance Highlights

    The company achieved record full-year consolidated sales and adjusted diluted EPS in 2025, despite a "softer for longer" demand environment. Gross profit and adjusted EBITDA margins expanded, and net operating cash grew 9.4% to $3.5 billion, with free cash flow conversion at 59%. The company returned $2.5 billion to shareholders and maintained a strong balance sheet with a net debt to adjusted EBITDA ratio of 2.3x.

    02

    401(k) Match Reinstatement

    Sherwin-Williams reinstated its 401(k) matching program for eligible U.S. employees effective February 1, and will retroactively restore paused contributions by the end of Q1 FY26. This decision was enabled by elevated performance, accelerated cost reductions, and risks being less severe than anticipated, allowing the company to protect jobs rather than pursue widespread layoffs.

    03

    FY26 Market Outlook

    Management expects the "softer for longer" demand dynamic to persist well into 2026, with little support for broad-based recovery. Key indicators like existing home sales forecasts vary widely, consumer sentiment remains muted, and the new residential market is expected to be down mid-single digits. Industrial PMIs are contracting globally, and the DIY market remains challenged.

    04

    Strategic Focus and Outperformance

    Despite market headwinds🌐, Sherwin-Williams aims to outperform the market for the third consecutive year by focusing on share gains, new business wins, pricing discipline, and cost reductions. The company is making targeted investments in residential repaint, adding 80 to 100 net new stores and sales reps, and innovating with new products like a Zero VOC plant-based interior coating.

    05

    Segment-Specific Outlook

    Paint Stores Group expects Protective & Marine and residential repaint to be the best sales performers in FY26. Performance Coatings Group anticipates low single-digit sales growth driven by new account wins and positive price/mix, despite a flat core business. Consumer Brands Group faces challenges from soft North American DIY demand, with FX headwinds🌐 expected in Latin America in the second half of FY26.

    06

    Cost and Margin Management

    The company expects full-year gross margin expansion in 2026, overcoming raw material headwinds (low single-digit increase) through incremental pricing and supply chain simplification. SG&A dollars are projected to grow by a low single-digit percentage, reflecting continued cost controls and $46 million in savings from restructuring actions, while absorbing increased interest expenses.

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