Q1 2024 The Sherwin-Williams Co Earnings Call

Unknown Executive: Good morning. Thank you for joining us for the Sherwin-Williams Company's review of first quarter 2024 results and our outlook for the second quarter and full year of 2024. With us on today's call are Heidi Petz, President and CEO, Al Mistysyn, Chief Financial Officer, Jane Cronin, Senior Vice President, Enterprise Finance, and Jim Jay, Senior Vice President, Investor Relations and Communication. This conference call is being webcast simultaneously in listen-only mode by issue or directly via the internet at www.sherwin.com.

Good morning, Thank you for joining the Sherwin Williams Company's review of first quarter 2024 results and our outlook for the second quarter and full year of 2024.

With us on today's call are Heidi Petz, President and CEO Mr.

Speaker Change: Mr Sims, Chief Financial Officer, Jane Cronin, Senior Vice President Enterprise Finance, and Jim Jaye, Senior Vice President Investor Relations and communications.

Speaker Change: This conference call is being webcast simultaneously in listen only mode by issuer direct via the Internet at Www Dot Sherwin Dot com.

Unknown Executive: An archived replay of this webcast will be available at www.sherwin.com beginning approximately two hours after this conference call concludes. This conference call will include certain forward-looking statements as defined under the U.S. Federal Securities Laws with respect to sales, earnings, and other matters. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Speaker Change: An archived replay of this webcast will be available at www Dot Sherwin Dot com beginning approximately two hours. After this conference call concludes.

Speaker Change: This conference call will include certain forward looking statements as defined under the U S. Federal Securities laws with respect to sales earnings and other matters.

Speaker Change: Any forward looking statements speaks only as of the date on which such statement is made and the company undertakes no obligation to update or revise any forward looking statement, whether as a result of new information future events or otherwise.

Unknown Executive: A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company's prepared remarks, we will open the session to questions. I will now turn the call over to Jim Jaye.

Speaker Change: A full declaration regarding forward looking statements is provided in the company's earnings release transmitted earlier this morning.

Speaker Change: After the company's prepared remarks, we will open the session to questions.

Speaker Change: I will now turn the call over to Jim Jaye.

James R. Jaye: Thank you, and good morning. In what is a seasonally smaller first quarter and with continued demand choppiness in several end markets, Sherwin-Williams delivered consolidated sales within our guided range. Gross Margin Expansion, and Diluted Earnings Per Share and EBITDA Growth. Throughout the quarter, we continued to execute on our strategy, demonstrate our value proposition with current and prospective customers, and position ourselves to take advantage of disruptions in the market. While our results were at the lower end of our sales expectations, we remain confident in our full-year outlook, and there is no change from the guidance we provided in January. We also remain highly confident in our differentiated business model, and we are well positioned as the painting season begins. While uncertainties persist in the macroeconomic environment, we see opportunity.

James R. Jaye: Thank you Andy and good morning in what is a seasonally smaller first quarter and with continued demand choppiness in several end markets.

James R. Jaye: Williams delivered consolidated sales within our guided range gross margin expansion and diluted earnings per share and EBITDA growth.

James R. Jaye: Throughout the quarter, we continued to execute on our strategy demonstrate our value proposition with current and prospective customers and position ourselves to take advantage of disruption in the market.

James R. Jaye: While our results were at the lower end of our sales expectations. We remain confident in our full year outlook and there is no change from the guidance we provided in January.

James R. Jaye: We also remain highly confident in our differentiated business model and we are well positioned as the painting season begins.

Uncertainties persist in the macroeconomic environment, we see opportunity.

Heidi G. Petz: We are encouraged by the pro-architectural sentiment in April, and customers in several end markets are optimistic about an improving demand environment as the year progresses. Competitor decisions coupled with our recent growth investments are enabling us to continue penetrating our targeted end markets at multiple levels. We expect share gains and returns to become more and more evident as the year progresses. Consolidated sales in the quarter. We're at the low end of our range, driven by lower than anticipated volume, primarily in Paint Stores Group against the strongest comparison we will face this year, followed by Consumer Brands Group in North America.

James R. Jaye: We're encouraged by pro architectural sentiment in April and customers in several end markets are optimistic about an improving demand environment as the year progresses.

James R. Jaye: Competitor decisions, coupled with our recent growth investments are enabling us to continue penetrating our targeted end markets at multiple levels, we expect share gains and returns to become more and more evident as the year progresses.

James R. Jaye: Consolidated sales in the quarter were at the low end of our range driven by lower than anticipated volume.

James R. Jaye: Marilee in paint stores group against the strongest comparisons we will face this year.

James R. Jaye: Followed by consumer brands group in North America.

Heidi G. Petz: Contributions from Price were modest, as expected, and we are now seeing our recently announced increases in paint stores beginning to ramp more fully in our second quarter. Gross margin expanded 270 basis points year over year to 47.2% Higher SG&A in the quarter reflects the deliberate and accelerated investments and growth we made in the second half of last year, which have not yet annualized. Even the margin improved by 60 basis points to 16.7%.

James R. Jaye: Contributions from price were modest as expected and we are now seeing our recently announced increases in paint stores beginning to ramp more fully in our second quarter.

James R. Jaye: Gross margin expanded 270 basis points year over year to 47, 2%.

James R. Jaye: Higher SG&A in the quarter reflects the deliberate and accelerated investments in growth. We made in the second half of last year, and which have not yet annualized.

James R. Jaye: EBITDA margin improved by 60 basis points to 16, 7%.

Heidi G. Petz: And adjusted diluted net income per share increased 6.4%. We also maintained our disciplined capital allocation approach and returned $728 million to our shareholders through dividends and share repurchases during the quarter, an increase of 59% year over year. I will now turn it over to Heidi, who will provide some commentary on our first quarter results by segment before moving on to our outlook and your questions.

And adjusted diluted net income per share increased six 4%.

James R. Jaye: We also maintained our disciplined capital allocation approach and returned $728 million to our shareholders through dividends and share repurchases during the quarter, an increase of 59% year over year.

James R. Jaye: Let me now turn it over to Heidi, who will provide some commentary on our first quarter results by segment.

Heidi G. Petz: Moving onto our outlook and your questions.

Heidi G. Petz: Thank you Jen.

Heidi G. Petz: We are successfully implementing our strategy, which at Sherwin-Williams we do with a very forward-looking and aggressive approach. While market conditions are choppy and may give others in our industry a moment of pause, let me be clear, we are not paused. So this morning, I'm going to talk as much about our results as I am about what we're doing to ensure the momentum of our company not only continues but accelerates our ability to widen the gap between us and our competition. So let me start with the results for the first quarter.

We are successfully implementing our strategy, which at Sherwin Williams, we deal with is very forward looking an aggressive approach.

Heidi G. Petz: While market conditions are choppy and may give others in our industry a moment apart let me be clear we're not pausing.

So this morning, I'm going to talk as much about our result, as I am about what we're doing to ensure the momentum of our company not only continues but accelerates our ability to widen the gap between us and our competition.

So let me start with the results of the first quarter as Jim mentioned, our first quarter is a seasonally smaller one and our results do not necessarily dictate how our full year will unfold.

Heidi G. Petz: As Jim mentioned, our first quarter is a seasonally smaller one, and our results do not necessarily dictate how our full year will unfold. While our sales came in within our guidance, they were at the lower end of our range. Going forward, I believe in our differentiated strategy, our deeply experienced leadership, and our team's ability to execute in lockstep with our customers to deliver above market growth. Here are several of the leading indicators that give me great confidence that we will continue to strengthen our position.

While our sales came in within our guidance. It was at the lower end of our range going forward I believe and our differentiated strategy our deeply experienced leadership.

Heidi G. Petz: And our teams ability to execute in lockstep with our customers to deliver above market growth here.

Heidi G. Petz: Here are several of the leading indicators that give me great confidence that we continue to strengthen our position for.

Heidi G. Petz: For example, we increased the number of exclusive national contracts we have with homebuilders and property management customers in the quarter. New accounts and active purchasing accounts in our stores are up significantly from a year ago. Paint Stores Group rep call activity and unique account calls are also up in the quarter. Foot traffic in our stores is up, and our net promoter score is at an all-time high.

Heidi G. Petz: For example, we increased the number of exclusive national contracts, we have with homebuilders and property management customers in the quarter.

Heidi G. Petz: New accounts and active purchasing accounts and our stores are up significantly from a year ago.

Heidi G. Petz: Paint stores group Rep call activity and unique accounts calls are also up in the quarter.

Heidi G. Petz: Foot traffic in our stores is that and our net promoter score is at an all time high.

Heidi G. Petz: And we're seeing multiple share of wallet gains and meaningful new customer wins across our industrial businesses. These are just some of the factors we expect will translate into strong performance as the year unfolds. As far as specifics on the first quarter, I'll begin with the paint stores group, where sales increased by a half percentage against a mid-teens comparison. However, we are not satisfied with this level of performance, as volume was basically flat in the quarter. Exterior paint sales were pressured by challenging outdoor painting conditions in some geographies.

Heidi G. Petz: And we're seeing multiple share of wallet and meaningful new customer wins across our industrial businesses.

Heidi G. Petz: These are just some of the factors, we expect will translate into strong performance as the year unfolds.

Speaker Change: As far as specifics on the first quarter I'll begin with the paint stores group, where sales increased by a half percentage against a mid teens comparison.

Speaker Change: We are not satisfied with this level of performance as volume was basically flat in the quarter.

Speaker Change: Exterior paint sales were pressured by challenging outdoor painting conditions in some geographies as.

Heidi G. Petz: As we've demonstrated in the past, we expect to see the benefit of our focused investments unfold throughout the balance of the year. A few strong weeks in June can more than offset first quarter challenges. Price was up modestly related to our February 1 announced increase. We are now seeing a ramp to typical effectiveness as our second quarter moves forward. However, segment margin decreased to 17.2%, reflecting flat volume and the higher year-over-year planned growth investment.

Speaker Change: As we've demonstrated in the past, we expect to see the benefit of our focused investments unfold throughout the balance of the year. A few strong weeks in June can more than offset first quarter challenges.

Speaker Change: Price was up modestly related to our February one announced increase.

Speaker Change: We are now seeing a ramp to typical effectiveness as our second quarter moved forward.

Speaker Change: Segment margin decreased to 17, 2%, reflecting flat volume and the higher year over year planned growth investments.

Heidi G. Petz: As a reminder, paint store sales were up by double-digit percentages in every customer segment in the first quarter of a year ago. In this year's first quarter, professional sales were led by residential repaint, where gallons were up mid single digits. We see this above market growth as evidence that our increased investments in this segment are already beginning to deliver a return. Commercial and Protective, and Marine grew modestly in the quarter. New residential was down, as expected, but there is momentum in single-family starts that will increasingly turn to completions as the year progresses. Property management was also down, driven by delays in capital expenditure projects, even as apartment terms remained steady.

Speaker Change: As a reminder, paint store sales were up by a double digit percentage in every customer segment in the first quarter a year ago.

Speaker Change: In this year's first quarter Pro sales were led by residential repaint, where gallons were up mid single digits.

Speaker Change: We see this above market growth as evidence that our increased investments in this segment are already beginning to deliver a return.

Speaker Change: Commercial and protective and marine grew modestly in the quarter.

Speaker Change: New residential was down as expected, but theres momentum in single family starts that will increasingly turn to completions as the year progresses.

Speaker Change: Property management was also down driven by delays in Capex projects, even as apartment turns remained steady.

Heidi G. Petz: From a product perspective, interior paint sales increased by a low single-digit percentage, while exterior sales decreased modestly. Encouragingly, spray equipment sales were up mid-single digits in the quarter. We opened seven net new stores in the quarter and expect to open 80 to 100 for the full year. Our doors are open.

Speaker Change: From a product perspective interior paint sales increased by a low single digit percentage.

Speaker Change: Exterior sales decreased modestly.

Speaker Change: Encouragingly spray equipment sales were up mid single digits in the quarter.

Speaker Change: We opened seven net new stores in the quarter and expect to open 80 to 100 for the full year.

Speaker Change: Our doors are open.

Heidi G. Petz: We're laser focused on the momentum we have created, serving both existing and new customers, and will continue to win business and take share based on our differentiated solution. Moving on to our Consumer Brands Group, sales decreased by 7.1% in the quarter. Lower volume and the impact of divestitures were partially offset by selling price increases, primarily in Latin America. However, sales in North America decreased by a high single-digit percentage as our strategic partners managed the timing of their seasonal inventory bills. Outside of North America, sales increased by a double-digit percentage in Europe and a low single-digit percentage in Latin America. Adjusted segment margin, which excludes acquisition-related amortization expense, expanded to 20.9%.

Speaker Change: We are laser focused on the momentum we have created serving both existing and new customers.

Speaker Change: We will continue to win business and take share based on our differentiated solutions.

Speaker Change: Moving on to our consumer brands group sales decreased by seven 1% in the quarter.

Speaker Change: Lower volume and the impact of divestitures were partially offset by selling price increases primarily in Latin America.

Speaker Change: Sales in North America decreased by a high single digit percentage as our strategic partners manage the timing of their seasonal inventory builds.

Speaker Change: Outside of North America sales increased by a double digit percentage in Europe, and a low single digit percentage in Latin America.

Speaker Change: Adjusted segment margin, which excludes acquisition related amortization expense expanded to 29%.

Heidi G. Petz: This was primarily driven by improved manufacturing and distribution fixed cost absorption, moderating raw material costs, and improved results in Latin America and Europe, partially offset by lower North American sales volume. Sales in the Performance Codings Group were in the range we expected, with continued choppiness across each of our businesses and regions. Lower volume was partially offset by growth from acquisition. However, sales growth in Europe and Asia was offset by decreases in North America and Latin America.

Speaker Change: This was primarily driven by improved manufacturing and distribution fixed cost absorption moderating raw material costs and improved results in Latin America, and Europe, partially offset by lower North American sales volume.

Speaker Change: Sales in the performance coatings group were in the range, we expected with continued choppiness across each of our businesses and regions.

Speaker Change: Lower volume was partially offset by growth from acquisitions.

Speaker Change: Sales growth in Europe, and Asia was offset by decreases in North America, and Latin America.

Heidi G. Petz: Adjusted segment margin, which excludes acquisition-related amortization expense, improved to 17.1%. This is the fifth straight quarter this team has delivered year-over-year segment margin improvement and again reflects the disciplined strategy of growing operating margin in the industrial business to mirror that of our architectural business. Industrial wood led the growth, including the impact of recent acquisitions. Coil also delivered solid growth. However, Autorefinish was flat against a mid-teens comparison.

Adjusted segment margin, which excludes acquisition related amortization expense improved to 17, 1%.

Speaker Change: This is the fifth straight quarter. This team has delivered year over year segment margin improvement.

Speaker Change: And again reflects the disciplined strategy to growing operating margin in the industrial business to mirror that of our architectural business.

Speaker Change: Industrial wood led the growth, including the impact of recent acquisitions.

Speaker Change: <unk> also delivered solid growth.

Speaker Change: Auto refinish was flat against a mid teens comparison.

Heidi G. Petz: We are confident recent Sherwins, driven by our differentiated service and technology, will begin to show up more meaningfully as the year progresses. Packaging was down as expected, with improvement expected in the back half of the year. General Industrial was impacted by lower demand in all regions.

Speaker Change: We are confident recent share wins, driven by our differentiated service and technology will begin to show up more meaningfully as the year progresses.

Speaker Change: Packaging was down as expected with improvement expected in the back half of the year.

Speaker Change: General industrial was impacted by lower demand in all regions.

Heidi G. Petz: Moving on to our guidance for the second quarter and full year, first, I want to talk about our global team. It always comes down to our people.

Speaker Change: Moving onto our guidance for the second quarter and full year.

Speaker Change: First I want to talk about our global team. It always comes down to our people. Our team is highly engaged aggressive and acting with determination and urgency. They are focused on the right priorities and this will become more and more visible in our results I would bet on this team all day.

Heidi G. Petz: Our team is highly engaged, aggressive, and acting with determination and urgency. They're focused on the right priorities, and this will become more and more visible in our results. I would bet on this team all day, every day.

Speaker Change: Hey everyday.

Heidi G. Petz: Second, on our January call, we acknowledged there are uncertainties in the economy. We don't expect to get material help from the macro environment this year, but a few bright spots are emerging. Single-Family Housing Starts have improved, and this will increasingly turn to completions as the year progresses. Existing home sales are unlikely to get much softer.

Second on our January call. We acknowledged there are uncertainties in the economy, we don't expect to get material help from the macro environment. This year, but a few bright spots are emerging.

Speaker Change: Single family housing starts have improved and this will increasingly turn to completions as the year progresses.

Speaker Change: Existing home sales are unlikely to get much softer.

Heidi G. Petz: Last week's LERA report from Harvard indicates that the remodeling outlook continues to improve, with declines easing and momentum building later in the year. On the industrial side, the manufacturing PMI has stabilized or improved in several regions. Third, we are tilting the table in our favor by controlling what we can control. Year-to-date, we have signed 56 new exclusive national account agreements and paint stores groups, primarily in new residential and property maintenance. We also have increased sales rep call activity, and unique accounts called significantly. We have a robust plan and aggressive field activity to engage customers of competitors who have recently closed their doors or are otherwise distracted. As I said earlier, our doors are open. We are not distracted.

Speaker Change: Last week's Lira report from Harvard indicate that the remodeling outlook continues to improve.

Speaker Change: With declines easing and momentum building later in the year.

Speaker Change: On the industrial side, the manufacturing PMI has stabilized or improved in several regions.

Speaker Change: Third we are tilting the table in our favor by controlling what we can control.

Speaker Change: Year to date, we have signed 56, new exclusive national account agreements in paint stores group, primarily in new residential and property maintenance.

Speaker Change: We also have increased sales rep call activity and unique accounts called significantly.

We have a robust plan an aggressive field activity to engage customers of competitors, who have recently closed their doors or are otherwise distracted.

Speaker Change: As I said earlier, our doors are open.

We are not distracted you can expect us to be very aggressive here.

Heidi G. Petz: You can expect us to be very aggressive here. In addition to our retail platform and team of experienced reps and store managers, we're driving customer stickiness through our digital initiative. In March, we had the highest number of ProPlus users ever engaging with our platform, along with a near record number of new registrations. Additionally, we opened our Tourneau France packaging plant, which will support customers converting to non-BPA coatings to meet the European Commission's 2026 mandate.

Speaker Change: In addition to our stores platform and team of experienced reps and store managers, we're driving customer stickiness through our digital initiatives and.

Speaker Change: In March we had the highest number of pro plus users ever engaging with our platform along with a near record number of new registration.

Speaker Change: We've opened our tour, new France packaging plant, which will support customers converting to non BPA coatings to meet the European Commission 2026 mandate.

Heidi G. Petz: We are specked on multiple new infrastructure and mega projects that are gaining momentum, and we're introducing multiple new products in both the architectural and industrial businesses to drive our customers' success. Obviously, we're not going to share everything that we're doing for competitive reasons, but you can be certain that there's a long list of actions that we're taking in addition to these items. The key takeaway is this: at some point, the demand logjam in multiple end markets is going to break.

Speaker Change: We're specced on multiple new infrastructure and Mega projects that are gaining momentum.

Speaker Change: And were introducing multiple new products in both the architectural and industrial businesses to drive our customers' success.

Speaker Change: Obviously, we're not going to share everything that we're doing for competitive reasons.

You can be certain that there's a long list of actions that we're taking in addition to these items.

Speaker Change: The key takeaway is this at some point the demand logjam in multiple end markets is going to break.

Heidi G. Petz: We will be there to capitalize. We're very confident it's a matter of when, not if. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the second quarter of 2024. The deck also contains our full-year sales and earnings per share outlook, which is again unchanged from what we provided in January. We expect to provide an update on our 2024 full-year outlook when we report our second quarter results in July. Our slide deck also provides guidance on our expectations for raw material costs and other items helpful for modeling purposes. All of these remain unchanged from our January call as well.

Speaker Change: We will be there to capitalize.

Speaker Change: We're very confident it's a matter of when not if.

Speaker Change: As for our specific outlook the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the second quarter of 2024.

Speaker Change: The deck also contains our full year sales and earnings per share outlook, which again is unchanged from what we provided in January.

Speaker Change: We expect to provide an update on our 2020 for full year outlook. When we report our second quarter results in July.

Speaker Change: Our slide deck also provides guidance on our expectations for raw material costs and other items helpful for modeling purposes.

Speaker Change: All of these remain unchanged from our January call as well.

Heidi G. Petz: As you can see, we have high expectations of ourselves. Our team is aggressive, determined, and focused on the right priorities. I want to be clear. We are playing to win. We know our strategy is the right one, and we have demonstrated for decades that it works. We expect to outperform the market, and we are confident our differentiated solutions will continue to drive our customers' success, while also rewarding our shareholders. This concludes our prepared remarks. And with that, I'd like to thank you all for joining us this morning. We'll be happy to take your questions.

Speaker Change: As you can see we have high expectations of ourselves.

Speaker Change: Our team is aggressive determined and focused on the right priorities.

Speaker Change: I want to be clear, we are playing to win.

We know our strategy is the right one and we have demonstrated for decades that it works.

Speaker Change: Expect to outperform the market and we are confident our differentiated solutions, we will continue to drive our customers' success.

Speaker Change: While also rewarding our shareholders.

Speaker Change: This concludes our prepared remarks and with that I'd like to thank you all for joining US. This morning, we will be happy to take your questions.

Speaker Change: Okay.

Unknown Executive: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, you pick up your handset, if listening on speakerphone, to provide optimum sound quality. We do ask that participants please ask one question, then re-enter the queue. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Vincent Andrews from Morgan Stanley. Your line is live.

Speaker Change: Certainly.

Speaker Change: At this time will be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.

Speaker Change: We do ask that while posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.

Speaker Change: We do ask that participants. Please ask one question and then reenter the queue.

Speaker Change: Once again, if you have any questions or comments. Please press star one on your phone.

Your first question is coming from Vincent Andrews from Morgan Stanley. Your line is live.

Vincent Stephen Andrews: Thank you and good morning everyone. Heidi, I know historically the company doesn't like to talk about the weather and use it as an excuse, but maybe you could comment on it a little bit since it was on your deck and you brought it up. Just curious how much you think you may be lost from an external day's perspective and how much you think you might make up in 2Q. And related to that, you did mention that you were disappointed with results in the quarter, and PSG did come at the low end of your range. So I just want to clarify whether that was all weather-related or whether you felt like the execution could have been better in the quarter and you're looking to course correct as you move into 2Q.

Vincent Stephen Andrews: Thank you and good morning, everyone.

Vincent Stephen Andrews: Hi, there I know historically the company doesn't like to talk about weather and use it as an excuse.

Vincent Stephen Andrews: But maybe you could comment on it a little bit since it was in your deck and you brought it up just curious how much you think.

Vincent Stephen Andrews: You may be lost from an exterior day's perspective, and how much you think you might make up in <unk>.

Vincent Stephen Andrews: <unk>.

Vincent Stephen Andrews: Related to that you did mentioned that you were disappointed with results in the quarter.

Vincent Stephen Andrews: PSG did come in at the low end of your range. So I just want to clarify whether that was all weather related or whether.

Vincent Stephen Andrews: You felt like the execution could have been better in the quarter and Youre looking to course, correct as you move to two two.

Heidi G. Petz: Yeah, good morning, Vincent. Thanks for the question.

Speaker Change: Yes, good morning, Vincent Thanks for the question.

Heidi G. Petz: You know, I would tell you whether that's part of it, but certainly there's no excuse that the last thing we're going to do is sit back and point to the weather. We're trying to create our own weather here at Sherwin-Williams. So I would say not so much with relative execution, but I think in some regards, a lot of this is delayed activity. Let me just take a minute here.

Speaker Change: I would tell you whether the part of it but certainly there is no excuse of the last thing we're going to do is sit.

Speaker Change: If I can point to whether we're trying to create our own weather here at Sherwin Williams, So I would say not so much with retail route relative our execution, but I think in some regards a lot of this is delayed activity may just take a minute here. If you look broadly at stores that I'm spending as you would imagine a lot of time out in the market right now with with.

Heidi G. Petz: If you look broadly at stores, and I'm spending, as you would imagine, a lot of time out in the market right now with our team and with existing customers, also with potential and newly acquired customers, and the theme that we're hearing over and over that I'm getting a lot of validation on is that our differentiated strategy of distribution, certainly with our paint store, our unique specialty paint store model, our quality of people, the availability of our products, That is really critical right now in this environment.

Speaker Change: Our team win with existing customers also with the potential of newly acquired customers in the theme that we're hearing over and over that time.

Speaker Change: Getting a lot of validation is that our differentiated strategy of distribution.

Speaker Change: Certainly with our paint store unique specialty paint store model, our quality of people the availability of our products. The list goes on.

Speaker Change: That is really critical right now in this environment and I'll point to a few areas that gives me a lot of confidence as we head into the balance of the year.

Heidi G. Petz: And I'll point to a few areas that give me a lot of confidence as we head into the balance of the year. The ability to be accessible, to be dependable, the consistent execution that our contractors are experiencing store to store with us, certainly is really critical going forward and an important launch pad. Weather certainly is part of it. The choppiness in the market, you're going to see that vary by segment. I'm going to ask Al to jump in here and give you a little bit of color, and then I'll come back with some additional points.

Speaker Change: <unk> ability to be accessible to be dependable, but.

Speaker Change: Consistent execution that our contractors are experiencing store to store with us.

Speaker Change: Certainly is really critical going forward, an important launch pad I'd point to a few areas.

Speaker Change: Relative to the quarter weather certainly is part of it.

Speaker Change: The choppiness in the market youre going to see that ranging by by segment I'm going to ask al to jump in here and give you a little bit of color and then I'll come back with some additional points.

Allen J. Mistysyn: Vincent, a sales mystic. You know, we did talk in the opening about softer than anticipated exterior sales, which were pressured by the challenging outdoor painting conditions. And we saw it; if you looked at our slide deck, Southeastern Division, which is our largest sales division in the first quarter, was a laggard, which is typically not the case. Commercial, we saw slower exterior sales, property maintenance, and then protective memory and got off to a slower start than we were expecting.

The sale of institution.

al: We did talk about in the opening about softer than anticipated exterior sales, which were pressured by the challenging outdoor painting conditions.

al: And we saw it if you looked at our slide deck.

al: Southeastern Division, which is our largest <unk>.

Sales division in the first quarter was a laggard, which is typically not the case.

al: Commercial we saw slower exterior.

al: Sales property maintenance, and then protective and marine got off to a slower start than we were we were expecting.

Allen J. Mistysyn: All of these three segments, we're confident that these jobs and projects have just been moved, and not all of them will get done in the second quarter. Some will be pushed into the balance of the year, but certainly have a high level of confidence there. One highlight, I think, that I think is worth mentioning, and Heidi mentioned it in her opening remarks: we talked about the ResRePaint market being flat for the year.

al: All of these three segments with confidence that these jobs and projects have just been moved in and not all of them will get done in the second quarter. Some will be pushed into the balance of the year, but certainly I have a high level of.

Confidence there one highlight I think that I think is worth mentioning and Heidi mentioned it in her opening remarks, we talked about rosary pain market being flat.

al: For the year, but with the investments. We've made we were up mid single digits in the fourth quarter were up mid single digits in the first quarter and I think if you look at how the quarter unfolded on a same day basis March was the strongest month for paint stores group.

Allen J. Mistysyn: But with the investments we've made, we're up mid single digits in the fourth quarter, and we're up mid single digits in the first quarter. And I think if you look at how the quarter unfolded on a same day basis, March was the strongest month for Paint Stories Group in the first quarter, and we see that continued momentum in April.

al: Ain't stores group in the first quarter and we see that continuing momentum in April one piece I would add just on the residential repaint side al said, this but remind that remained.

Heidi G. Petz: One piece I would add, just on the residential repaint side, I'll sub this, but, you know, remind all of us, obviously, that not only did we say it would be flat, and we hit mid to high in the range, but we're looking at our comparisons. They're not only indicative of now, but also the previous year.

All of US obviously, not unlimited with it would be flat and we had mid to high in that range.

al: But we're looking at our comparisons are not only in days now, but also the previous year, we had a pretty aggressive comp last year and I do think it's evidence that we're making the right investments here delivering this above market growth, we expect to continue to do so here.

Heidi G. Petz: We had a pretty aggressive comp last year, and I do think it's evidence that we're making the right investments here, delivering this above-market growth. We expect to continue to do so. We're taking this segment very seriously, as you can see from the value proposition that we have designed specifically for this segment, not just the products, but certainly the services, everything that we're doing to try to continue to help this contractor be as successful as possible, and I think that's what you're seeing now in this above-market growth relative to residential.

al: We are taking this segment very seriously as you can think about the value proposition that we have designed specific for this segment not just the products, but certainly the services everything that we're doing to try to continue to help this contractor be as successful as possible and I think thats, what youre seeing now in this above market growth relative to the rest of the pain.

Speaker Change: Thank you Vincent.

Vincent Stephen Andrews: Thank you, Vincent. Thank you. Your next question is coming from Greg Melich from Evercore ISI. Your line is live. Hi, thanks. I wanted to follow up on the margins.

Speaker Change: Thank you. Your next question is coming from Greg Melick from Evercore ISI. Your line is live.

Gregory Scott Melich: Hi, Thanks, I wanted to follow up on the margin specifically gross margin I think you mentioned that there was some operating leverage in the consumer brands group, but volume was was flat or disappoint. So just could you put that together.

Gregory Scott Melich: Thank you. Your next question is coming from Greg Melich from Evercore ISI. Your line is live. Hi, thanks.

Gregory Scott Melich: And maybe help us understand was there any benefit to gross margin from manufacturing or was it all price versus raws and <unk>.

Allen J. Mistysyn: Yeah, Greg, it's primarily moderating raw material costs and modest price increases in the paint stores group, and also, another tailwind is that the paint search group volumes are higher than the other segments, which has a higher gross margin in the company. So those are the primary drivers of the year over year improvement.

Speaker Change: Yes, Greg it's primarily.

Speaker Change: So we're moderating raw material costs and modest price increases in paint stores group and also.

Speaker Change: Another <unk>.

Speaker Change: Tailwind as the paint stores group volumes were higher than the other segments, which has a higher gross margin in the company. So those are the primary drivers of the year over year improvement.

Allen J. Mistysyn: The call out on the higher fixed cost manufacturing affected the consumer brands, Operating Margin, including the Gross Margin, but that was offset by other segments. And if you recall, I did talk about this on our year-end call and said I expected our global supply chain to improve performance throughout the year of 2024. I also, if you recall, I talked about it in our financial community presentation last August that our consumer operating margin was under pressure and underperformed due to supply chain inefficiencies.

Speaker Change: Callout on the.

Speaker Change: Higher fixed cost manufacturing affected the consumer brands.

Speaker Change: Operating margin.

Speaker Change: Including our gross margin, but that was offset by other segments.

Speaker Change: And if you recall I did talk about this on our year end call that I expected our.

Speaker Change: Global supply chain to improve performance throughout the year of 2024.

Speaker Change: Also if you recall I talked about it on our financial community presentation last August.

Speaker Change: Consumer operating margin was under pressure and underperform due to the supply chain inefficiencies, we experienced choppy production swings that negatively impacted our cost plus higher wages energy and other costs and so as we typically do annually, we update our product costs.

Allen J. Mistysyn: We do expect to continue to see improvements in incremental cost per gallon with our global supply chain continuous improvement and simplification efforts. There is an impact on the paint stores group in PCG. I talked about not getting into the detail of that on our year-end call. And it's really not a material impact in the quarter. It is on the consumer because it's a small quarter for consumers.

Speaker Change: Has.

Do you expect to continue to see it.

Speaker Change: Improvements in incremental cost per gallon with our global supply chain continuous improvement and simplification efforts.

Speaker Change: There is an impact on paint stores group and PSEG I talked about not getting into the detail of that on our year end call and it's really not.

Speaker Change: Not a material impact in the quarter. It is on consumer because it's a small quarter for consumer, but if you look at paint stores as we've talked about that's volume driven.

Jeffrey John Zekauskas: But if you look at paint stores, as we talked about this volume-driven and the incremental investments in SG&A. On PCG, we're still in the high teens for performance, nice and improvement year over year. And we'd expect that kind of performance as the year goes on.

Speaker Change: And the incremental investments in SG&A.

Speaker Change: <unk>, we're still in the high teens performance nice improvement year over year, and we would expect that kind of performance as the year goes out.

Jeffrey John Zekauskas: Thank you. Your next question is coming from Jeff Zekauskas from J.P. Morgan. Your line is live.

Speaker Change: Thank you Greg.

Speaker Change: Thank you. Your next question is coming from Jeff Zekauskas from Jpmorgan. Your line is live.

Jeffrey John Zekauskas: Thanks very much. In the first quarter, consumer brands, you earned roughly $170 million in EBIT adjusted, and normally, consumer brands are seasonally weak in the first quarter. That is, your sales, whether they grow a little bit or whether they shrink a little bit, are higher in the second and third quarter. So, from a logical standpoint, And should it be the case that you earn at least as much in the consumer brands group in the second and third quarter as you did in the first,

Jeffrey John Zekauskas: Thanks very much.

Jeffrey John Zekauskas: In the first quarter in consumer brands.

Jeffrey John Zekauskas: You earned roughly $170 million in EBIT adjusted.

Jeffrey John Zekauskas: And normally the consumer brands.

Jeffrey John Zekauskas: Yes, seasonally weak in the first quarter that NCR sales, whether they grow a little bit or whether they shrink a little bit are higher in the second and third quarter.

Jeffrey John Zekauskas: So from a logical standpoint.

Jeffrey John Zekauskas: Be the case that you are in at least since March and the consumer brands group in the second and third quarter.

Jeffrey John Zekauskas: As you did in the first.

Allen J. Mistysyn: Yeah, Jeff. You know, even though we don't give operating margin guidance by segment, I will add color that, yes, we would expect sequential margin improvement in the second and third quarter because of the seasonally higher architectural sales in 2Q and 3Q. I do expect North America's sales volume to be less of a headwind in our second quarter compared to our first quarter, with our second quarter guidance for consumer sales being down low single digits.

Speaker Change: Yes, Jeff.

Jeffrey John Zekauskas: Even though we know.

Jeffrey John Zekauskas: Give operating margin guidance by segment I will add color that yes, we would expect.

Jeffrey John Zekauskas: Sequential margin improvement in the second and third quarter because of the seasonality seasonally higher architectural sales in <unk> and <unk> I do expect North America sales volume to be less of a headwind in our our second quarter compared to our first quarter.

Jeffrey John Zekauskas: With our guidance in our second quarter guidance for consumer sales being down low single digits I do expect that the higher fixed cost absorption of manufacturing and distribution operations will continue in our second.

Allen J. Mistysyn: I do expect that the higher fixed cost absorption and manufacturing and distribution operations will continue in our second and remaining quarters of the year, but I agree with that. We should be back to our more typical bell curve with the seasonality of architectural going into 2Q and 3Q and then dropping as it typically does in our fourth quarter.

Jeffrey John Zekauskas: And the remaining quarters of the year.

Speaker Change: I agree with that.

Speaker Change: We should be back toward more typical bell curve.

Speaker Change: With the seasonality of architectural going into <unk>, and <unk> and then dropping as it typically does in our fourth quarter.

David L. Begleiter: Thank you, Jeff. Thank you. Your next question is coming from David Begleiter from Deutsche Bank. Your line is live. Thank you. Good morning. How do you want to refer to you?

Speaker Change: Thank you Jeff.

Speaker Change: Thank you. Your next question is coming from David Begleiter from Deutsche Bank. Your line is live.

David L. Begleiter: Thank you and good morning.

David L. Begleiter: How do you mentioned you won 56, new exclusive on National account wins.

David L. Begleiter: Thank you. Your next question is coming from David Begleiter from Deutsche Bank. Your line is live.

David L. Begleiter: Is that a big number is a small number or what was what was it last year or maybe the average of the last three years and is there a dollar amount associated with that.

Heidi G. Petz: Good morning, Dave. Thanks for your question. I won't share the numbers, but I appreciate your question.

Speaker Change: 56, when when number thank you.

Speaker Change: Yes. Good morning. Thanks for your question I'm not sure if the numbers that I. Appreciate your question what I would tell you is it's material.

Heidi G. Petz: What I would tell you is that it's material. And I would also tell you that it's evidence of our ability to put on display what it is that only Sherwin-Williams can do relative to, you know, servicing these contractors, certainly both from a new residential and a property maintenance standpoint, in a way that only a specialty paint store can do. And so the function of our footprint, of our team, of the expertise that we have not just on a broad base nationally, leveraging that platform, but our ability to be nimble and local and support the needs of these local contractors. So I think what you're seeing is a material pickup, but it's evidence of our value proposition and what we're able to do uniquely in the market.

Speaker Change: And I would also tell you that what's also it's.

Speaker Change: As evidence of our ability to put on display what it is it only Sherman Williams can do relative to <unk>.

Speaker Change: Servicing these contractors.

Speaker Change: Certainly both from a new residential and our property maintenance standpoint in a way that only a specialty paint store can do and so it's a function of our footprint of our team of the expertise that we have not just on a broad base nationally leveraging that platform, but our ability to be nimble and local and <unk>.

Speaker Change: Support the needs of these local contractors. So I think what you are seeing it's a material pick up but it is evidence of our value proposition and what we're able to do uniquely in the market.

David L. Begleiter: Thank you, David.

Speaker Change: Thank you David.

John Patrick McNulty: Thank you. Your next question is coming from John McNulty from BMO Capital Markets. Your line is live.

Speaker Change: Thank you. Your next question is coming from John Mcnulty from BMO capital markets. Your line is live.

John Patrick McNulty: Yeah, thanks for taking my question. Maybe we can speak about the raw material environment. You've left the outlook for the year unchanged.

Yes, thanks for taking my questions.

Maybe we can speak to the to the raw material environment.

John Patrick McNulty: You've left the outlooks for the year unchanged. It does seem like we've kind of got a mixed bag out there with oil having run up but a lot of the derivatives not really moving <unk> kind of a little bit of a question Mark but I. So I guess can you give us color on how you're seeing your raw material basket at this point. If there are if everything is kind of stable if you.

John Patrick McNulty: It does seem like, you know, we've kind of got a mixed bag out there with oil having a run up, but a lot of the derivative is not really moving. TiO2 is kind of a little bit of a question mark. But I guess, can you give us color on how you're seeing your raw material basket at this point, if there are, if everything is kind of stable, if you're starting to see things, from an inflationary perspective, go higher, or some still falling lower? I guess, maybe you can just give us a little bit more color behind the raw material basket.

John Patrick McNulty: Starting to see things.

John Patrick McNulty: From an inflationary perspective go higher or are some still falling lower I guess, maybe you can just give us a little bit more color behind the raw material basket.

James R. Jaye: Yeah, sure. This is Jim. And good morning, John.

John Patrick McNulty: Yes, sure. This is Jim and good morning, John.

James R. Jaye: Yeah, maybe I'll just start with, you know, the first quarter. Our basket was down year over year, a mid single-digit percentage. And that's likely the biggest benefit of the year also down slightly sequentially. Where we saw the biggest benefit in the first quarter was monomer, resin, solvents, and TiO2, I would say was flattish year over year. Do you look out for the rest of the year, 2Q, ROS still down, probably low single digits year over year, a little bit less benefit than what we saw in 1Q?

James R. Jaye: Yes, maybe I'll just start with the first quarter, our basket was down year over year, a mid single digit percentage and that's likely the biggest benefit of the year also down slightly sequentially.

James R. Jaye: Where we saw the biggest benefit in the first quarter was monomer resins solvents, and <unk> I would say it was flattish year over year.

James R. Jaye: As you look out for the rest of the year to Q raws still down probably low single digits year over year, a little bit less benefit than what we saw in <unk>.

James R. Jaye: And then in the back half of the year, I think it's, you know, just down slightly flattish in the back half year over year. So that full year right now, we're still looking at, you know, down low single digits for the year, to see if there's some upside as the year progresses. But right now, we're still on that low single-digit. Your question about some of the commodities specifically, John, you know, crude right now is $80 or $81 a barrel.

James R. Jaye: And then in the back half of the year I think it's just down slightly flattish in the back half year over year. So the full year right now we're still looking at down low single digits for the year, we'll see if there's some upside as the year progresses, but right now we're still in the down-low single digit.

James R. Jaye: Your question about some of the commodities specifically John.

James R. Jaye: Crude right now 80, $81 a barrel that's up year over year and since December, but it's still down from where we were in the fall when it ran up into the Ninety's.

James R. Jaye: That's up year over year and since December, but it's still down from where we were in the fall when it ran up into the 90s. I'd say for us, we expect to still see a little bit of moderation in TIO2. And, you know, the other thing that's always out there is China. And, you know, with their domestic demand in China being softer, they're exporting a lot of that. And I think that's going to continue to put some pressure on the demand environment for TIO2. So, summarize it, you know, still down low single digits for the year, a bit in 2Q and then flattened out. And thanks for the question, John.

James R. Jaye: Propylene has ticked up sequentially here now, it's sort of flattish year over year, and then I'd say on Tio too.

James R. Jaye: We're seeing some of the producers do a little bit of restocking, but the true end demand in some of these markets is still still choppy.

James R. Jaye: Utilization rates are picking up a little bit theyre seeing some lower input costs.

James R. Jaye: Say for US, we expect to still see a little bit of moderation in tio too.

James R. Jaye: The other thing Thats out there always is China and with their domestic demand in China being softer.

James R. Jaye: They are exporting a lot of that and I think thats going to continue to put some pressure on the demand environment for tio too so.

James R. Jaye: Summarize it still down low single digits for the year.

James R. Jaye: In <unk> and then flattening out.

Speaker Change: Thanks for the question John.

Christopher S. Parkinson: Thank you. Your next question is coming from Chris Parkinson from Wolf Research. Your line is live.

Speaker Change: Thank you. Your next question is coming from Chris Parkinson from Wolfe Research. Your line is live great. Thank you. So can you just give a little more highlights on your projected market share gain you know all of US obviously, you have a thesis across the social community as well as the buzzer community, but since three things are going on that you have the inflection of historically low single family inventory.

Heidi G. Petz: Great, thank you. So can you just give a little more highlights on your projected market share gain? You know, all of us, obviously, have a thesis across the sell-side community as well as the buy-side community. But it seems three things are going on. You have the inflection of historically low single family inventories, potentially, obviously, rates will have to do with that. You have a demographic geographic advantage in many ways.

Christopher S. Parkinson: Potentially obviously rates will have to do with that you have of demographics geographic advantage in many ways and then also you have the underlying share gain narrative versus not one but now two of your competitors. So has your spending plans actually evolved or changed over the last six months to 12 months or is this something.

Heidi G. Petz: And then also you have the underlying share gain narrative versus not one, but now two of your competitors. So, how have your spending plans actually evolved or changed over the last, you know, six to 12 months, or is this something where you're kind of, you know, further positioning and further thinking about things, you know, as it relates to an eventual inflection and your outlook for 25, 26, and onwards? Thank you.

Christopher S. Parkinson: Where you're kind of.

Christopher S. Parkinson: Further positioning and further thinking about things as it relates to an interventional inflection in your outlook for 'twenty five 'twenty six and onwards. Thank you.

Heidi G. Petz: Yeah, Chris, I don't think our spending thesis has changed yet. I think you see what we talked about on our second half and our year-end call, leaning in with additional investments or accelerated investments to influence the share gains and accelerate the share gains that we expect to see, and we saw that with ResRepaint. And we talked about this on our first quarterly call. As interest rates moderate, we would expect to see existing home sales improve. We expect to see an acceleration in new single-family starts and in property maintenance improve CapEx, and we will be better positioned as those turn to get a greater share of that market. Chris, I would

Speaker Change: Yeah, Chris I don't think our spending.

Speaker Change: Thesis has changed yes, I think you look at what we talked about on our second half in our year end call leaning in.

Speaker Change: With additional investments or accelerated investments to influence the share gains and accelerate the share gains that we expect to see and we saw that with the res repaint.

Speaker Change: I think as we get through the second quarter as we've typically done.

Speaker Change: We will look at the indicators market indicators and what we see happening not only in the second half of 2024, but to your point looking at the first half of 2025 look at the trends in volumes the trends in our gross margin and as we've done not just in 'twenty three but in the past if we believe that we have upsell.

Speaker Change: And our volumes upside in our gross margin, we will lean in and add more investments than we would normally do or typically do because of the confidence we have in our strategy because of the.

Heidi G. Petz: Chris, I would add to that as well, just to reiterate what we said earlier, it's not a matter of if, it's when. Spending a lot of time strengthening our position in the market. We've pointed to a few examples. I shared some of the indicators that gave me a lot of confidence. So I'll just give you a bit more color here.

Speaker Change: Confidence we have in long term, new single family construction and the need for housing in the in this country and as interest rates. We've talked about this on our first quarter call as interest interest rates moderate we would expect to see existing home sales improve we would expect to see in access.

Heidi G. Petz: If you think about the short term, executing some actions here, you mentioned increased call activity. But the other way to think about this is that because of our controlled distribution model, we, as you well know, own that data. We're unleashing our selling team right now on the world's largest database of painting contractors. So the team is out hunting in a very surgical and a very targeted fashion. We're not guessing, you know, where to spend time or energy.

Speaker Change: <unk>, our new single family starts and then property maintenance improved Capex and we will be better positioned as those turn to get a greater share of that market.

Speaker Change: Chris I would add to that as well just to reiterate what we said earlier, it's not a matter of if it's when.

Christopher S. Parkinson: And we're spending a lot of time strengthening our position in the market we've pointed to a few examples.

Speaker Change: Shared some of the indicators that gave me a lot of confidence I will just give you a bit more color here. If you think about the short term.

Executing some actions here mentioned increased call activity, but the other way to think about this is because of our controlled.

Heidi G. Petz: We're being very prescriptive in terms of where we want the team to focus. So, in terms of my confidence relative to how the team's hunting, our new account activation, and I mentioned earlier about the unique accounts, but also a significant increase in our active accounts. We're also working hard in the store and with our reps and our managers to get paint out of the bucket and getting products into the hands of these painters and the pros who paint.

Speaker Change: Distribution model.

Speaker Change: As you well know we own that data.

Speaker Change: For unleashing higher selling team right now on the world's largest database of painting contractors. So the team is out hunting in a very surgical in a very targeted fashion, we're not guessing where to spend time or energy we're being very.

Prescriptive in terms of where we want the team's focus so I think in terms of my confidence relative to help the teams hunting or new account activation and mentioned that earlier on the unique accounts that also a significant increase in our active accounts.

Speaker Change: We're also working hard in the store and with our reps and our managers getting paid out of the bucket getting products into the hands of these painters and the promo paints. So in the short term, making sure we're very clear and deliberate about how we want to go into the painting season.

Heidi G. Petz: So in the short term, making sure we're very clear and deliberate about how we want to go into the painting season. And when you think about some of these actions that are going to impact the long term, they give us a lot of confidence in market share, investing a lot in these activities such as Specifications, Applications, and then working with owners to make sure that the projects are meeting their expectations.

Speaker Change: And when you think about some of these actions that are going to impact the long term that gives us a lot of confidence in market share is investing a lot in these activities such as specifications applications and then working with owners to make sure that the projects are meeting their expectations. So there's a lot of factors here that we're making sure that we're.

Heidi G. Petz: So there are a lot of factors here that we're making sure that we're continuing to control what we can control, which is strengthening our position coming out of this. But we will be in a position to take outside discretion.

Speaker Change: Continuing to control, we can control, which is strengthening our position coming out of this what we will be in a position to take out plans gross here.

Speaker Change: Thank you Chris.

Speaker Change: Thank you. Your next question is coming from Josh Spector from UBS. Your line is live.

Joshua David Spector: Thank you, Chris. Thank you. Your next question is coming from Josh Spector from UBS. Your line is live. Yeah, hi, good morning. I wanted to ask a question about pricing.

Joshua David Spector: Yes, hi, good morning, I wanted to ask a question on pricing and first I guess, what was the realized price in the paint store group, specifically in first quarter and how you expect that to roll into the coming quarters. So it sounds a little bit more phased in your description of that so do we see in <unk> kind of the full.

Joshua David Spector: Thank you. Your next question is coming from Josh Spector from UBS.

Joshua David Spector: Impact of that pricing rollout. Thanks.

Allen J. Mistysyn: Yeah, Josh, you know, as we talked about on our first year in call, we went out just as a reminder. We went out with 5% on February 1, and we said we would realize the increase. The full price increase over the next few quarters, the next couple of quarters, as we typically have done, I would say prior, you know, pre-COVID, it's so it's more typical, you know, as we talked about, we had a half a percent increase in our first quarter split pretty evenly between price and volume, and we'd expect that price to ramp up and get fully realized as we exit the second quarter. Thanks, Josh.

Speaker Change: Yes, Josh.

Speaker Change: We've talked about on our first year end call. We went out just as a reminder, we went out with 5% February one.

Joshua David Spector: And we said it.

Joshua David Spector: We would realize the increase.

Joshua David Spector: The full price increase over the next few quarters or next couple of quarters. As we typically have done I would say prior pre COVID-19. So that's more typical as.

Joshua David Spector: As we talked about we had a half a percent increase in our first quarter split pretty evenly between price and volume and we would expect that price to ramp up and get fully realized as we exited the second quarter.

Speaker Change: Thanks, Josh.

Joshua David Spector: Thank you. Your next question is coming from Mike Harrison from Seaport Global.

Speaker Change: Thank you. Your next question is coming from Mike Harrison from Seaport Global Your line is live.

Michael Joseph Harrison: One of your competitors announced a strategic review of their architectural business. I think you guys have alluded to their challenges helping to drive some customer wins. But I'm just curious, are there parts of this business that you will consider looking at, and have you ever acquired paint stores as part of your store expansion efforts, or are you always new builds or some other kind of new stores rather than acquiring?

Michael Joseph Harrison: Hi, good morning.

Michael Joseph Harrison: Hey, Mike.

Michael Joseph Harrison: One of your competitors announced a strategic review of their architectural business. I think you guys have alluded to their challenge is helping to drive some customer wins.

Michael Joseph Harrison: But.

Michael Joseph Harrison: I'm curious are there parts of this business that you will consider looking at.

Michael Joseph Harrison: And have you ever acquired paint stores as part of your store expansion efforts where are you always.

Michael Joseph Harrison: New builds or kind of new new stores rather than acquiring.

Heidi G. Petz: No, thanks for the question. The answer is no.

No. Thanks for the question the answer is no and I would tell you the way that we're looking at this is this is an acquisition without the cash outlay.

Heidi G. Petz: And I would tell you the way that we're looking at this is, this is an acquisition without the cash outlay. We got a lot of excitement in terms of the opportunity to demonstrate our, you know, our value proposition in the market. I think there's a lot of confusion out there as a result of some of these decisions.

Michael Joseph Harrison: We've got a lot of excitement in terms of the opportunity to demonstrate our value proposition in the market I think there's a lot of confusion out there as a result of some of these decisions and quite frankly. This again this is our opportunity to reinforce the consistency.

Heidi G. Petz: And frankly, this, again, this is our opportunity to reinforce the consistency and the reliability of Sherwin-Williams so that when customers want to partner with us, and choose to partner with us. They know and trust that we're going to be there with them every step of the way, whether it's product or project or planning or bidding, helping them with leads. We're going to help make sure, without a doubt, that they are successful. So there's the stability and the continuity of our strategy, I think is on display here. And it's our opportunity to go out and continue to demonstrate that. Yeah, Micah.

Michael Joseph Harrison: And the reliability of Sherwin Williams, so when customers want to partner with us and choose to partner with us.

Michael Joseph Harrison: They know and they trust that we're going to be there with them every step of the way.

Michael Joseph Harrison: Whether it's product or projects or planning or bidding help.

Michael Joseph Harrison: Helping them with leads we're going to help make sure that without a doubt that they are successful. So there's the stability and the continuity of our strategy I think is on display here and it's our opportunity to go out and continue to demonstrate that.

Michael Joseph Harrison: We have we have purchased a store changed before the last one I want to say was PPI, which was a part of <unk> and that was back in 2000.

Michael Joseph Harrison: Yeah, Mike, we have purchased store chains before. The last one, I want to say, was PPI, which was a part of COMEX, and that was back in 2008.

Michael Joseph Harrison: Ken.

Allen J. Mistysyn: 10. I think, as Heidi mentioned, we're confident in our strategy, and opening 80 to 100 stores is like acquiring a small store chain in the US as it is. So we're happy with that strategy, and we'll continue executing against that. Thank you, Mike. Thank you. Your next question is coming from Patrick Cunningham from Citi Investment Research. Your line is live. Good morning.

Michael Joseph Harrison: I think as Heidi mentioned, where we're confident in our strategy.

Turning 80 to 100 stores is like acquiring a small store chain in the U S. As it is so we're happy with that strategy and we'll continue executing against that.

Speaker Change: Thank you Mike.

Thank you. Your next question is coming from Patrick Cunningham from Citi Investment Research. Your line is live.

Patrick Cunningham: Hi, good morning.

Patrick Cunningham: There still seems to be quite a bit of choppiness in general industrial and packaging.

Patrick David Cunningham: Thank you. Your next question is coming from Patrick Cunningham from Citi Investment Research. Your line is live.

Patrick Cunningham: Our expectation for market volumes for the year and how much do you expect to outperform from share gains and then maybe just across performance coatings broadly what are your expectations for pricing for the year, given there might be some indices rolling off but maybe some targeted price increases as well.

Heidi G. Petz: Yeah, good morning. I'll take the first piece of that relative to the segments and some of the outlook, and then I'll hand over to Allen on some of the pricing. I think if you look across the board, you know, packaging, auto refinish, industrial wood, Coil, and P&M, I would say there are upsides to all of that. There's absolutely choppiness if you look at this a bit more by

Speaker Change: Yes, good morning, I'll take the first piece of that relative to the segments in some of the outlook and then I'll hand over to Allen and some of the pricing.

Allen: I think if you look across the board.

Allen: <unk>.

Allen: Packaging auto refinish industrial wood.

Allen: Coil and PNM, what I would say there is upside to all of that there's absolutely choppiness. If you look at this.

Allen: More by geography, I would say that that's true.

Heidi G. Petz: I would say that that's true. GI certainly continues to be, as we said last quarter, the most under-pressure segment. But if I just start with packaging, we said this in our prepared remarks, while the sales are down in the quarter, as we expected, there were some customers, some of our customers out there that were required to make a short-term commitment. And we're really proud and excited that our plant in Texas is back up and running. As I mentioned earlier, our plant in Europe is now producing.

Allen: I certainly continues to be as we said last quarter the most under pressure.

Allen: Segment, but if I just start with packaging.

Allen: <unk> said this in our prepared remarks, while the sales were down in the quarter as we expected.

There were some customers some of our customers out there that we're required to make that a short term commitment and we're really proud and excited that our plant in Texas is back up and running as we mentioned earlier plant in Europe is now producing so we do expect them to regain these customers through the use of our non BPA coating, which is.

Heidi G. Petz: So we do expect to regain these customers through the use of our non-BPA coding, which is a superior technology that allows our customers not only to be faster, more efficient, more profitable, but also to be more sustainable as a result of this advanced technology that we have in the market. So there's a lot of excitement in terms of what we can do to take this technology on a more global basis to support our customers and their sustainability agendas. Automotive refinishing

Allen: Our superior technology allows our customers not only to be faster and more efficient.

More profitable, but also to be more sustainable.

Allen: As a result of this advanced technology that we have in the market. So there's a lot of excitement in terms of what we can do to take this technology and a more global basis to support our customers and their sustainability agenda.

Allen: Automotive refinish, we've talked about this our installed continued to be up double digits in North America and we are.

Heidi G. Petz: We've talked about this, and our installs continue to be up double digits in North America. We are taking share. There's a unique technology and service that we're offering together. So it's the package, along with our ability to leverage our automotive branches, much like our paint stores group, to provide that consistent and reliable service. So another point of differentiation is something that we're really proud of, and I don't think everyone can say that they're taking a share here.

Allen: We're taking share.

Allen: There is a unique technology and service that we're offering together so it's the package along with our ability to leverage our automotive branches.

Allen: Much like our paint stores group to provide that consistent and reliable service. So another point of differentiation.

Allen: It's something that we're really proud of and I don't think everyone can say that theyre taking share here. We know the customers that we're winning we know the competitors were taking business from and we certainly know the volume we're gaining so these numbers will be clearly evident as the year unfolds. We've got a lot more work ahead, but we are winning with.

Heidi G. Petz: We know the customers that we're winning. We know the competitors we're taking business from, and we certainly know the volume we're gaining, so these numbers will be clearly evident as the year unfolds. We've got a lot more work ahead, but we're winning with small customers, we're winning with medium-sized customers, and we're absolutely winning with large customers here. Just briefly on COIL, I mentioned this earlier, but, you know, North America is holding up a bit better than other regions.

Allen: Small customers are winning with medium sized customers and were absolutely winning with large customers here.

Allen: Just briefly on coil.

Allen: <unk> mentioned this earlier, but North America is holding up better than other regions. We have had some significant new business wins in North America. There is some positive tailwind as it relates to near shoring, Mexico, helping to create some demand here.

Heidi G. Petz: We have had some significant new business windfalls in North America. There is some positive tailwind as it relates to near-shoring. Mexico is helping to create some demand for them here. Industrial wood, another positive story here for us. We believe that the market has bottomed out in all regions, but to your point, demand does continue to be choppy going into the second quarter. Some of the recent acquisitions, ICA and Oscar Nolte, EBITDA, dollars, and percent continue to be ahead of plan, so we're saying this is very creative for the industrial wood program, and we're chasing new accounts pretty aggressively, and expect a lot more again as the year unfolds.

Allen: Industrial wood another positive story here for US we believe that the market has bottomed out in all regions, but to your point demand does continue to be choppy going into the second quarter.

Allen: Some of the recent acquisitions eager and Oscar Nolte, a EBITDA dollars and percent continued to be ahead of plan.

Saying this is very accretive to the industrial wood program, and we're chasing new accounts pretty aggressively and we expect a lot more again as the year unfolds and won't go into much detail on general industrial that that is choppy and down in all regions and we are continuing to fight hard to make sure that we best position ourselves as we recover there.

Heidi G. Petz: And I won't go into much detail on general industrial; that's choppy and down in all regions, and we're continuing to fight hard to make sure that we best position ourselves as we recover there. Yeah, Patrick, on the

Heidi G. Petz: Yeah, Patrick, on volumes, with our second quarter guidance to be up or down low single digits, that would tell you our first half volumes will be down low single digits. Full year guidance is flat to up low single digits, there is no change to that, which tells you that our volume in the second half has to be flat to up low single digits.

Patrick Cunningham: Patrick on.

Patrick Cunningham: On the volumes with our second quarter guidance to be up or down low single digits. I would tell you our first half volumes will be down low single digits.

Patrick Cunningham: Full year guidance is.

Patrick Cunningham: To up low single digits. There is no change to that which tells you that our volume in the second half has to be up up flat to up low single digits.

Allen J. Mistysyn: Thank you, Patrick. Thank you. Your next question is coming from Aleksey Yefremov from KeyBank Capital Markets. Your line is live. Thank you. Good morning, everyone.

Speaker Change: Thank you Patrick.

Speaker Change: Thank you. Your next question is coming from Alexia <unk> from Keybanc capital markets. Your line is live.

Thank you and good morning, everyone.

Alexia: You mentioned momentum in.

Aleksey V. Yefremov: Thank you. Your next question is coming from Aleksey Yefremov from KeyBank Capital Markets. Your line is locked.

Alexia: Homebuilding was homebuilding customers in new residential.

Alexia: Extend have you sensed any change among the set of customers.

Alexia: And latest volatility in rates.

Aleksey V. Yefremov: Yeah, I'll take that, Aleksey. I think the sentiment among our home builder customers continues to be very positive. Matter of fact, I was in Texas traveling with our national accounts team earlier in the quarter and spoke to several of our customers down there, and they remain optimistic about where things are heading. The rate environment, you know; we'll see how that plays out. It seems to change month to month as to what's going to happen there.

Alexia: The optimism basically maintained the same.

Alexia: Level or has it moderated perhaps.

Yes, I'll take that <unk>.

Alexia: <unk>.

Alexia: <unk>.

Alexia: Sentiment among our homebuilder customers continues to be very positive.

Alexia: Matter of fact, I was in Texas travelling with our national accounts team earlier in the quarter and spoke to several of our customers down there.

Remain.

Alexia: Optimistic about where things are heading the right environment, we'll see how that.

Plays out.

Alexia: It seems to change month to month of what's going to happen there, but I think al started to hit some of the demographics that are they're driving people to.

Aleksey V. Yefremov: But I think Al started to hit it, you know, some of the demographics that are driving people to find a place to live are intact. And I think also what you're seeing a little bit is people may be adjusting some of their expectations around what type of a home they might be able to afford or buy. And home builders are working to drive affordability, and we're part of that as well.

Alexia: You need a place to live are intact and I think also what youre seeing a little bit as people, maybe adjusting some of their expectations around what types of a home they might be able to afford or buy and the homebuilders are working to drive affordability.

Alexia: Part of that as well.

Alexia: Yeah.

Speaker Change: Thanks for the question.

Speaker Change: Thank you. Your next question is coming from Ghansham Panjabi from Baird. Your line is live.

Heidi G. Petz: Thanks for the question. Thank you. Your next question is coming from Ghansham Panjabi from Baird. Your line is live. Thank you. Good morning. You know, Heidi just followed up on the last one.

Ghansham Panjabi: Thank you good morning.

Ghansham Panjabi: Maybe just following up on the last question you gave us a fair amount of color on how share wins position based on your various internal initiatives, but has your outlook for any of the various PSG verticals changed in any meaningful way versus your initial view coming into the year and then just a second question maybe for al in terms of free cash flow allocation context of a fair amount of debt coming due between this year.

Ghansham Panjabi: Thank you. Your next question is coming from Ghansham Panjabi from Baird. Your line is live.

Heidi G. Petz: Yeah, good morning, Ghansham. No, I don't think anything has materially changed. But I do think as you again, as you look segment by segment, I'd point to protective and marine as a segment where we certainly see upside, and I think I'll use them as an example, because there continues to be demand strength in all markets, although some of the projects have been delayed. So there's been some timing issues here. But I think when you look at the visibility that we're gaining, relative to some of these mega projects, we're launching some pretty significant new technology into the market this year, you know, with fire and flooring and protective coatings, which is an indicator not just of our incremental investment but, I think, some good upside.

Ghansham Panjabi: And next year, and how youre kind of balancing buybacks versus debt paydown.

al: Yes, good morning, Ghansham no I don't think anything has materially changed but I do think as you again as you look segment by segment I'd point to protective and marine was the segment.

al: Certainly, we see upside and I think I'll use them as an example, because there continues to be demand strength in all markets.

al: On some of the projects have been delayed so there's been some timing issues here, but I think when you look at the visibility that we're gaining relative to some of these mega projects for launching.

al: Some pretty significant new technology into the market this year with.

al: Fire and flooring and protective coatings, which is an indicator not just of our incremental investment, but I think some some some good upside having said that I want to go back to where I started which is there's nothing that's materially different.

Heidi G. Petz: Having said that, I want to go back to where I started, which is there's nothing that's materially different from where we came in last quarter. But again, as rates fluctuate, as some of these jobs pick back up, then we'll be back out in July if there's any more upside than what we're up today. Yeah, gotcha.

al: From where we came in last quarter, but again as rates fluctuate as some of these jobs pick back up then we'll be back out in.

In July if there's any any more upside than where we're at today.

al: Ghansham I would say that.

Allen J. Mistysyn: Ghansham, I would say that I feel very good about our strong net operating cash flow generation for the year. You know, you saw us return a big increase in shareholder cash, dividends, and buybacks in our first quarter. I think when you look at our debt, I do expect our total debt to remain flat in 2024. And we'll refinance, to your point, the $1.1 billion of debt maturing, albeit at higher rates, likely we'll take out short-term debt, and then mature it out as we see fit. You know, but, you know, just to reiterate, I mean, we're going to stick to our capital allocation philosophy.

al: I feel very.

al: Good about our strong net operating cash flow generation for the year.

al: Sauce return them.

al: A big increase in shareholder cash and dividends and buybacks in our first quarter I think when you look at our debt I do expect our total debt to remain flat in 2024.

And we will refinance the to your point, the $1 1 billion of debt maturing, albeit albeit they'll be at higher rates.

al: Likely we'll take out short term debt and then mature it out as we see fit.

al: But just to reiterate I mean, we're going to stick to our capital allocation philosophy, we have been very just on about that investing in capex, we pay the dividend, which was a nice increase of 18 over 18%. Our first quarter, we expect that to continue and then.

Allen J. Mistysyn: We've been very disciplined about that. We invest in CapEx, we pay the dividend, which was a nice increase of 18%, over 18%. In our first quarter, we expect that to continue. And then, absent acquisitions, we're going to buy our stock back. And I do expect to be in a two to two and a half debt to EBIT or target range by the end of the year.

al: Absent <unk>.

al: Acquisitions, we're going to we're going to buy our stock back and I do expect to be in that two to two and a half debt to EBITDA target range by end of the year.

Michael James Leithead: Thank you. Your next question is coming from Michael Leithead from Barclays. Your line is live.

Speaker Change: Thank you guys.

Speaker Change: Thank you. Your next question is coming from Michael <unk> from Barclays. Your line is live.

Allen J. Mistysyn: Great, thank you. Good morning. On SG&A, I think the first quarter was up about 6% year-on-year. Is that roughly in line with the rate of wage inflation you're incurring, or how should we think about wage inflation relative to other growth and growth investment drivers in that year-over-year increase?

Michael: Great. Thank you good morning.

Michael: On SG&A I think first quarter was up about 6% year on year is that roughly in line with the rate of wage inflation, you are incurring or how should we think about wage inflation relative to other growth some growth investment drivers in that year over year increase.

Allen J. Mistysyn: Yeah, Mike, I think that if you think about it this way, the wage inflation for 2024 is more typical of prior years. You know, so think about a low single-digit impact. I think what you're seeing in our first quarter is the start of the annualization of the accelerated long-term growth investments we made in the second half of last year. As you recall, on our year-end call, I said I thought SG&A would be up a mid single-digit percentage for the full year, with the first half being above that range, because we're annualizing the investments that we made in the second half, and then that'll level out in the second half.

Speaker Change: Yeah, Mike I think think about it this way the wage.

Speaker Change: Inflation is for 2024 is more typical.

Speaker Change: Prior years.

Speaker Change: So think about a low single digit impact I think what youre seeing.

Speaker Change: And our first quarter is the start of the annualized <unk> of the accelerated long term growth investments. We've made in the second half of last year as you recall on our.

Speaker Change: Our year end call I said I thought SG&A would be up a mid single digit percentage for the full year with the first half being above that range because we're annualizing the investments that we made in the second half and then that will level out.

Speaker Change: In the second half of this year.

Adam Michael Baumgarten: Thank you. Your next question is coming from Adam Baumgarten from Zelman. Your line is live. Hey, everyone. I don't know if you've seen this, but could you give us an update on how the pro suit paint business did in the quarter? I know you mentioned DIY was soft.

Thank you Mike.

Michael Joseph Harrison: Thank you. Your next question is coming from Adam Baumgarten from Zelman Your line is live.

Adam Michael Baumgarten: Hey, everyone I have to say.

Adam Michael Baumgarten: I don't know if you mentioned this but could you give us an update on how the pros who paint business did in the quarter. I know you mentioned DIY was soft with maybe some color on protein pain.

Heidi G. Petz: Yeah, good morning. It's been a challenging quarter, I would say, is maybe the best way to characterize Propane in the first quarter, which was below our expectations, but we have a lot of confidence in our investments, and I would also say a lot of confidence in our strong alignment with our retail partners. I don't know that the alignment has ever been in a better place. It gives us a lot of confidence that we are going to continue to grow share in this space for the balance of the year, but no doubt we've got some work to do here.

Speaker Change: Yes, good morning, I think.

Speaker Change: Certainly there has been.

Speaker Change: A challenged quarter I would say is maybe the best way to characterize propane in.

Speaker Change: In the first quarter, which was below our expectations, but we have a lot of confidence.

Speaker Change: And our investments and I would also say a lot of confidence in our strong alignment with our retail partners.

Speaker Change: Don't know that the alignment is as ever been in a better place. It gives us a lot of confidence that we are going to continue to grow share in this space for the balance of the year, but but no doubt we've got some work to do here.

Speaker Change: Thank you Adam.

Patrick Duffy Fischer: Thank you. Your next question is coming from Duffy Fisher from Goldman Sachs. Your line is live.

Speaker Change: Thank you. Your next question is coming from Duffy Fischer from Goldman Sachs. Your line is live.

Patrick Duffy Fischer: Good morning. Can we drill down on margins and PSG? I would assume you got a little price; raw material was a meaningful benefit. So I have a hard time attributing the decline from those increases to the negative margin, wholly to your growth investments. So were there other things besides the growth investments that were negative in that segment, maybe the transfer from segment to segment on the paint, which was basically the benefit you saw in consumer? Or, you know, anything else that was pulling down the margin other than the growth investments? Yeah, it's tough here.

Yes, good morning.

Patrick Duffy Fischer: Can we drill down on margins in PSG.

Patrick Duffy Fischer: I would assume you've got a little price raw material was a meaningful benefit. So I have a hard time attributing that to decline from those increases to the negative margin wholly to your growth investments. So are there other things. Besides the growth investments that were negative in that segment, maybe the transfer.

Patrick Duffy Fischer: From segment to segment on the paint which was basically the benefit you saw.

Patrick Duffy Fischer: In consumer or anything else, it's pulling down the margin other than the growth investments.

Speaker Change: Yeah, Duffy, it's primarily volume as we have talked about in the past volume is the single biggest driver of operating margin leverage and I'd say all of our segments, but for sure in our paint stores group, so that that's going to be.

Allen J. Mistysyn: Yeah, Duffy, it's primarily volume. As we have talked about in the past, volume is the single biggest driver of operating margin leverage in, I'd say, all of our segments, but for sure in our paint storage group.

Allen J. Mistysyn: So that's going to be the majority of it. And then, yes, we also have an impact from the investments being made, but we do expect to continue to get a return for those investments over the year. Thank you. Thank you. Your next question is coming from Michael Sison from Wells Fargo. Your line is live. Hey, good morning. I guess sort of a follow up on that is

Speaker Change: The majority of it and yes, we also have an impact from the.

Speaker Change: Investments, we made but we do expect to continue to get a return for those investments as the year progresses.

Speaker Change: Thank you Duffy.

Speaker Change: Thank you. Your next question is coming from Michael Sison from Wells Fargo. Your line is live.

Michael Joseph Sison: Hey, good morning, I guess sort of a follow up on that is as you can.

Michael Joseph Sison: Thank you. Your next question is coming from Michael Sison from Wilson. Your line is live. Hey, good morning. I guess sort of a follow-up on that is, as you get into 2Q, 3Q, 4Q for PSG, do you expect segment profits to turn positive and, and for the whole year, will segment profit grow?

Michael Joseph Sison: <unk> for PSG.

Michael Joseph Sison: Do you expect segment profit.

Michael Joseph Sison: Turned positive.

Michael Joseph Sison: And for the whole year will segment profit grower.

Allen J. Mistysyn: Yes, on all of that. Thank you. Thanks, Mike. Thank you. Your next question is coming from Kevin McCarthy from Vertical Research. Your line is live.

Speaker Change: Yes on all of that.

Speaker Change: Thank you.

Speaker Change: Thanks, Mike.

Kevin William McCarthy: Thank you. Your next question is coming from Kevin Mccarthy from vertical Research partners. Your line is live.

Kevin William McCarthy: Yes, good morning. Thank you. Maybe a two-part question, if I may, on the pain stores group.

Kevin William McCarthy: Yes. Good morning. Thank you maybe a two part question if I may on paint stores group.

Kevin William McCarthy: First, with a few more months in the rearview mirror, would you comment on where you think US architectural industry gallonage will come in for 2023? And where you think it might track for this year? And then the second part would be to do with protective and marine coatings. In crafting your segment guidance for PSG, do you think Protective and Marine is likely to grow faster than your paint stores' sales, or slower or on par? How would you characterize that given the commentary around timing and slower start-ups?

Kevin William McCarthy: First with a few more months in the rearview mirror or would you comment on where you think U S. Architectural industry Gallonage came in for 2023, and where you think it might track for this year and then the second part would be to do with protective and marine coatings.

Kevin William McCarthy: Crafting your segment guidance for PSG do you think protective and marine is likely to grow faster than your paint stores sales were slower or on par how would you characterize that given.

Kevin William McCarthy: On the commentary around timing and slower start and so forth.

Heidi G. Petz: Yeah, good morning. I'll start with the P&M piece, and then I'll hand it over to Al. We look at some of the gallons year over year. I think you said it in your question. It is timing. And I think with some of these project delays, we don't believe, in any regard, that they have gone away. It's simply timing.

Speaker Change: Yeah. Good morning, I'll start with the PNM piece, and then I'll hand, it over to al we look at some of the gallons year over year.

Speaker Change: I think you said it in your question it is timing and I think with some of these project delays.

Speaker Change: We don't believe in any regard that they have gone away, it's simply timing and as I mentioned earlier, what gives us confidence as our increased visibility into some of this some of this project work.

Allen J. Mistysyn: And as I mentioned earlier, what gives us confidence is our increased visibility into some of this, some of this project work. So again, the team's working hard to make sure that with some of these launches, we are best positioned in the industry. So when the timing does recover, we're at the front of that line. And then I'll hand it over to Al to talk about your question relatively quickly. Yeah, Kevin, I think the P&M, we do expect it to grow faster than architectural just because, as we talked about, new res, we expect it to be softer in the first half and stronger in the second half.

Speaker Change: So again the teams are working hard to make sure that with some of these launches we are best positioned in the industry. So when the timing does recover we're at the front of that line.

Speaker Change: And then I'll hand, it over to al to talk about the your question relative to <unk>, Kevin I think the.

al: PNM, we do expect to grow faster than architectural just because of as we've talked about new raise.

al: We expected to be softer in the first half and stronger in the second half we commented that <unk>.

Allen J. Mistysyn: We commented that commercially, we had a better line of sight to the first half being strong and then likely softening. I think that maybe has changed a little bit with the first quarter project delay that we're experiencing. So some of that will probably find its way into our third quarter this year. But we have a lot of confidence in P&M and the strength in that. I think that when you talk about industry volume, I think 2023 is likely down, maybe a low single. And I think 24 we talked about because the new res was down so much, but I think in 24, with better indicators coming into the year, we talked about it probably being flattish.

al: Commercial we had a better line of sight to the first half being strong and then likely softening I think that maybe has changed a little bit with the.

al: First quarter project delays that we're experiencing some of that will probably find its way into our third quarter.

al: This year, so, but we have a lot of confidence in PNM and strengthen that.

al: When you're talking about industry volume I think 2023 is likely down maybe low single and I think 24, we talked about because of the because of new res was was down so much but I think in 24 with with better indicators coming into the year, we talked about it probably being flattish.

al: Yeah.

Kevin William McCarthy: Thank you, Kevin. Thank you. Your next question is coming from John Roberts from Mizzouho. Your line is live.

Speaker Change: Thank you Kevin.

Speaker Change: Thank you. Your next question is coming from John Roberts from Mizuho. Your line is live.

John Roberts: Thank you is the delay property maintenance activity delayed into the June quarter. So that's in your guidance for the June quarter.

John Roberts: Thank you. Your next question is coming from John Roberts from Mizzou.

John Roberts: Or are there more significant delays going on because of the mortgage issues with some apartment buildings and commercial properties.

John Roberts: Yeah, I think, you know, from a project delay, right, relative to what we saw from weather in the first quarter, we'll see those pick up in the second quarter and into the third quarter. As far as CapEx projects, we talked about this on our first quarter call. As rates moderate, we do expect to start seeing CapEx projects improve both rates, and lending gets easier as lending standards ease up a little bit.

Speaker Change: Yeah, I think from a project delay.

John Roberts: Relative to what we saw from weather in the first quarter, we will see those pick up in the second quarter and into the third quarter as far as Capex projects, we talked about this on our first quarter call as rates moderate we do expect to start seeing capex.

John Roberts: Capex projects improve both rates and lending.

John Roberts: It's easier.

John Roberts: Lending standards ease up a little bit.

John Roberts: I, you know, John, we don't have a material growth impact in our forecast for property maintenance and CapEx growing a significant amount in our second half. So, you know, turns are going to continue to improve, and then as CapEx returns, they will benefit with that as a slight tailwind. Thank you, John. Thank you. Your next question is coming from Garik Shmois from Loop Capital. Your line is live.

John Roberts: John we don't have a material growth impact in our forecast for our property maintenance capex growing a significant amount in our second half so.

John Roberts: We're going to continue to improve and then as Capex returns will benefit with that as a slight tailwind.

Speaker Change: Thank you John.

Thank you. Your next question is coming from Garik <unk> from loop capital. Your line is live.

Garik: Oh Hi. Thank you you mentioned there was some impact in consumer brands in the quarter due to inventory build in the journey, where the size if that was material for the quarter or would you expect any restocking in Q2, and maybe speak broadly to many opportunities to restocking across your network.

Allen J. Mistysyn: I'll start with that and ask Al to jump in. I would say we're not going to comment on materiality because that's certainly something we would ask our customers to comment on. But I think it goes without saying that, as we've all come through the last few years, wanting to come into the season in a very strong position is a signal that there's opportunity ahead. And Al, anything you want to add to that?

Speaker Change: I'll start with that and ask outer Jonathan I would say, we're not going I would say comment on materiality, because that's certainly something we would ask our customers to comment on but I think it goes without saying that as we've all come through the last few years wanting to come into the season in a very strong position.

Speaker Change: As a signal that there is opportunity.

Jonathan: Anything you'd want to add to that Eric.

Allen J. Mistysyn: Yeah, Garik, I mean, think about it, our first quarter is a small quarter for consumers in North America, and it ramps up as the architectural season ramps up. So, you know, we have seen this in the past, and it's not overly material. You think about a couple percent of 800 million; it's not huge.

Speaker Change: Thinking about our first quarter is.

Eric: A small quarter for consumer in North America, and it ramps up as the architectural season ramps up so we have seen this in the past and it's not overly material you think about a couple of percent on.

Eric: $800 million, it's not huge.

Garik Simha Shmois: Thank you. Your next question is coming from Steve Byrne from Bank of America. Your line is live.

Speaker Change: Thanks Garik.

Speaker Change: Thank you. Your next question is coming from Steve Byrne from Bank of America. Your line is live.

Stephen V. Byrne: Yes, thank you. Heidi, you made the comment about your sales force being out there hunting for a new account. Clearly, that's been the model. My question for you is, how are you incentivizing that or driving that with your investment? Is it headcount-related, or are you doing something to drive more servicing to existing customers? And is this really to drive share gains, or can this also Drive, Mixshift to Higher Performing Products

Stephen V. Byrne: Yes. Thank you you.

Stephen V. Byrne: You made the comment about your sales force is out there hunting for new accounts.

Stephen V. Byrne: Clearly that's that's been the model.

Stephen V. Byrne: My question for you is how are you incentivizing that are driving that with your investments is it head count related or are you doing something to drive more more services to existing accounts.

Stephen V. Byrne: And is this really to drive share gains or can this also drive mix shift to higher performing products.

Heidi G. Petz: Well, Steve, that's a great question. I would say a few things.

Speaker Change: Well see if thats a great question I would say a few things I think if you look at we use the word ecosystem a lot to talk about what it is that we're trying to bring to our contractors. So it's it's basically everything is that when you look at you know.

Heidi G. Petz: I think if you look at us, we use the word ecosystem a lot to talk about, you know, what it is that we're trying to bring to our contractors. So it's, it's basically everything that I, when you look at, you know, the reps, and certainly our suite of digital tools, the goal here is regardless of where these contractors are at in their business maturity, their selling cycle, you know, their growth plans, we are going to intercept them exactly where they are in that cycle.

Speaker Change: The reps and certainly our suite of digital tools. The goal here is regardless of where these contractors are at.

Speaker Change: In their business maturity theyre selling cycle their growth plans, we are going to intercept them exactly where they are in that cycle and so it differs by segment.

Heidi G. Petz: And so it differs by segment, the needs of those contractors being different by segment, if it's residential repaint versus new res versus commercial. So the readiness of our team and the digital tools to support them to intercept these contractors is where we're investing. We obviously won't go into a lot of details on that, for obvious reasons.

Speaker Change: The needs obviously of those contractors different by segment, if it's residential repaint versus new res versus commercial so the readiness of our team and the digital tools to support them to intercept. These contractors is where we're investing we obviously won't go into a lot of details on that for obvious reasons, but.

Allen J. Mistysyn: But when we're out hunting, and I mentioned the word surgical, it is just that we have the data, we've got the team prepared, we've got the right set of tools to help make our team more efficient to help make our customers more successful. Steve, the only thing I would add to that is, You know, we often talk about surveys of painting contractors, and the number one driver of their loyalty is who helps them make the most money.

Speaker Change: When we're out hunting and I mentioned the word surgical it is just that we've got they've got the data. We've got the team prepared we've got the right set of tools to help make our team more efficient to help make our customers more successful Steve the only thing I would add to that is.

Stephen V. Byrne: You know, we often talk about surveys.

Stephen V. Byrne: Surveys of painting contractors and number one.

Speaker Change: The driver there.

Speaker Change: Loyalty is who helps them make the most money so the more reps we have in the field.

Allen J. Mistysyn: So the more reps we have in the field and our ability to spend more time with those painting contractors and doing demos with higher quality products, we can show them the efficiencies that they can gain so that they can grow their top line and their bottom line with the same number of painters because the labor markets haven't improved dramatically, so that's a value add that I think we can provide.

Speaker Change: <unk> ability to spend more time with those painting contractors and doing demos with higher quality products. We can show them the efficiencies that they can gain so that they can grow their topline and their bottom line with the same number of painters because the labor market labor markets haven't improved dramatically. So that's a value add.

Speaker Change: I think we can provide.

Arun Shankar Viswanathan: Thank you, Steve. Thank you. Your next question is coming from Arun Viswanathan from RBC Capital Markets. Your line is live.

Speaker Change: Thank you Steve.

Speaker Change: Thank you. Your next question is coming from Arun Viswanathan from RBC capital markets. Your line is live.

Arun Shankar Viswanathan: Great, thanks for taking my question. Just maybe two questions on the pain stores group. So first of all, historically, I think you've been under penetrated on the West Coast.

Arun Shankar Viswanathan: Great. Thanks for taking my question.

Arun Shankar Viswanathan: Maybe two questions on paint stores group, so first of all.

Historically, I think you've been underpenetrated on the West coast and given one of your competitors now there.

Heidi G. Petz: And given that one of your competitors has now shut its doors, is that something that you could maybe pivot and increase your store openings towards? And then my second question was basically on growth and margins. So it looks like you face your easiest comps and the second half in the pain stores group. Last year, you were up two to 4% or so in those quarters. So would you expect to be up kind of mid single digits in the pain stores group in the second half of this year towards the upper end of your full year guide for sales? Thanks.

Arun Shankar Viswanathan: Shut in stores is that something that you could maybe pivot and increase your store openings towards and then my second question was basically on on growth and margins. So it looks like your face your easiest comps in the second half in paint stores group.

Arun Shankar Viswanathan: Last year, you were up 2% to 4% or so in those quarters. So would you expect to be up kind of mid single digits in paint stores group.

Arun Shankar Viswanathan: In the second half of this year towards the upper end of your.

Heidi G. Petz: Yeah, everyone, good morning. I'll start with the first one. And then I'll hand it over to Al to cover your second one. And, by the way, nice job getting two questions into the one question. You did that really gracefully.

Arun Shankar Viswanathan: Full year guide for sales thanks.

Speaker Change: Yes, Ron good morning, I'll start with the first one and then I'll hand, it over to al to cover your second one.

al: And by the way and they start getting two questions into one question you did that really gratefully. So on the first one yeah.

Heidi G. Petz: So on the first one, yeah, I think your point on what was happening in the West. We've recognized, you know, Kelly Moore's closure, and it would tell you that we have long and aggressively competed against Kelly Moore with a lot of respect for them as a competitor. We are well-positioned. And are already beginning to serve some of their former customers. We expect to gain continued share here. We're not going to comment on the potential size of the gains.

al: Yeah, I think your point on what was happening in the West we've recognized the Kelly Morris closure and I would tell you that we have long and aggressively competed against Kelly more a lot of respect for them as a competitor.

al: We are well positioned.

And are already beginning to serve some of their former customers. We expect to gain continued share here, we're not going to comment on the potential size of the gains, but as I said earlier, you can expect us to be very aggressive and we.

Heidi G. Petz: But as I said earlier, you can expect us to be very aggressive, and I wouldn't look at this through the lens of necessarily opening new stores necessarily there. I think, you know, when something like this happens in our industry, we want to make sure that we're very thoughtful about, you know, where real estate makes sense for us, and talent that we've taken the steps and the actions to take the best out of, and we're ready to go.

al: Shouldn't look at this through the lens of opening new stores necessarily there I think.

al: When something like this happens in our industry, we want to make sure that we're being very thoughtful about where real estate makes sense for us talent that we've taken.

al: The steps and the actions to take the best and we're ready to go.

Allen J. Mistysyn: Yeah, everyone, I think you're right. We would expect that our second half would be in that mid-single-digit range.

Speaker Change: I think youre right.

Speaker Change: We would expect that our second half would be in that mid single digit range of course, as we see the summer selling season unfolds, we'll look at those trends look at indicators in certainly give an update to the street on our July call as appropriate.

Arun Shankar Viswanathan: Of course, as we see the summer selling season unfold, we'll look at those trends, look at indicators, and certainly give an update to the street on our July call as appropriate. Thank you, Arun. Thank you. Your next question is coming from Lawrence Alexander from Jeffreys. Your line is live.

Speaker Change: Thank you Arun.

Arun Shankar Viswanathan: Thank you. Your next question is coming from Laurence Alexander from Jefferies. Your line is live.

Laurence Alexander: Good morning, just a quick one on industrial coatings can you just characterize the landscape for bolt on M&A.

Laurence Alexander: How appealing it is currently and our.

Lawrence Alexander: Good morning; just a quick one.

Laurence Alexander: Multiples in discussions starting to starting to drift down.

Lawrence Alexander: Yeah, Lawrence, as you said, I think in this type of uncertain environment, you do see multiple start to decline, and you also see maybe a smaller pipeline than you would typically see in a growing market. That being said, I think we're out.

Laurence Alexander: Yeah, Laurence as you.

Laurence Alexander: I think in this type of a uncertain environment you do see multiples start to decline you also see.

Laurence Alexander: Maybe a smaller pipeline then than you would typically see in a growing market that being said I think we're out.

Allen J. Mistysyn: You know, we know, we're confident in our strategy in industrial; we are actively pursuing bolt-ons that fit that strategy and accelerate that strategy. And, you know, as the markets turn, and as there's a better line of sight to growth, we will be certainly well positioned with our balance sheet to make any acquisitions that we want to make and that fit our strategy. Thank you, Lawrence.

Laurence Alexander: We know.

Laurence Alexander: We're confident in our strategy and industrial we are actively pursuing.

Laurence Alexander: OLT onset fit that strategy and strategy and accelerate that strategy and.

Laurence Alexander: As the markets turn and as Theres better line of sight to growth and that will be.

Laurence Alexander: Certainly well position with our balance sheet to make any acquisitions that we want to make and that fit our strategy.

Speaker Change: Thank you Lawrence.

Lawrence Alexander: Thank you. Your next question is coming from Eric Bosshard.

Thank you. Your next question is coming from Eric Bosshardt from Cleveland Research Company. Your line is live.

Eric Bosshard: Thanks. I wanted to ask about SG&A that we're making to gain share. Al, you talked about his rates being moderated, and there was some conversation earlier about improving the remodel in the second half. And obviously, I think Heidi, you said it, the question is when, in a scenario where, you know, perhaps rates don't go down, and the remodel doesn't improve. Do you sustain the investment? Is there a point where you tap the brakes a little bit on the investment that you're being made and what is, in that scenario, a bit of a slower environment? And then the second piece of this is, once we cycle this incremental investment, do we get back to where SG&A grows slower than before?

Speaker Change: Thanks.

Eric Bosshard: Wanted to ask about SG&A.

Eric Bosshard: We're making the gain share.

Eric Bosshard: Al you talked up as rates moderated and there was some conversation earlier about improvement remodel in the second half.

Eric Bosshard: And obviously I think how do you set up the question is when.

Eric Bosshard: In a scenario, where perhaps rates don't go down and the remodel doesn't improve.

Eric Bosshard: Can you sustain the investment is there a point, where you tap the brakes, a little bit on the investment that you are being made and what is in that scenario a bit of a slower environment and then the second piece of this is once we cycle. This incremental investment do we get back to where SG&A grow slower than sales.

Heidi G. Petz: So Eric, no, we don't see a situation or an environment where we pull back. We're confident, again, in our strategy. The comment we made earlier: these are very focused investments. And so we're not trying to be all things to all people, water all the trees, but where we know we've got points of differentiation that are meaningful in the market, you can expect that we'll continue to be very bullish there. So no, I don't see us pulling back in any regard there.

Speaker Change: So Eric no, we don't see a situation or an environment, where we pulled back and we're confident again in our strategy.

Speaker Change: The comment we made earlier these are very focused investments and so we're not trying to be all things to all people water all the trees, but where we know we've got points of differentiation that are meaningful in the market. You can expect that we will continue to be very bullish there. So no I don't.

Speaker Change: He is pulling back in any regard there and I'll, let you speak to the rates relative to what.

Allen J. Mistysyn: And Al, I'll let you speak to the rates relative to what's going on. Yeah, Eric, as you know, I mean, we're focused on growing operating margin. And sometimes that's your gross margin expansion. Sometimes that's SG&A leverage. Whenever we see outsized gross margin expansion, we take that opportunity to accelerate the investment, again, because it's the confidence you have and we have in our strategy.

Speaker Change: Eric is as you know I mean, we're.

Speaker Change: Focused on growing operating margin and sometimes that's through gross margin expansion and sometimes that's in SG&A leverage.

Whenever we see outsized gross margin expansion, we take that opportunity to accelerate the investments again, because it's the confidence you have we have in our strategy.

Eric Bosshard: But yeah, as rates. Thanks, Eric. Thank you. Your next question is coming from Aron Ceccarelli from Barenburg. Your line is live. Hello, hi, good morning. If I understood correctly, you mentioned that the traffic in

Speaker Change: But yes as rates.

Speaker Change: Start to come down existing home sales improve new single family starts improving and the Capex that I talked about with property maintenance and we see those volumes improving I would expect to start seeing leverage on our SG&A.

Speaker Change: And the 25% to 26 and the go forward.

Aron Ceccarelli: Thank you. Your next question is coming from Aron Ceccarelli from Barenburg. Your line is live.

Speaker Change: Thanks, Eric.

Speaker Change: Thank you. Your next question is coming from Aaron check really from Baron Berg. Your line is live.

Heidi G. Petz: That's a great question. I would say the opportunity continues to be, first and foremost, while there's opportunity in every segment, the biggest opportunity for us, as we've said historically, is ResRepaint, where we've got more share there. And I would say that it's on top of already very healthy growth. So I don't think in any way this incremental traffic is going to help correct it. I think this incremental traffic is going to continue to help us to outperform the kind of flat environment that ResRepaint sits in today.

Aaron Check: Hello, Hi, good morning, if I understood correctly, you mentioned that traffic in your PSG was all time high in March.

Aaron Check: What part of your retained networking in your view is the largest upside in terms of safe density traffic. I mean is there any part of your tours retail stores that is not running yet.

Aaron Check: To what do you see opportunity and we'll have to understand thank you.

Speaker Change: It's a great question I would say the opportunity continues to be first and foremost while theres opportunity in every segment.

Speaker Change: The biggest opportunity for us as we've said historically is Reds repaint, where we've got more share there and I would say that it's on top of already.

Speaker Change: Very healthy growth. So I don't think in any way this incremental traffic is going to help correct.

Heidi G. Petz: So it'll be creative, and it's something that we're confident that this is an opportunity, as you mentioned, or as I mentioned earlier, increased call activity and increased new, unique accounts, rather, and active accounts. So this is evidence that we're taking share.

Speaker Change: This incremental traffic is going to continue to help us.

Speaker Change: To outperform kind of the flat environment that runs repaint sits in today, so it'll be accretive and it's something that we're.

Speaker Change: Confident that this is an opportunity as you mentioned or as I mentioned earlier and increased call activity and increased new.

Speaker Change: Unique accounts rather than active accounts. So this is evidence that we're taking share.

James R. Jaye: Thank you. That concludes our Q&A session. I will now hand the conference back to Jim Jaye for closing remarks. Please go ahead.

Speaker Change #100: Thank you Aaron.

Speaker Change #100: Thank you that concludes our Q&A session I will now hand, the conference back to Jim Jaye for closing remarks. Please go ahead.

James R. Jaye: Yeah, thank you everybody for joining our call today. I think you heard that the team is very aligned, very confident in our strategy and what we're doing. We've made the right investments, and we're driving those solutions for our customers. And we're pretty confident that, as the year unfolds, those share gains and those returns will become more and more evident. The other thing I would do is just remind you that we will have our annual financial community presentation this year in Boston.

James R. Jaye: Yes. Thank you everybody for joining our call today I think you heard that the team is very aligned very confident in our strategy and what we're doing we've made the right investments and we're driving those solutions for our customers.

James R. Jaye: And we're pretty confident that youre going to see as the year unfolds those share gains in those returns become more and more evident.

James R. Jaye: The other thing I would do is just remind you we will have our annual financial community presentation. This year in Boston on August 29th in addition to Heidi and Al you'll hear commentary from our group presidents as well so additional information on that will be coming out.

James R. Jaye: That's on August 29, and in addition to Heidi and Al, you'll hear commentary from our group presidents as well. So additional information on that will be coming out sometime soon. So look for that, please. And as always, thanks for your interest, and we'll be available for your follow-up calls over the next several days. Have a great day.

James R. Jaye: Sometime soon so look for that please and as always thanks for your interest and will be available for your follow up calls over the next several days have a great day. Thank you.

Unknown Executive: Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Speaker Change #101: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.