The Sherwin-Williams Company Q3 FY2025 earnings call

• Sherwin-Williams delivered solid third quarter results with consolidated sales at high end of guided range. - Paint Stores and Consumer Brands Groups exceeded expectations; Performance Coatings Group in line. - Gross margin and profit expanded. SG&A growth moderated. Adjusted EBITDA margin expanded 60 basis points to 21.4%, adjusted diluted EPS grew 6.5%. - Returned $864 million to shareholders. - Heidi Petz highlighted segment performance details and company strategy in choppy demand environment. - Mentioned successful Suvinil acquisition and channel optimization in Consumer Brands Group. - Performance Coatings Group saw mixed regional growth and division results.

Paint Stores Group: Sales increased mid-single digits, price/mix up high end of low single digits, volume up low single digits. Segment profit grew mid-single digits, margin up 40 basis points. Consumer Brands Group: Sales beat expectations, price/mix up low single digits, volume down mid-single digits, FX headwind. Adjusted segment margin improved due to product mix shift and cost control, offset by supply chain inefficiencies and restructuring costs. Performance Coatings Group: Sales in line, volume, acquisitions, FX up low single digits but offset by unfavorable price/mix. Regional growth mixed. Segment profit and margin down due to lower gross margin, mix, and costs.

• Full-year 2025 sales guidance remains a low single-digit percentage increase. - 2026 outlook: challenging demand environment likely persists through first half, raw material costs up low single digits, health care wages up low double digits. - Announced 7% price increase in Paint Stores Group effective Jan 1, with targeted increases in other segments. - Expect CapEx to return to typical range of around 2% of sales next year. - Restructuring initiatives expected to yield $80 million in annual savings going forward.

• Softer demand environment persisting for longer. - Competitive pressures from inconsistent offerings. - Raw material cost increases, including tariffs and varying commodity costs. - Health care wage increases posing cost challenges. - Uncertainty in demand cycle recovery timing.

Q: Ghansham Panjabi asked about the 7% price increase in Paint Stores Group given tepid demand.

A: Heidi Petz and Allen Mistysyn responded discussing pricing philosophy, raw material costs, and balancing volume growth with price increase effectiveness.

Q: Jeffrey Zekauskas inquired about 30-year mortgage rates and demand catalysis.

A: Allen Mistysyn and Heidi Petz talked about mortgage rate impact on existing home turnover and affordability.

Q: Vincent Andrews asked about investment spending efficiency.

A: Allen Mistysyn discussed disciplined process for new store and rep adds, focusing on return on investment.

Q: John McNulty asked about Suvinil acquisition actions.

A: Heidi Petz and Allen Mistysyn spoke about acquisition opportunities, business continuity, and future synergies.

Q: Aleksey Yefremov asked about second half 2026 recovery outlook.

A: Heidi Petz stated it's based on current sight line and lack of immediate catalysts.

Q: Michael Harrison asked about contractor backlogs and submarket confidence.

A: Heidi Petz and Jim Jaye discussed Commercial segment performance and sight line on market trends.

Q: Matthew Deo asked about 4Q implied guidance deceleration.

A: Allen Mistysyn explained factors like seasonality and regional mix.

Q: Michael Sison asked about pricing capture in 2026.

A: Allen Mistysyn talked about balancing gallon growth and price increase effectiveness.

Q: John Roberts asked about industry gallons by subsegment.

A: Jim Jaye mentioned gallons challenged across most end markets but Sherwin outperforming.

Q: Arun Viswanathan asked about Paint Stores Group mid-single-digit comp.

A: Heidi Petz and Allen Mistysyn discussed differentiation and share gain efforts.

Q: Patrick Cunningham asked about Performance Coatings Group margin declines.

A: Allen Mistysyn and Heidi Petz explained mix dynamics and future margin expectations.

Q: Josh Spector asked about Paint Store volumes in 2026.

A: Allen Mistysyn discussed volume forecasting and share gain strategies.

Q: David Begleiter asked about pricing pressure on Pittsburgh Paint.

A: Heidi Petz and Allen Mistysyn talked about balancing volume growth and price increase timing.

Q: Kevin McCarthy asked about price increases in other segments.

A: Allen Mistysyn and Heidi Petz mentioned targeted price increases across businesses.

Q: Christopher Parkinson asked about gross margin and volume.

A: Allen Mistysyn discussed volume impact on gross margin and future margin leverage.

Q: Greg Melich asked about volume impact on gross margin rate.

A: Allen Mistysyn explained gross margin impact and operating margin focus.

Q: Garik Shmois asked about incremental margins in Paint Stores.

A: Allen Mistysyn and Heidi Petz discussed incremental margins and cost control efforts.

Q: Eric Bosshard asked about consumer brand organic growth.

A: Heidi Petz and Allen Mistysyn talked about DIY pressure and Pros Who Paint progress.

Q: Charles Cerankosky asked about res repaint market activity.

A: Heidi Petz and Allen Mistysyn discussed remodeling activity and contractor focus.

Q: Laurence Alexander asked about share gains in downturn.

A: Heidi Petz stated Sherwin is taking share gains and creating structural advantage.

Q: Duffy Fisher asked about SBUs in Paint Stores.

A: Heidi Petz explained differentiation and team's creative response in challenging environment.