Q3 2024 Masco Corp Earnings Call
Paul.
Speaker Change: As a reminder, today's conference call is being recorded for replay purposes to ask a question. Please press the star followed by the number one on your telephone keypad to withdraw your question. Please press the star followed by the number two I will now turn the call over to Robyn Zondervan, Vice President Investor Relations and F. D. N. A of Masco Corp. You may begin.
Robyn Zondervan: Thank you operator, and good morning, everyone.
Ludy: Good morning, ladies and gentlemen. Welcome to Moscow Corporation's third quarter 2024 conference call. My name is Ludy and I will be your operator for today's call. As your minor today's conference call is being recorded for replay purposes.
Robyn Zondervan: Welcome to Masco Corporation's 2024 third quarter conference call.
Robyn Zondervan: With me today are Keith Allman, President and CEO of Masco.
Robyn Zondervan: And Rick Westenburg, Masco, as Vice President and Chief Financial Officer.
Ludy: To ask a question, these press to store followed by the number one on your telephone keypad. To read while your question, these press to store followed by the number two. I'll now turn to Colour to Robin Zondervan, Vice President, Investor Relations, and Epiene of Masco Corps. You may begin.
Robyn Zondervan: Our third quarter earnings release and presentation slides are available on our website under Investor Relations.
Robyn Zondervan: Following our remarks, we will open the call for analyst questions.
Robin Zondervan: Thank you, Operator. Here, and good morning, everyone. Welcome to Masco Corporation's 2024 Third Quarter Conference Call.
Please limit yourself to one question with one follow up.
Speaker Change: If we can't take your question now please call me directly at 31379 to $5 500.
Robin Zondervan: With me today, our Keith Allman, President and CEO of Masco, and Rick Westenberg, Masco's Vice President and Chief Financial Officer.
Speaker Change: Our statements today will include our views about our future performance, which constitute forward looking statements.
Robin Zondervan: Our third quarter earnings release and presentation slides are available on our website under investor relations.
Speaker Change: These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward looking statements.
Robin Zondervan: Following our remarks, we will open the call for analyst questions.
Robin Zondervan: Please limit yourselves to one question with one follow-up.
We've described these risks and uncertainties in our risk factors and other disclosures in our Form 10-K, and our Form 10-Q that we filed with the Securities and Exchange Commission.
Robin Zondervan: If we can't take your question now, please call me directly at 313-792-5500.
Speaker Change: Our statements will also include non-GAAP financial metrics.
Robin Zondervan: Our statements today will include our views about our future performance, which constitute forward-looking statements.
Speaker Change: Our references to operating profit and earnings per share will be as adjusted unless otherwise noted.
Robin Zondervan: These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements.
Speaker Change: We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations.
Robin Zondervan: We've described these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission.
Speaker Change: With that I will now turn the call over to Keith.
Keith Allman: Thank you Robin.
Good morning, everyone and thank you for joining us today.
Keith Allman: Please turn to slide five.
Robin Zondervan: Our statements will also include non-GAAP financial metrics.
Keith Allman: For the third quarter, we delivered strong operating results as we focused on driving the full potential of our portfolio through leading brands innovative.
Robin Zondervan: Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted.
Keith Allman: <unk> and exceptional customer service.
Robin Zondervan: We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations.
Keith Allman: Net sales were in line with the prior year as we saw demand continue to stabilize most notably in our plumbing segment.
Keith Allman: Our gross profit margin rose 90 basis points to 36, 7% as a result of our ongoing initiatives to drive operational efficiencies and achieve cost savings.
Speaker Change: With that, I will now turn the call over to Keith.
Keith Allman: Thank you, Robin. Good morning, everyone, and thank you for joining us today.
Keith Allman: Please turn to slide 5.
Keith Allman: Our solid execution resulted in operating profit of $360 million, an increase of $12 million or 3% over the prior year.
Keith Allman: For the third quarter, we delivered strong operating results as we focused on driving the full potential of our portfolio through leading brands, innovative products, and exceptional customer service.
Keith Allman: Our operating profit margin expanded 60 basis points to 18, 2%.
Keith Allman: That sales were in line with the prior year, as we saw demand continue to stabilize, most notably in our plumbing segment.
Keith Allman: Marking the sixth consecutive quarter of year over year margin expansion.
Keith Allman: Our gross profit margin rose 90 basis points to 36.7% as a result of our ongoing initiatives to drive operational efficiencies and achieve cost savings.
Keith Allman: In addition, our earnings per share grew 8% to $1 <unk> per share.
Keith Allman: Moving to our segments plumbing.
Keith Allman: Plumbing sales increased 2% overall and 1%, excluding the impacts of acquisitions and currency.
Keith Allman: Our solid execution resulted in operating profit of $360 million, an increase of $12 million or 3% over the prior year.
Keith Allman: In local currency, North American plumbing sales increased 2% overall and 1% excluding the impact of acquisitions.
Keith Allman: Our operating profit margin expanded 60 basis points to 18.2%.
And international plumbing sales increased 3% in local currency led by growth in our key markets of Europe and China.
Keith Allman: marking the sixth consecutive quarter of year-over-year margin expansion.
Keith Allman: In addition, our earnings per share grew 8% to $1.08 per share.
Keith Allman: Operating profit for the segment was up $17 million to $242 million.
Keith Allman: Moving to our segments.
Keith Allman: Operating margin expanded 100 basis points to 19, 9%.
Keith Allman: Plumbing sales increased 2% overall, and 1%, excluding the impacts of acquisitions and currency.
Keith Allman: Driven by higher volumes and our continued focus on productivity.
Keith Allman: In local currency, North American plumbing sales increased 2% overall and 1% excluding the impact of acquisitions.
Keith Allman: <unk> and cost savings initiatives.
Keith Allman: Additionally, we continue to demonstrate our leadership in water quality and innovation through new product launches that leverage our channels and brands.
Keith Allman: In international plumbing, sales increased 3% in local currency, led by growth in our key markets of Europe and China.
Keith Allman: We launched the Tankless reverse osmosis water filtration system this quarter across our Delta and <unk> brands.
Keith Allman: Operating profit for the segment was up $17 million to $242 million.
This system is certified to filter out more than 90 contaminants from your drinking water and is both easy to install and maintain.
Keith Allman: Operating margin expanded 100 basis points to 19.9%.
Keith Allman: driven by higher volumes and our continued focus on productivity, efficiency, and cost savings initiatives.
Keith Allman: At home jewelry, we launched the powder spray faucet, where micro find water cascades from beneath the faucet spout for easier washing of foods like fruits and vegetables at a lower flow rate for water conservation and less cleanup.
Keith Allman: Additionally, we continue to demonstrate our leadership in water quality and innovation through new product launches that leverage our channels and brands.
Keith Allman: <unk> also received the Super brand, Germany Award in the quarter.
Keith Allman: We launched a tankless reverse osmosis water filtration system this quarter across our Delta and Brizo brands.
Keith Allman: This prestigious award recognized <unk> dedication to excellence quality and service to our customers.
Keith Allman: This system is certified to filter out more than 90 contaminants from your drinking water and is both easy to install and maintain.
Keith Allman: Finally, we reached the one year anniversary of our acquisition of <unk> 360 during the quarter.
Keith Allman: At Hans Roi, we launched the Powder Spray Faucet, where micro-fine water cascades from beneath the faucet spout for easier washing of foods like fruits and vegetables at a lower flow rate for water conservation and less cleanup.
Keith Allman: We are proud of the work our team has done to successfully integrate this business, which includes the recent launch of <unk> branded <unk> into our existing Watkins dealer network.
Keith Allman: Moving to our decorative architectural segment.
Keith Allman: Hasgrohe also received the Superbrand Germany Award in the quarter.
Keith Allman: We announced earlier this quarter the completion of the sale of kitchen or lighting.
Keith Allman: This prestigious award recognizes Hans Grohe's dedication to excellence, quality, and service to our customers.
Keith Allman: We are confident that this transaction to further streamline our portfolio will drive greater value for <unk> shareholders as we focus on the strategic initiatives of our core plumbing and decorative architectural businesses.
Keith Allman: Finally, we reach the one-year anniversary of our acquisition of SANA 360 during the quarter.
Keith Allman: We are proud of the work our team has done to successfully integrate this business.
Keith Allman: Sales in the decorative architectural segment decreased 3% in the quarter or 1%, excluding the impact of currency and divestitures.
Keith Allman: which includes the recent launch of Tilo-branded saunas into our existing Watkins Dealer Network.
Keith Allman: Overall paint sales were down low single digits.
Keith Allman: Moving to our decorative architectural segment.
Keith Allman: Why paint sales remain challenged decreasing mid single digits, while propane sales continued to show strength growing high single digits.
Keith Allman: We announced earlier this quarter the completion of the sale of Kichler Lighting.
Keith Allman: We are confident that this transaction, to further streamline our portfolio, will drive greater value for Masco shareholders as we focus on the strategic initiatives of our core plumbing and decorative architectural businesses.
Keith Allman: Operating profit for the segment decreased $6 million to $138 million, while operating margin remained strong at 18, 1%.
Keith Allman: Sales in the decorative architectural segment decreased 3% in the quarter, or 1% excluding the impact of currency and divestitures.
Keith Allman: We were pleased once again this quarter with our performance in propane.
Keith Allman: Out of our continued sales growth with the pro painter and we are continuing to invest to drive additional growth going forward.
Keith Allman: Overall paint sales were down low single digits.
Keith Allman: DIY paint sales remain challenged, decreasing mid-single digits, while pro-paint sales continue to show strength, growing high single digits.
Keith Allman: We have an incredibly strong relationship with the home depot, which dates back over 40 years.
Keith Allman: For multiple decades, we have partnered with the home depot to distribute our products and there are over 2300 stores.
Keith Allman: Operating profit for the segment decreased $6 million to $138 million while operating margin remained strong at 18.1%.
We continue to partner with them on strategic initiatives centered on the strength of our brand our unmatched service and the award winning quality of our products to drive share gains in both DIY and pro paint categories.
Keith Allman: We were pleased once again this quarter with our performance in propane.
Keith Allman: We're proud of our continued sales growth with the propainer, and we are continuing to invest to drive additional growth going forward.
Turning to capital allocation, we continued to generate strong free cash flow during the quarter and maintained a solid balance sheet.
Keith Allman: We have an incredibly strong relationship with the Home Depot, which dates back over 40 years.
Keith Allman: As a result, we executed on our capital deployment strategy and returned $255 million to shareholders through dividends and share repurchases.
Keith Allman: For multiple decades, we have partnered with the Home Depot to distribute our products in their over 2,300 stores.
We plan to deploy the net cash proceeds from the sale of kits lighting consistent with our capital allocation framework.
Keith Allman: We continue to partner with them on strategic initiatives centered on the strength of our brand, our unmasked service, and the award-winning quality of our products to drive share gains in both DIY and propane categories.
Keith Allman: Therefore, we now expect to allocate approximately $750 million in total to share repurchases or acquisitions in 2024.
Keith Allman: Turning to capital allocation, we continue to generate strong free cash flow during the quarter and maintain a solid balance sheet.
Keith Allman: Now a few comments on our full year outlook.
Keith Allman: Overall sales for the total company were within our expected range for the first three quarters of the year.
Keith Allman: As a result, we executed on our capital deployment strategy and returned $255 million to shareholders through dividends and share repurchases.
Keith Allman: However, the divestiture of Kitchener will impact the remainder of our year and the DIY paint market remains challenged.
Keith Allman: We plan to deploy the net cash proceeds from the sale of Kichler Lighting consistent with our capital allocation framework.
Keith Allman: Therefore, we now anticipate that sales for the full year will be down low single digits compared to our previous expectations of plus or minus low single digits.
Keith Allman: Therefore, we now expect to allocate approximately $750 million in total to share repurchases or acquisitions in 2024.
Keith Allman: However, due to the strength of our operational performance year to date.
Keith Allman: Thank you for tuning in. I'm Robin Zondervan. I'll see you next time.
Speaker Change: Now, a few comments on our full-year outlook.
Keith Allman: Now expect that our full year operating margin will be approximately 17, 5%.
Speaker Change: Overall, sales for the total company were within our expected range for the first three-quarters of the year.
Keith Allman: Which is at the top end of our previously guided range of 17% to 17, 5%.
Speaker Change: However, the divestiture of Kichler will impact the remainder of our year, and the DIY paint market remains challenged.
We now anticipate adjusted earnings per share for 2024 to be in the range of $4 five.
Speaker Change: Therefore, we now anticipate that sales for the full year will be down low single digits compared to our previous expectations of plus or minus low single digits.
Keith Allman: Two $4 15 per share.
Keith Allman: Compared to our previous expectations of $4 five to.
Keith Allman: To $4 20 per share.
Speaker Change: However, due to the strength of our operational performance year to date, we now expect that our full year operating margin will be approximately 17.5%.
Keith Allman: We continue to believe that the long term fundamentals of our repair and remodel markets are strong and that structural factors such as the age of housing stock consumers staying in their homes longer higher home equity levels at household formations for millennials will drive increased repair and remodel activity in the mid to long term.
Speaker Change: which is at the top end of our previously guided range of 17% to 17.5%.
Speaker Change: We now anticipate adjusted earnings per share for 2024 to be in the range of $4.05 to $4.15 per share.
Keith Allman: <unk>.
Keith Allman: We believe we are well positioned to capitalize on future volume growth as our capacity efficiency productivity and cost structure are setup to drive favorable incremental benefits from additional volume.
Speaker Change: compared to our previous expectations of $4.05 to $4.20 per share.
Speaker Change: We continue to believe that the long-term fundamentals of our repair and remodel markets are strong.
Keith Allman: With these favorable fundamentals the continued successful execution of our strategic initiatives across our portfolio.
Keith Allman: And our disciplined capital deployment.
Keith Allman: We are well positioned to outperform the competition and deliver double digit EPS growth through cycles for our investors.
Speaker Change: Now I'll turn the call over to Rick to go over our third quarter results and 2024 outlook in more detail Rick.
Rick Westenburg: Thank you Keith and good morning, everyone. Thank you for joining us.
Rick Westenburg: As Robin mentioned my comments today will focus on adjusted performance.
Rick Westenburg: The impact of rationalization charges and other onetime items.
Rick Westenburg: Turning to slide seven sales in the quarter were in line with the prior year and.
Rick Westenburg: <unk> increased 1%, excluding the unfavorable impact of currency.
Our acquisition of <unk> hundred 60 in the third quarter of last year, and 1% of growth to our third quarter results.
Rick Westenburg: However, this was offset by the impact of our <unk> divestiture during the third quarter.
Rick Westenburg: In local currency North American sales were in line with the prior year, while international sales increased 3% in local currency.
Rick Westenburg: Despite relatively flat sales overall, our initiatives to drive operational efficiencies contributed to another quarter of strong gross margin performance at 36, 7%.
Rick Westenburg: An expansion of 90 basis points year over year.
SG&A as a percent of sales was 18, 6% and was impacted by the timing of marketing spend in our decorative architectural segment as mentioned during our second quarter call.
Rick Westenburg: Overall, our operating profit grew $12 million to $360 million in the quarter.
Rick Westenburg: And our margin was strong at 18, 2%.
Rick Westenburg: Our margin performance was primarily driven by executing on our cost savings initiatives.
Rick Westenburg: We also grew EPS during the quarter by 8% to $1 <unk> per share.
Rick Westenburg: Turning to slide eight plumbing sales increased 2% in the third quarter.
Rick Westenburg: Currency had a minimal impact on our results.
Volume in our plumbing segment drove an increase in sales of 2%.
And acquisitions contributed 1% to growth year over year.
Rick Westenburg: This was partially offset by unfavorable mix, which reduced sales by 1%.
Rick Westenburg: North American plumbing sales increased 2% driven by our acquisition and solid performance in our retail and e-commerce channels.
Rick Westenburg: In local currency international plumbing sales increased 3% driven.
Rick Westenburg: Driven by favorable volume and pricing actions.
Rick Westenburg: Firstly offset by unfavorable mix.
Rick Westenburg: Demand continues to show signs of stabilization in Europe, and while the China market remains challenged we benefited from our pipeline of projects in the quarter.
Rick Westenburg: Segment operating profit in the third quarter was $242 million.
Rick Westenburg: Up $17 million or 8% year over year.
Rick Westenburg: And operating margin was 19, 9% up 100 basis points.
Rick Westenburg: This operating profit performance was driven primarily by cost savings initiatives and higher volume.
Rick Westenburg: Partially offset by unfavorable mix and higher commodity and freight costs.
Rick Westenburg: Turning to slide nine.
Rick Westenburg: Decorative architectural sales decreased 3% in the third quarter.
Rick Westenburg: Currency and the divestiture of <unk> lowered sales by 1% each.
Rick Westenburg: In the quarter totaled paint sales decreased low single digits.
Rick Westenburg: Propane sales were up high single digits in DIY paint sales decreased mid single digits.
Excuse me, ladies and gentlemen, please standby your conference will resume momentarily. Thank you.
Rick Westenburg: The DIY paint market remains soft and we now anticipate our full year DIY paint business to be down high single digits versus our previous expectation of down mid single digits.
Rick Westenburg: And our propane business. However, we continue to expect sales for the year to increase low single digits.
Rick Westenburg: Operating profit was $138 million and operating margin was 18, 1%.
Rick Westenburg: Operating profit was down $6 million year over year impacted by the timing of marketing spend and unfavorable price cost relationship and lower volume.
Rick Westenburg: Partially offset by cost savings initiatives.
Turning to slide 10, our balance sheet remained strong with gross debt to EBITDA at two times at quarter end.
Rick Westenburg: We ended the quarter with $1 6 billion of liquidity, including cash and availability under our revolving credit facility.
Rick Westenburg: Working capital as a percent of sales was 16, 4%.
Rick Westenburg: And reflects the impact of the divestiture of <unk> as.
Rick Westenburg: As well as our continued discipline with regards to our working capital levels.
Rick Westenburg: As a result of the divestiture impact.
Rick Westenburg: We now anticipate our working capital as a percent of sales to be approximately 16% at year end.
Rick Westenburg: Versus our previous guidance of 16, 5%.
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Rick Westenburg: During the third quarter, we repurchased two 5 million shares for $192 million and paid a dividend of $63 million to shareholders.
Speaker Change: As Keith mentioned, we plan to deploy the net proceeds from the sale of <unk> consistent with our capital allocation framework.
Yes.
Speaker Change: As a result, we now expect to deploy approximately $750 million.
And then come back up.
Okay.
Okay.
Speaker Change: Up from $600 million.
Okay.
Okay.
Speaker Change: During the year toward share repurchases or acquisitions.
Okay.
Okay.
Speaker Change: Now, let's turn to slide 11, and review our outlook for 2024.
Okay.
Okay.
Okay.
Hang on hang on.
Speaker Change: For total Moscow, our year to date topline has largely been in line with expectations.
Hang on hang on hang on.
Okay.
Okay.
Speaker Change: Last quarter, we updated our second half expectation to roughly flat as market conditions remain challenging.
Okay.
Okay.
Thank you.
Speaker Change: The fourth quarter. However, we will also now be impacted by our divestiture of <unk>.
No.
Okay.
Okay.
Okay.
Speaker Change: As a result, we currently anticipate full year sales to be down low single digits.
Comment on that.
Thanks.
I'll come back on.
Versus our previous guide of plus or minus low single digit.
Speaker Change: Despite this change with our strong execution and operating margin performance year to date, we now expect full year operating margin to be approximately 17, 5%.
Speaker Change: Which is the high end of our previous guide of approximately 17% to 17, 5%.
Excuse me presenters you may continue.
Speaker Change: In our plumbing segment, we are maintaining our topline expectation of full year 2024 sales to be plus or minus low single digits.
Okay, I apologize for that interruption I know that.
Speaker Change: Versus prior year.
We're all very busy today, there's a lot of calls that you need to be answered my apologies as always talking with respect to the long term fundamentals of our repair remodel markets. We believe there is strong and that structural factors such as the age of housing stock consumers staying in their homes longer.
Speaker Change: And our expected full year operating margin to be approximately 19%.
In our decorative architectural segment, we are lowering our 2024 sales expectation to be down mid single digits year over year.
Higher home equity levels and household formations for millennials will drive increased repair and remodel activity in the mid to long term.
Versus our previous guidance of down low single digits.
Speaker Change: Primarily due to our divestiture.
Speaker Change: In addition, the DIY paint market remained soft and has not shown signs of a material rebound.
We believe we're well positioned to capitalize on future volume.
As our capacity efficiency productivity and cost structures are set up to drive favorable incremental benefits from additional.
Speaker Change: However, despite lower expected sales, we are maintaining our anticipated full year operating margin of approximately 18%.
Volume.
With these favorable fundamentals and the continued successful execution of our strategic initiatives across our portfolio.
Speaker Change: Finally, as Keith mentioned earlier, we are updating our 2024 EPS estimate to be in the range of $4 <unk> to $4 15 per share.
And our disciplined capital deployment, we are well positioned to outperform the competition and deliver double digit EPS growth through cycles for our investors.
Speaker Change: This assumes a 219 million average diluted share count for the year and at 24, 5% effective tax rate.
Now I'll turn the call over to Rick to go over our third quarter results and 2024 outlook in more detail Rick.
Speaker Change: As mentioned there continues to be choppiness in the overall market.
Speaker Change: That said, we are focused on execution and controlling what we can control to deliver results within this range.
Thank you Kate and good morning, everyone. Thank you for joining us.
As Robin mentioned my comments today will focus on adjusted performance.
Speaker Change: Lastly, additional financial assumptions for 2024 can be found on slide 14 of our earnings deck.
Excluding the impact of rationalization charges and other onetime items.
Speaker Change: With that I'd like to open up the call for questions.
Turning to slide seven sales in the quarter were in line with the prior year and increased 1%, excluding the unfavorable impact of currency.
Operator.
Speaker Change: Thank you in order to ensure that everyone has the chance to participate we would.
Speaker Change: Like to request that you limit yourself to asking one question and one follow up question during the Q&A session to ask a question. Please press star followed by the number one on your telephone keypad.
Our acquisition of <unk> hundred 60 in the third quarter of last year added 1% of growth to our third quarter results.
However, this was offset by the impact of our Kitchener divestiture during the third quarter.
Speaker Change: <unk>. Your question. Please press the star followed by the number Q. Once again do you see yourself to one question and one follow up.
In local currency North American sales were in line with the prior year.
While international sales increased 3% in local currency.
Speaker Change: First question comes from the line of Susan Mcclary with Goldman Sachs. Please go ahead.
Despite relatively flat sales overall, our initiatives to drive operational efficiencies contributed to another quarter of strong gross margin performance at 36, 7% an expansion of 90 basis points year over year.
Susan Mcclary: Thank you good morning, everyone.
Susan Mcclary: Thank you.
Susan Mcclary: Is focusing in on the DIY weakness that you highlighted in decorative architectural can you just talk a bit about how those sales trended through the quarter, how youre thinking about the implications of perhaps the election and the broader macro uncertainty and as we get past some of that how you think things there could come back as we look over the.
SG&A as a percent of sales was 18, 6% and was impacted by the timing of marketing spend in our decorative architectural segment as mentioned during our second quarter call.
Overall, our operating profit grew $12 million $360 million in the quarter.
Susan Mcclary: Next couple of quarters.
Susan It's Keith good morning.
And our margin was strong at 18, 2%.
Susan Mcclary: As you know, we really don't breakdown inside the quarter month to month performance as that can be.
Our margin performance was primarily driven by executing on our cost savings initiatives.
Susan Mcclary: Quite variable, depending particularly on year over year, and what happened with regards to new product launches in fill of revenue.
We also grew EPS during the quarter by 8% to $1 and <unk> 10 per share.
Susan Mcclary: Of stock et cetera, So I would tell you that it's been fairly consistent.
Turning to slide eight plumbing.
Plumbing sales increased 2% in the third quarter.
Susan Mcclary: Through the quarter.
Currency had a minimum impact on the results.
Susan Mcclary: And that there wasn't any particular notable change within the quarter, so I'll speak to that in that fashion with.
Volume in our plumbing segment drove an increase in sales of 2% and acquisitions acquisitions contributed 1% to growth year over year.
Susan Mcclary: With regards to.
The election.
Susan Mcclary: Don't really view.
This was partially offset by unfavorable mix, which reduced sales by 1%.
Susan Mcclary: The election or the cloud.
Susan Mcclary: How the results go specifically as it relates to DIY paint, we think of it more holistically about what that means for our overall business and fundamentally.
North American plumbing sales increased 2% driven by our acquisition.
Solid performance in our retail and e-commerce channels.
In local currency international implemented increased 3% driven by favorable volume and pricing actions.
Susan Mcclary: Think like.
Susan Mcclary: So many issues that we face in a volatile environment like we have now.
Susan Mcclary: It really puts a premium on the ability to respond.
Partially offset by unfavorable mix.
Demand continues to show signs of stabilization in Europe.
Susan Mcclary: In terms of our supply chains and our commercial teams.
And while the China market remains challenged we benefited from our pipeline of projects in the quarter.
Susan Mcclary: The ability for us to get price if needed based on the strength of our innovation pipeline and the strength of our brands and how.
Segment operating profit in the third quarter was $242 million up $17 million or 8% year over year in.
Susan Mcclary: How we are doing with regards to overall shelf space in market share. So it's really for us.
And operating margin was 19, 9% up 100 basis points.
Susan Mcclary: <unk>.
Susan Mcclary: In terms of the election.
This operating profit performance was driven primarily by cost savings initiatives and higher volumes.
Susan Mcclary: <unk> of how well, we're able to respond and I think if you look at the various challenges that we've experienced with our team and our operating system over the course of the last several years, where do you look to the capacity issues and paint that.
We offset by unfavorable mix and higher commodity and freight costs.
Turning to slide nine.
Decorative architectural sales decreased 3% in the third quarter.
Susan Mcclary: Faced a couple of years ago, whether you look to the.
Currency and the divestiture of Kensler lowered sales by 1% each.
Susan Mcclary: Tariff situation that we faced and how we've broadened our margin up above pre tariff levels, where we sit today I think all of those things point to the fact that our portfolio.
In the quarter total pain sales decreased low single digits.
Propane sales were up high single digits in DIY paint sales decreased mid single digits.
Susan Mcclary: Of small ticket.
Susan Mcclary: Sure.
The DIY paint market remained soft.
Susan Mcclary: More resilient less volatile products together with our team and our operating system has put us in a position where we're able to respond. So we're really looking at the election of.
And we now anticipate our full year DIY paint business to be down high single digits.
Our previous expectation of down mid single digits.
Susan Mcclary: As just being at a high alert and being ready to respond to the challenges that may or may not come our way.
And our propane business however.
We continue to expect sales for the year to increase low single digits.
Speaker Change: Okay. That's that's helpful color. Thank you and then.
Speaker Change: Turning to the margin despite all the uncertainty that's out there it's impressive to see the consolidated expectations at the higher end of the guide can you just talk to some of those factors that you noted around the company specific initiatives and how we should be thinking about those continuing to come through as we think about year end and maybe even into next year.
Operating profit was $138 million and operating margin was 18, 1%.
Operating profit was down $6 million year over year.
Impacted by the timing of marketing spend.
An unfavorable price cost relationship.
And lower volume.
Sure. We're definitely pleased with our margin performance, it's come in as expected and this was our sixth as we said in the prepared remarks. This was our sixth consecutive quarter of margin expansion and it has been executed in a volatile environment.
Partially offset by cost savings initiatives.
Turning to slide 10, our balance sheet remained strong with gross debt to EBITDA at two times at quarter end.
We ended the quarter with $1 6 billion of liquidity.
<unk> cash and availability under our revolving credit facility.
Speaker Change: Again that goes back to what we intended when we designed our portfolio to be less resilient or excuse me more resilient and less cyclical higher margin. So.
Working capital as a percent of sales was 16, 4% and reflects the impact of the divestiture of <unk>.
Speaker Change: It's that combination of a robust portfolio the operating system and our teams we got.
As well as our continued discipline with regards to our working capital levels.
As a result of the divestiture impact.
Speaker Change: Particularly strong gross margin performance and of course, that's really from our focus on operational excellence cost savings initiatives and yes, 17, five strong for us and Thats at the top end of our range.
We now anticipate our working capital as a percent of sales to be approximately 16% at year end.
Versus our previous guidance of 16, 5%.
Speaker Change: We expect the full year margins to expand for the entire company and for both our plumbing and decorative segments and we certainly will carry that momentum into next year.
During the third quarter, we repurchased two 5 million shares for $192 million.
Paid a dividend of $63 million to shareholders.
As Keith mentioned, we plan to deploy the net proceeds from the sale of <unk> consistent.
Speaker Change: Okay. Thank you for the color and good luck with everything.
Speaker Change: Your next question comes from the line of Michael Rehaut with Jpmorgan. Please go ahead.
Consistent with our capital allocation framework.
As a result, we now expect to deploy approximately $750 million.
Speaker Change: Hi, everyone. Thank you for taking my questions the Sandra <unk> on for Michael.
Up from $600 million during the year toward share repurchases or acquisitions.
Speaker Change: Good morning, I just wanted to ask maybe.
Speaker Change: I believe your 2026 targets were predicated on a 3% to 5% R&R.
Yeah.
Now, let's turn to slide 11, and review our outlook for 2024.
Speaker Change: Growth rate for the next couple of years.
For total Moscow, our year to date topline has largely been in line with expectations.
Is that kind of still the right way to think about it and maybe.
Speaker Change: High level, maybe if we can get your thoughts on the repair and remodel end market for next year.
Last quarter, we updated our second half expectations to roughly flat.
As market conditions remain challenging.
Speaker Change: Sure. Thanks, Andrew.
The fourth quarter. However, we will also now be impacted by our divestiture of <unk>.
Speaker Change: Yes.
Speaker Change: We.
Speaker Change: When you think about that more normalized 3% to 5% growth rate for R&R. We have not changed that is our expectation of what a quote unquote normal or historical growth rates for R&R is and we still expect that.
As a result, we currently anticipate full year sales to be down low single digits versus our previous guide of plus or minus low single digits.
Despite this change.
Speaker Change: Certainly.
With our strong execution and operating margin performance year to date.
When this market turns to that normal rate of growth.
We now expect full year operating margin to be approximately 17, 5%.
Speaker Change: Is up for debate and our Crystal ball is no clearer than anyone else and that as I said.
Which is at the high end of our previous guide of approximately 17 to 17, 5%.
Speaker Change: Earlier today puts a premium on our ability to respond quickly and we've demonstrated that we.
Speaker Change: We have that capability.
In our plumbing segment, we are maintaining our topline expectation of full year 2024 sales to be plus or minus low single digits versus prior year.
Speaker Change: So we haven't changed our expectations of what the R&R market is we think the fundamentals are very strong when you look at <unk>.
Speaker Change: Mid to long term of what drives R&R, it's about home equity, it's about home price appreciation, it's about consumer confidence and so when those things start to turn we think when you when you see the reduction in rates and when you think about the under built or the deferred R&R spend and the deferrals state that we're in.
And our expected full year operating margin to be approximately 19%.
In our decorative architectural segment.
We are lowering our 2024 sales expectation to be down mid single digits year over year.
Versus our previous guidance of down low single digits.
Speaker Change: We're poised in the mid to long term.
Primarily due to our divestiture.
Speaker Change: On predictable when that will turn we're not changing our 2026.
In addition, the DIY paint market remained soft.
Expectations or.
It has not shown signs of a material rebound.
Speaker Change: Got it if you will.
Speaker Change: Thank you I appreciate that color and then maybe.
However, despite lower expected sales.
We are maintaining our anticipated full year operating margin of approximately 18%.
Speaker Change: In terms of the propane business, it's nice to see.
Speaker Change: It being pretty resilient, obviously in the past few quarters can you kind of review.
Finally, as Keith mentioned earlier, we are updating our 2024 EPS estimate to be in the range of $4 <unk>.
Speaker Change: Maybe to the current size of the business and how.
Speaker Change: You should think about the growth opportunity going forward.
To $4 15 per share.
Speaker Change: We're very pleased with the growth in.
This assumes a 219 million average diluted share count for the year.
Speaker Change: Propane and our ability to gain share.
Speaker Change: To hold that share and that goes back to the strength of the brand the strength of our deep relationship with a great channel partner in home depot in the 40 years that we've been working together as we mentioned certainly our innovation pipeline the quality in the can and how well recognize that as and when we.
And a 24, 5% effective tax rate.
As mentioned there continues to be choppiness in the overall market.
That said, we are focused on execution and controlling what we can control to deliver results within this range.
Lastly, additional financial assumptions for 2024 can be found on slide 14 of our earnings deck.
Speaker Change: Gained share and we look at the net promoter score of our new customers and the pro side or customers who have increased.
With that I would like to open up the call for questions.
Speaker Change: <unk> share of our by the net promoter scores are fantastic.
Operator.
Thank you in order to ensure that everyone has a chance to participate we would like to request that you limit yourself to asking one question and one follow up question. During the Q&A session to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: Try it you'll like a sort of thing and Thats really whats happening. So we're very happy with the.
Speaker Change:
Speaker Change: Our performance in <unk>.
Speaker Change: Andrew what was the second part of your question.
I suppose kind of like the size of the business and how we should think about the growth opportunity maybe even.
And while your question. Please press the star followed by the number Q once again the theme at yourself to one question and one follow up. Your first question comes from the line of Susan Mcclary with Goldman Sachs. Please go ahead.
Speaker Change: Alongside DIY going forward right.
Speaker Change: It's approximately $900 million and in terms of the size of our pro paint market and we expect to continue to grow above market and gain share going forward.
Thank you good morning, everyone.
Thanks for taking my question is focusing in on the DIY weakness that you highlighted in decorative architectural can you just talk a bit about how those sales trended through the quarter, how youre thinking about the implications of perhaps the election and the broader macro uncertainty and as we get past some of that how you think things.
Speaker Change: Is that on the above market growth is that kind of on the DIY and pro or just on the pro.
Speaker Change: We believe and it's hard to it's hard to judge, particularly DIY.
Speaker Change: Market size from one quarter to quarter as I've consistently said.
There could come back as we look over the next couple of quarters.
On these calls, but we believe we're holding our own and holding our share in the DIY market, maybe gaining a little bit.
Susan It's Keith good morning.
As you know, we really don't breakdown inside the quarter month to months.
Speaker Change: But the DIY market continues to be challenged.
<unk> is that can be.
Speaker Change: Thank you very much I really appreciate your time.
Quite variable, depending particularly in year over year, and what happened with regards to new product launches in terms of revenue.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Stephen Kim with Evercore ISI. Please go ahead.
Of stock et cetera, So I would tell you that it's been fairly consistent.
Speaker Change: Hi, This is <unk> on for Steve Thanks for taking my questions.
Through the quarter.
And that there wasn't any particular notable change within the quarter, so I'll speak to that in that fashion and.
Speaker Change: I just want to start with.
Speaker Change: Within <unk> was mentioned.
Speaker Change: Our updated sales guidance.
With regards to.
Speaker Change: Primarily.
The election.
Speaker Change: It was due to the divestiture of <unk>.
We don't really view.
Turning to the margin piece.
The election or how the results go specifically as it relates to DIY paint, we think of it more holistically about what that means for our overall business and fundamentally.
Speaker Change: How much of a benefit would you say to the current margin guidance is due to the divestiture of pichler.
Speaker Change: Yes, hi, good morning.
Speaker Change: Okay.
Speaker Change: So with regards to.
Think like.
Speaker Change: As you indicated.
So many issues that we face in a volatile environment like we have now.
Kisler.
Speaker Change: Translated into.
Speaker Change: US revising our guidance downward with regards to our topline.
It really puts a premium on.
The ability to respond.
Speaker Change: Down to mid single digits for the decorative architectural products segment as well as for total Moscow down low single digits.
Both in terms of our supply chains and our commercial teams.
We don't disclose individual profitability by business unit, we have indicated in the past that <unk> margin performance was below that of the segment and below that of masco. Overall. So the divestiture is accretive we haven't quantified it but I would say that our increase in our margin expectations really through the course of the year because as you may recall.
The ability for us to get price if needed based on the strength of our innovation pipeline and the strength of our brands and how.
How we are doing with regards to overall shelf space or market share. So it's really for us.
<unk>.
In terms of the election.
<unk> of how well, we're able to respond and I think if you look at the various challenges that we've experienced with our team and our operating system over the course of the last several years, where the outlook to the <unk>.
Speaker Change: Paul we came into the year with an expectation of about 17% operating profit margin.
Speaker Change: <unk> set a couple of times through the course of the year and now we're expecting 17, 5% operating profit margins for the year.
Capacity issues and paint that.
Yes, Kessler as a contributing factor to that but I would say equal or more than that as our operating performance across the business units and being able to continue to deliver the productivity and the cost efficiencies that Keith alluded to to be able to deliver operating profit margin expansion in the face of a challenging market.
Faced a couple of years ago, whether you look to the.
Tariff situation that we faced and how we've broadened our margin up above pre tariff levels of where we sit today I think all of those things point to the fact that our portfolio of.
Small ticket.
Speaker Change: Great.
<unk>.
Speaker Change: Super helpful.
More resilient less volatile products together with our team and our operating system has put us in a position and we're able to respond. So we're really looking at the election of is just hang on at a high alert and being ready to respond to the challenges that may or may not come our way.
Speaker Change: One more then.
Speaker Change: Just talking about.
Speaker Change: For the paint category overall can you talk about the mix effect and then specifically within DIY are you seeing any trade up or trade down trends within the category.
Speaker Change: Not really much in <unk>, we saw a little bit of mix impact in plumbing in the quarter.
Okay. That's that's helpful color. Thank you and then turning to the margin. Despite all the uncertainty that's out there it's impressive to see the consolidated expectations at the higher end of the guide can you just talk to some of those factors that you noted around the company specific initiatives and how we should be thinking about those continuing to come through as we think about year end.
Speaker Change: But no in paint we worked really hard across our portfolio.
Speaker Change: Ross the assortment across our channels et cetera to work to reduce the.
Speaker Change: Variability in our margin there is still some that exists, but we've done a particularly good job in paint and we really haven't seen them.
And maybe even into next year.
Sure. We're definitely pleased with our margin performance, it's come in as expected and this was our sixth as we said in our prepared remarks. This was our sixth consecutive quarter of margin expansion and.
Speaker Change: With our broad assortment in terms of price point coverage, we really haven't seen a significant mix hit and coatings.
Speaker Change: Great. Thank you.
Speaker Change: Your next question comes from the line of Trevor Allinson with Wolfe Research. Please go ahead.
It has been executed in a volatile environment. So I think again that goes back to what we intended when we designed our portfolio to be less resilient or excuse me more resilient less cyclical higher margin. So it's that combination of a robust portfolio the operating system and our teams.
Trevor Allinson: Hey, good morning. Thank you for taking my questions first one on DIY paint clearly faced some headwinds over the last few years. Following some really strong performance. During the pandemic do you think that market has reset to the point, where moving forward do you expect it would grow in line with the overall R&R market.
We got.
Particularly strong gross margin performance and of course, that's really from our focus on operational excellence cost savings initiatives and yes, 17, five strong for us and that's at the top end of our range.
Speaker Change: Yes.
Speaker Change: I don't know that I would say that it will grow in line with the overall R&R market, but when you think about how in the past it has been.
We expect the full year margins to expand for the entire company and for both our plumbing and decorative segments and we certainly will carry that momentum into next year.
Speaker Change: Declining subsegment for us in terms of DIY I do believe that's going to turnaround and go to growth.
Speaker Change: And I think it's because of the fundamentals when you look at the influx of millennials that are forming households, and getting into the housing market.
Okay. Thank you for the color and good luck with everything.
Your next question comes from the line of Michael Rehaut with JP Morgan. Please go ahead.
The healthy levels of home equity that continue to be a.
Hi, everyone. Thank you for taking my questions. This Andrew <unk> on for Michael.
Speaker Change: Support.
Speaker Change: Investment in your home and the DIY position. The fact that we know through our research that millennials are not only diyer, but their repeat DIY as we follow them over the last couple of years. So we do think that there will be a return to growth in.
Good morning, I just wanted to ask maybe.
I believe here in 2026 targets were predicated on a 3% to 5% R&R.
Growth rates for the next couple of years.
Is that kind of build the right way to think about it and maybe.
Speaker Change: In DIY paint.
High level, maybe if we can get your thoughts on the repair and remodel end market for next year.
The question is when.
Speaker Change: Okay.
Speaker Change: Right that makes sense, Okay and then.
Speaker Change: <unk>.
Sure. Thanks, Andrew.
Speaker Change: You had an outside.
Okay.
Speaker Change: Exposure to China in courts for a relatively small side of the business.
We are.
When you think about that.
More normalized 3% to 5% growth rate for on US we have not changed that is our expectation of what a quote unquote normal or historical growth rates for R&R is and we still expect that.
Speaker Change: Gave a rough framework on your last call about your China input exposure I would assume that that improves here with the kitchen Divesture any way you can roughly stream.
Speaker Change: Our updated exposure to Chinese imports post sale.
Certainly.
When this market turns to that normal rate of growth.
Speaker Change: Yes, I would tell you that from a concentration perspective as it relates to the revenue.
Is up for debate.
Our crystal ball is no clearer than anyone else and that as I said.
Speaker Change: <unk> had a higher concentration of Chinese imports than the other portions of our business.
Earlier today puts a premium on our ability to respond quickly and we've demonstrated that.
Speaker Change: But.
Speaker Change: Relatively small when you look at the overall scheme of things, yes, sure maybe just to dimension a bit I think you alluded to the fact that we commented in our Q2 earnings call that the section 301 tariffs were implemented in 2019, we've reduced our our exposure.
We have that capability.
So we haven't changed our expectations of what the R&R market is we think the fundamentals are very strong when you look at <unk>.
Mid to long term of what drives R&R, it's about.
Home equity is about home price appreciation, it's about consumer confidence and so when those things start to turn we think when you when you see the reduction in rates and when you do you think about the under belt or the deferred R&R spend and the deferrals state that we're in we're poised in the mid to long term, it's just unpredictable one that will.
Speaker Change: As a total masco enterprise by about 30%.
Speaker Change: With the divestiture of capsular that takes us up closer to 40% in terms of a reduction of our exposure.
Speaker Change: Still still.
Speaker Change: Significant exposure, but we've done a.
Speaker Change: Lot of work and we continue to do a lot of work in terms of our sourcing footprint to continue to mitigate and manage that exposure.
We're not changing our 2026.
Expectations or.
Speaker Change: Okay. That's very helpful. I appreciate the color there and good luck going forward.
Jai if you will.
Thank you I appreciate that color and then maybe.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of John Lovallo with UBS. Please go ahead.
In terms of the propane business, it's nice to see it being pretty resilient, obviously from the past few quarters can you kind of review.
Speaker Change: Hey, guys. Good morning. This is actually Spencer Kaufman on for John Thank you for the questions.
Speaker Change: The first one you talked a fair amount about DIY.
Moving to the current size of the business.
As you think about the growth opportunity going forward.
Speaker Change: The DIY paint market continues to be challenged.
We're very pleased with the growth.
How much lower our DIY paint volumes today relative to 2019 levels.
Propane and our ability to gain share.
And to hold that share and that goes back to the strength of the bear brand the strength of our deep relationship with a great channel partner in home depot in the 40 years that we've been working together as we mentioned.
Speaker Change: Well I don't have that number top of mind I know they are.
Speaker Change: Slightly lower but I don't have that actual number top of mind I can get to that after the call.
Speaker Change: Okay, no problem and now that the PPG.
Certainly our innovation pipeline on the <unk>.
Speaker Change: As announced the sale of its architectural coatings.
<unk> in the can and how well recognize that as and when we gained share and we look at the net promoter score of our new customers and the pro side or are customers who have increased their.
Speaker Change: Business to AIP.
Speaker Change: How closely did Nashville look at these assets did you engage in the bidding process and you can can you talk a little bit about your decision does not pursue those assets more aggressively I was there a conflict with your strategy with home depot or how should we think about how this played out.
<unk> share of our by the net promoter scores are fantastic. So.
Try it you'll like a sort of thing and that's really what's happening. So we're very happy with the.
Speaker Change: Of course, we looked at it we looked at it in depth when we gave it.
Our performance in pro Wolfgang Andrew what was the second part of your question.
Speaker Change: Hard analytics, but.
Speaker Change:
Speaker Change: At the end of the day, we have to make decisions that we believe will be the long term interest of our shareholder value and this wasn't a fit for us and we're going to go into details, but beside that beyond that.
I suppose kind of like the size of the business and how we should think about the growth opportunity maybe even <unk>.
Alongside DIY going forward right.
Approximately $900 million.
Speaker Change: I'll tell you.
In terms of the size of our pro paint market and we expect to continue to grow above market and gain share going forward.
Speaker Change: Sure.
Speaker Change: <unk> competed against CPG and others in the industry that are very strong and we're confident.
Speaker Change: And our ability to continue.
It is therefore on the above market growth is that kind of on the DIY and pro or just on the pro.
Speaker Change: Continue to do so successfully and this acquisition just wasn't something that we were interested in.
We believe and it's hard to it's hard to judge, particularly DIY.
Speaker Change: Yes.
Speaker Change: Fair enough. Thank you.
Speaker Change: Your next question comes from the line of Matthew Bouley with Barclays. Please go ahead.
Market size from one quarter to quarter as I've consistently said.
On these calls, but we believe we're holding our own and holding our share in the DIY market may be gaining a little bit.
Speaker Change: Good morning, everyone. Thank you for taking the questions.
Speaker Change: So the.
Speaker Change: Plumbing.
But the DIY market continues to be challenged.
Speaker Change: Good margin result, despite the higher commodity and freight.
Thank you very much I really appreciate your time.
Speaker Change: I am curious, if if commodity and freight costs.
Your next question comes from the line of Stephen Kim with Evercore ISI. Please go ahead.
Speaker Change: If they have indeed actually come in as a greater headwind than what you initially thought and as a result, if you've offset those by more either cost reductions or price and then specifically as we kind of get into 2025 is there.
Hi, This is <unk> on for Steve Thanks for taking my questions.
Just want to start with.
Within Dec arc was mentioned.
The updated sales guidance.
Primarily.
Speaker Change: Should we think about any need for additional price to be taken in the plumbing segment. Thank you.
It was due to the divestiture of titular.
Turning to the margin piece, how much of a benefit would you say to the current margin guidance is due to the divestiture pichler.
Sure. This is Rick and I guess to provide a bit of a timeline for commodity and freight overall, we came into the calendar year not expecting it to be a significant headwind or tailwind obviously as we all saw in Q2, the appreciation of commodity cost, namely copper and zinc.
Yeah, Hi, good morning.
Good morning, Craig So with regards to.
As you indicated.
The sale of kits are.
Translated into.
US revising our guidance downward with regards to our top line down.
Speaker Change: <unk> significantly actually copper as you may recall hit an all time high in may at over $5 per pound and that is when we commented in our Q2 call that would represent a headwind with regards to our second half results and Thats because.
Down to mid single digits for decorative architectural products segment as well as for total masco down low single digits.
We don't disclose individual profitability by business unit, we have indicated in the past that <unk> margin performance was below that of the segment and below that of masco overall, so the divestiture is accretive.
Speaker Change: As we've commented before it takes about six months between when we observe commodity costs in the market until they hit our P&L as they flow through.
Speaker Change: The sourcing and inventory pipeline and so we're seeing that headwind and as we indicated we are.
<unk> quantified it but I would say that our increase in our margin expectations really first through the course of the year because as you may recall, we came into the year with an expectation of about 17% operating profit margin, we increase that a couple of times through the course of the year and now we're expecting 75% more operating profit margins for the year.
Speaker Change: We are unfavorable from a price cost perspective in Q3, and we expect that to continue in Q4 and that is in line with our expectations. As we came out of the Q2 call and Thats pretty locked in right now in terms of our expectation that's dialed into our guidance for the year and despite those headwinds.
And yes, Kessler as a contributing factor to that but I would say equal or more than that as our operating performance across the business units and being able to continue to deliver the productivity and the cost efficiencies that Keith alluded to to be able to deliver operating profit margin expansion in the face of a challenging market.
Speaker Change: In terms of the commodity costs.
Speaker Change: We are we're actually through the cost initiatives and the pricing during the course of the year able to offset that from an overall margin perspective, and those were expanding our margins in plumbing 100 basis points in this quarter and we would expect margin expansion in Q4 and for the calendar year and plumbing now commodity costs have subsided a bit more.
Great.
Super helpful. Just one more.
Then just talking about for the paint category overall can you talk about the mix effect and then specifically within DIY are you seeing any trade up or trade down trends within the category.
Speaker Change: <unk>, but theres still remain elevated they remain elevated through 2023 that remain elevated relative to historical levels.
Thanks, Scott not really much in <unk>, we saw a little bit of mix impact in plumbing in the quarter.
Speaker Change: And so thats a factor as we go into 2025 and that will <unk>.
Speaker Change: Factor into our pricing strategy as we go into next year.
But no in paint we've worked really hard across our portfolio across the assortment across our channels et cetera to work to reduce the.
Speaker Change: Okay. Thank you for that very helpful color.
Speaker Change: And then secondly, I think going back to a prior question that was around your.
Variability in our margin there is still some that exists, but we've done a particularly good job in paint and we really haven't seen them.
Speaker Change: 3% to 5% longer term market growth.
Speaker Change: Wanted to ask specifically on 2025, as we kind of sit here in Q3.
With our broad assortment in terms of price point coverage, we really haven't seen a significant mix hit and coatings.
Speaker Change: Looking ahead kind of given how we're exiting the year.
Around DIY and R&R overall.
Speaker Change: Any kind of initial thoughts on what 2025 R&R could look like what you are planning for and sort of any implications to how we're starting 2025 relative to how you're planning the year to shape up thank you.
Great. Thank you.
Your next question comes from the line of Trevor Allinson with Wolfe Research. Please go ahead.
Hey, good morning. Thank you for taking my questions first one on DIY paint clearly that's based on headwinds over the last few years. Following some really strong performance during the pandemic.
I appreciate the question, but we will talk about 2025 on our next call when we're together next.
Think that market has reset to the point, where moving forward do you expect it will grow in line with the overall R&R market.
Speaker Change: I would leave.
Leave you with the thought that I have been consistently talking about with regards to the fundamentals and we think the fundamentals are strong and our industry, but we will get to the specific 2025 on our next call.
I don't know that I'd say that it would grow in line with the overall R&R market, but when you think about how in the past that it has been.
Speaker Change: Okay. Thanks, Keith Good luck guys. Thank you. Thank you.
Speaker Change: Your next question comes from the line of your language Jefferies. Please go ahead.
A declining sub segment for us in terms of DIY I do believe that's going to turn around and go to growth.
Hey, guys.
Speaker Change: Keith when I look at your plumbing business I think last quarter, you were generally constructive on the inflection in North America and maybe thought.
And I think it's because of the fundamentals when you look at the influx of millennials that are forming households, and getting into the housing market.
Speaker Change: International has bottomed out a little bit, but that recovery, but a little slower.
The healthy levels of home equity that continue to be a.
Speaker Change: National was actually quite strong. So can you talk about what are you seeing in both these markets and obviously no one's got a crystal ball, but how do you kind of see the recovery and the pace and momentum in these two sub segments within plumbing.
Ludy: Support.
Speaker Change: Investment in your home and the DIY position. The fact that we know through our research that Dr. That millennials are not only DIY ours, but their repeat DIY errors as we followed them over the last couple of years. So we do think that there will be a return to growth.
So starting with international sale pleased with the performance we grew 3% in the third quarter and this kind of market environment that really speaks to Jerry and his team at <unk> and what they've been able to.
Speaker Change: In DIY paint.
Speaker Change: The question is when.
Speaker Change: To accomplish I would characterize it.
Speaker Change: Okay.
Speaker Change: Right, Yes that makes sense, Okay and then.
Speaker Change: As particularly in Europe is showing signs of stability in our key markets.
Speaker Change: On titular.
Speaker Change: <unk> had an outside.
Speaker Change: Particularly in Germany.
Robin Zondervan: Exposure to China in courts for a relatively small side of the business.
Speaker Change: China is a bit more volatile.
Speaker Change: You gave a rough framework on your last call about your China import exposure I would assume that that improves here with the kitchen Divesture any way you can roughly frame your updated exposure to Chinese imports post sale.
We were able to deliver growth in the quarter and again that speaks to the team and the ability to gain share and a strong pipeline of trade projects that we have that continue to flow through.
Speaker Change: So we expect international in aggregate to be down low to mid single digits for the full year.
Speaker Change: Yes, I would tell you that from a concentration perspective as it relates to the revenue.
Speaker Change: That said this is a good opportunity for us to outperform the market and gain share.
Robin Zondervan: <unk> had a higher concentration of Chinese imports than the other portions of our business.
Speaker Change: What we plan on doing.
Robin Zondervan: But it's.
Speaker Change: In the United States.
Speaker Change: Relatively small when you look at the overall scheme of things, Yes, George maybe just to dimension a bit I think you alluded to the fact that we commented in our Q2 earnings call that Tim. The section 301 tariffs were implemented in 2019, we have reduced our our exposure.
Close to home here, we're seeing good e-commerce market the market continues to.
We believe grow a little bit there.
Speaker Change: Our retail performance has been.
Quite strong in the U S as well a trade I would say is a little bit more challenged.
Robin Zondervan: As a total masco enterprise by about 30%.
Speaker Change: But fundamentally stable in North America.
Robin Zondervan: With the divestiture of <unk> that takes us up closer to 40% in terms of a reduction of our exposure.
Speaker Change: Okay Super on.
Speaker Change: On your pro side for pain.
Speaker Change: So Lisa.
Speaker Change: Rate growth outperformed the market as.
Speaker Change: Our significant exposure, but we've done a.
Speaker Change: As you kind of work with your channel partner any other growth initiatives that you have slated for perhaps next year, maybe more shelf space and then just given some of the weakness <unk> seen in DIY do your lines have the ability to kind of swing production from DIY to more propane just because youre seeing simply more momentum there.
Speaker Change: Lot of work and we continue to do a lot of work in terms of our sourcing footprint to continue to mitigate or manage that exposure.
Speaker Change: Okay. That's very helpful. I appreciate the color there and good luck going forward.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of John Lovallo with UBS. Please go ahead.
Speaker Change: We do.
That's a key component of our our whole strategy.
Speaker Change: Hey, guys. Good morning. This is actually Spencer Kaufman on for John Thank you for the questions.
Speaker Change: To be less cyclical more resilient higher margin that is to work on margin differentials across channels to work on margin differentials across our assortment and to be able to flex our capacity should the demand go from one type of channel or installation process.
Speaker Change: The first one you talked a fair amount about how the DIY paint market continues to be challenged.
Speaker Change: How much lower our DIY paint volumes today relative to 2019 levels.
Speaker Change: Well I don't have that number top of mind I know they are.
Keith Allman: Slightly lower but I don't have that actual number top of mind I can get to that after the call.
Speaker Change: To another and yes, we absolutely have that flexibility and we have a new plant coming online very nicely and Heath, Ohio. So that's really what puts this portfolio in good shape, we have capacity to support.
Speaker Change: Okay, no problem and now that the PPG.
Keith Allman: Has announced the sale of its architectural coatings business.
Keith Allman: Business tend to AIP.
Speaker Change: Our expected growth for several years.
Speaker Change: How closely did Nashville look at these asset Jim did you engage in the bidding process and you can and can you talk a little bit about your decision does not pursue those assets more aggressively and I was there a conflict with your strategy with home depot or how should we think about how that's played out.
Speaker Change: And even with that available capacity, we're able to produce very strong margins. So the.
When the turnaround in the market does occur.
We're in a position to meet demand and also deliver some very nice dropdowns on that incremental.
Speaker Change: Of course, we looked at it.
Speaker Change: We looked at it in depth and we gave it a M <unk>.
Speaker Change: Volume. So yes, we have the capacity to our capacity is flexible in terms of what we're doing to drive propane our recipe is working.
Speaker Change: <unk> analytics, but.
Speaker Change: At the end of the day, we have to make decisions that we believe will be the long term interest of our shareholder value.
Speaker Change: And the more pros that triad that more pros that like it and what we've shown that we're able to maintain and have that share gain.
Keith Allman: And this wasn't a fit for us so I'm going to go into details beside that beyond that.
Speaker Change: Ricky so things like buy online pickup in store expanding delivery options.
Keith Allman: I'll tell you we've.
Keith Allman: <unk> competed against the PPG and others in the industry that are very strong and we're confident.
Spanning our outside sales force enhancing loyalty programs, we're working very closely with our channel partners continue to grow this segment and we're doing a good job at and I believe.
Keith Allman: And our ability to.
Keith Allman: <unk> continued to do so successfully and this just this acquisition just wasn't something that we're interested in.
Speaker Change: Okay I appreciate all the great color.
Keith Allman: Okay.
Speaker Change: Fair enough. Thank you.
Speaker Change: Your next question comes from the line of Keith Hughes with <unk>. Please go ahead.
Keith Allman: Okay.
Speaker Change: Your next question comes from the line of Matthew Bouley with Barclays. Please go ahead.
Speaker Change: Thank you.
Keith Hughes: With the Divesture of <unk>, Although you still are looking for M&A as according to the use of cash flow but.
Matthew Bouley: Good morning, everyone. Thank you for taking the questions.
Speaker Change: So the in plumbing.
Speaker Change: We continue to see.
Speaker Change: Good margin result, despite the higher commodity and freight.
Speaker Change: Bolt on transactions and plumbing products.
Matthew Bouley: I'm curious, if if commodity and freight costs of if they have indeed actually come in as a greater headwind than what you initially thought and as a result, if you've.
Speaker Change: Things or something like that in the coverings market or would you just look something a little further a feel in terms of.
Speaker Change: Future activity.
Speaker Change: Yes, Keith good morning, it's Rick so from an M&A perspective, our strategy is pretty consistent and clear we are focused primarily on bolt on acquisition opportunities really within our plumbing coatings or wellness businesses. So that's really our focus and we've demonstrated that with for example, <unk> hundred 60, <unk> transaction that we anniversaried this quarter.
Keith Allman: Offset those by more either cost reductions or price.
Speaker Change: And then specifically as we kind of get into 2025 is there.
Speaker Change: Should we think about any need for additional price to be taken in the plumbing segment. Thank you.
Speaker Change: Sure. This is Rick and I guess, you could provide a bit of a timeline for for commodity and freight overall, we came into the calendar year not.
Speaker Change: But that's what you would expect to see from US we're not.
Speaker Change: We're not averse to a bigger transaction, but that would be still within one of our core business segments.
Not expecting it to be a significant headwind or tailwind obviously as we all saw in Q2, the appreciation of commodity cost, namely copper and zinc.
Keith Hughes: Okay, and one follow up when it gets workflows.
Speaker Change: September 18th.
Speaker Change: Okay. Thank you.
Speaker Change: Go up significantly actually copper as you may recall hit an all time high in may at over $5 per pound and that is when we commented in our Q2 call that would represent a headwind with regards to our second half results and Thats because as we've commented before it takes about six months between when we observe commodity.
Speaker Change: Sure.
Speaker Change: Your next question comes from the line of Mike Dahl with RBC capital. Please go ahead.
Speaker Change: Hi, This is actually Chris on for Mike just to follow up on the M&A.
Speaker Change: Given your pipeline today should does it is it safe to assume the most likely outcome for the proceeds will be will be share buybacks at this time.
Speaker Change: In the market until they hit our P&L as they flow through.
Speaker Change: Okay.
Speaker Change: We haven't we haven't announced any particular thing and from an M&A perspective. So.
Speaker Change: The sourcing and inventory pipeline and so we're seeing that headwind and as we indicated we are.
Speaker Change: An announcement from our perspective, yes, we would follow our capital allocation framework and the and the proceeds would be allocated to share buybacks.
Keith Allman: We are unfavorable from a price cost perspective in Q3.
Keith Allman: We expect that to continue in Q4 and that is in line with our expectations as we came out of the Q2 call.
Speaker Change: To clarify we had about $150 million of net proceeds so that increased our capacity for share buybacks or acquisitions from $600 million to $750 for the year.
Keith Allman: And that's pretty locked in right now in terms of our expectation that's dialed into our guidance for the year and despite those headwinds in terms of the commodity costs.
Speaker Change: Got it understood and then just shifting over to.
Keith Allman: We are we're actually through the cost initiatives and the pricing during the course of the year able to offset that from an overall margin perspective, and thus we're expanding our margins in plumbing 100 basis points in this quarter and we would expect margin expansion in Q4 and for the calendar year and plumbing now.
Speaker Change: Thank you Ark and paint margins, specifically could you just kind of give us a bit more color on how.
Overall core paint margins performed relative to your expectations kind of where we are in the price cost relationship.
Speaker Change: And in terms of the timing shift in marketing spend and cost savings is a bit more color not.
Keith Allman: Now commodity costs have subsided a bit more recently, but theres still remain elevated they remain elevated through 2023 that remain elevated relative to historical level.
Patients for for next quarter.
Speaker Change: <unk> to date compared relative to your expectations.
Speaker Change: Sure from a decorative architectural products segment perspective, our expectation first of all we delivered.
Keith Allman: And so that's a factor as we go into 2025 and that will factor into our pricing strategy as we go into next year.
Speaker Change: We would consider strong margins in the quarter at 18, 1% and we reaffirmed our guidance in terms of margins for the year at 18 approximately 18%.
Speaker Change: Okay. Thank you for that rig very helpful color.
Speaker Change: And then secondly.
Speaker Change: Going back to a prior question that was around your.
Speaker Change: Effectively what that has driven based off of his cost performance within within our businesses within the decorative architectural products segment.
Speaker Change: 3% to 5% longer term market growth.
Speaker Change: Wanted to ask specifically on 2025, as we kind of sit here in Q3.
Because we are facing a negative price cost relationship so as we've mentioned before.
Keith Allman: Looking ahead kind of given how we're exiting the year.
Speaker Change: In our decorative architectural products segment.
Keith Allman: Around DIY and R&R overall.
Speaker Change: It is expected to be down low single digits.
Speaker Change: Any kind of initial thoughts on what 2025 R&R could look like what you are planning for and sort of any implications to how we're starting 2025 relative to how you're planning the year to shape up thank you.
Speaker Change: Our commodity dynamic is roughly flat we are seeing some pressure from a commodity input perspective tio two in resin, but largely this year expectation is flat. So therefore, our price cost expectation for the year and what we saw this quarter was down low single digits. So we're basically offsetting that headwind with regards.
Keith Allman: I appreciate the question, but we'll talk about 2025 on our next call when we're together next.
Keith Allman: I would leave.
Keith Allman: Leave you with the thought that I had been consistently talking about with regards to the fundamentals and we think the fundamentals are strong and our industry, but we'll get to the specific 2025 in our next call.
Speaker Change: With our cost savings initiatives and expect in modest operating profit margin expansion this year versus last year.
Speaker Change: Is your question.
Speaker Change: Okay. Thanks, Keith Good luck guys. Thank you. Thank you.
Speaker Change: It does thank you appreciate that sure.
Speaker Change: Your next question comes from the line of John Laing with Jefferies. Please go ahead.
Speaker Change: Your next question comes from the line of Garlic choice with loop capital. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: Oh, hi, Thanks, I wanted to ask on propane and follow up on your share gain.
John Laing: When I look at your plumbing business I think last quarter, you were generally constructive on an inflection in North America may be bad.
Speaker Change: There.
Speaker Change: Sure.
Speaker Change: International has bottomed out a little bit, but that recovery could be a little slower.
Speaker Change: This year are you gaining shelf space.
Speaker Change: National was actually quite strong can you talk about what are you seeing in both these markets and obviously no. One has got a crystal ball, but how do you kind of see the recovery and the pace and momentum and decide to sub segments within plumbing.
Speaker Change: The basis of your share gains or is the outperformance really coming against the broader market.
Speaker Change: It's against the broader market I would say.
Speaker Change: Shelf space is really not that critical of an item. When you are talking about the Po Pro segment, we've got sufficient and appropriate yourselves shelf space no real change in it.
So starting with international sale I'm pleased with the performance we grew 3% in the third quarter and this kind of market environment that really speaks tenants on Jerry and his team at hydro and what they've been able to.
Speaker Change: It's more about our offering.
Speaker Change: Our ease of doing business the quality of the of the installation the ease of installation and the customer and consumer pull that comes from that strong their brand and our innovation. So those are all more of the determining factors in our sales force effectiveness of course.
Speaker Change: To accomplish I would characterize it.
Speaker Change: Is particularly in Europe is showing signs of stability in our key markets.
Speaker Change: Particularly in Germany.
Speaker Change: Then shelf space per se.
Speaker Change: China is a bit more volatile.
Speaker Change: Okay, Thanks, and just kind of wanted to shift gears.
Speaker Change: We were able to deliver growth in the quarter and again that speaks to the team and the ability to gain share and a strong pipeline of trade projects that we have that continue to flow through.
Speaker Change: The.
Speaker Change: Smaller parts of your portfolio on the wellness side.
Speaker Change: I was wondering where you are seeing there considering it's a little bit more of a bigger ticket.
Speaker Change: So we expect international in aggregate to be down low to mid single digits for the full year.
Speaker Change: Offering that you provided.
Rick Westenburg: Yeah sure it's Rick we are.
Rick Westenburg: We are seeing relative stability.
Speaker Change: That said this is a good opportunity for us to outperform the market and gain share in that.
Rick Westenburg: Effectively we don't disclose wellness performance.
Speaker Change: What we plan on doing.
Rick Westenburg: In and of itself, but we're seeing stability in the performance has been in line with our overall segment.
Speaker Change: In the United States.
Speaker Change:
Speaker Change: Close to home here, where we're seeing good e-commerce market. The market continues to we believe grow a little bit there.
Rick Westenburg: So in Q2, we saw some growth in wellness.
Rick Westenburg: Those in our prior call and we're seeing similar performance in Q3.
Speaker Change: Our retail performance has been quite.
Speaker Change: Quite strong in the U S as well trade I would say is a little bit more challenged.
Rick Westenburg: Largely I would consider it flattish now keep in mind in our wellness business. We did acquire a 360. So we're seeing the benefit inorganically in terms of growth year over year, but from an organic perspective, we're seeing.
Speaker Change: But fundamentally stable in North America.
Speaker Change: Okay Super.
Speaker Change: Pro side for pain.
Speaker Change: Great growth outperformed the market.
Rick Westenburg: Rough stability and improvement so we're optimistic about the business, particularly going forward do you think the business is really well positioned in terms of.
Speaker Change: As you kind of work with your channel partner any other growth initiatives that you have slated for perhaps next year, maybe more shelf space and then just given some of the weakness you've seen in DIY do your lines have the ability to kind of swing production from DIY to more propane just because youre seeing certainly more momentum there.
Rick Westenburg: Product offering.
Rick Westenburg: Complementary products now with the <unk> with the acquisitions on a 360 and we continued to gain share in the market and so we're well positioned when the market does turnaround, but today I would characterize it as stable.
Speaker Change: We do.
Speaker Change: That's a key component of our our whole strategy to be less cyclical more resilient higher margin that is to work on margin differentials across channels to work on margin differentials.
Speaker Change: Great No I appreciate that thanks.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Anthony Pettinari with Citigroup. Please go ahead.
Speaker Change: Hi, Good morning. This is Greg on for Anthony This morning.
Speaker Change: Ross.
Speaker Change: Our assortment and to be able to flex our capacity should the demand go from.
Speaker Change: A lot's been discussed already but maybe just one on plumbing.
Speaker Change: Thinking about plumbing volume.
Speaker Change: One type of channel or installation process to another and yes, we absolutely have that flexibility and we have a new plant coming online very nicely and Heath, Ohio. So that's really what puts this portfolio in good shape, we have capacity to support.
Speaker Change: You spoke about solid performance in retail and E Commerce channels I'm wondering if you can kind of discuss what you've seen.
Wholesale and trade, specifically, where sentiment is and kind of your thoughts on inventories in the channel relative to historical norms for this time of the year.
Speaker Change: Our expected growth for several years.
Speaker Change: And even with that available capacity, we're able to produce.
Speaker Change: Inventories are really right, where they typically would be certainly Q3 is generally a strong quarter for us in terms of that segment and the.
Speaker Change: Strong margins so.
Speaker Change: When the turnaround in the market does occur we're.
Speaker Change: We're in a position to meet demand and also deliver some very nice dropdowns on that incremental volume.
Speaker Change: There is some inventory fluctuations associated with that so I would say inventories are where they need to be.
Speaker Change: Accounting for seasonal variation no no real change.
Speaker Change: Volume. So yes, we have the capacity to our capacity is flexible in terms of what we're doing to drive pro paint a recipe is working and the more pros that triad more pros that like it and what we've shown that we're able to maintain and have that share gain be sticky so things like buy online pickup in store.
Speaker Change: They're the.
Speaker Change: <unk>.
Speaker Change: Trade segment was down a little bit.
Speaker Change: Feeling a little bit of pressure on the sentiment as I talk to our customers and trade is really the same sentiment that we all share across the whole portfolio, which is this is a volatile market.
Speaker Change: Expanding delivery options.
Speaker Change: It's certainly stable and trade there is nothing.
Speaker Change: Expanding our outside sales force enhancing loyalty programs, we're working very closely with our channel partners continue to grow this segment and we're doing a good job at and I believe.
Speaker Change: That particularly concerns the channel from from the folks that I talked to other than the fact that it is.
Speaker Change: Unpredictable.
Okay.
Speaker Change: And the question is when will this turn there's very much optimism in terms of the overall fundamentals.
Speaker Change: Appreciate all the great color.
Speaker Change: Your next question comes from the line of Keith Hughes with <unk>. Please go ahead.
Speaker Change: And we're putting a premium on having the inventories in the right spot being able and ready to respond with capacity.
Speaker Change: Thank you.
Keith Hughes: With the Divesture of capsular, although you still are looking for M&A is core to your use of cash flow.
Speaker Change: That's how I would characterize the trade channel.
Speaker Change: We continue to see.
Speaker Change: Understood. Thank you Mr all of them.
Speaker Change: Bolt on transactions and plumbing products.
Speaker Change: Mr elements, my dad and complicated.
Claims or something like that in the coverings market or would you just look something a little further a feel in terms of.
Speaker Change: Okay.
Speaker Change #100: Once again, if you would like to ask a question you Press star followed by the number one on your telephone keypad.
Speaker Change: Future activity.
Speaker Change: Yes. Good morning, it's Rick so from an M&A perspective, and our strategy is pretty consistent and clear. We are focused primarily on bolt on acquisition opportunities really within our plumbing coatings or wellness businesses. So that's really our focus and we've demonstrated that with for example, the Santa Teresa II transaction that we anniversary it this quarter.
Speaker Change #101: And there are no further questions at this time I would like to turn it back to Robyn Sandra Zhang for closing remarks.
Speaker Change #102: We'd like to thank all of you for joining us on the call. This morning and for your interest in Moscow. Thank you and have a wonderful day.
Speaker Change #103: Thank you. This concludes today's conference call. Thank you all for participating you may now disconnect.
Speaker Change: But that's what you would expect to see from US we're not.
Speaker Change: Not averse to a bigger transaction, but that would be still within one of our core business segments.
Speaker Change: Okay, I will follow up a woman kitchen workflows.
Speaker Change: September 18th.
Speaker Change: Okay. Thank you.
Speaker Change: Sure.
Speaker Change: Your next question comes from the line of Mike Dahl with RBC capital. Please go ahead.
Hi, This is actually Chris on for Mike just to follow up on the M&A.
Speaker Change: Given your pipeline today is it is it safe to assume the most likely outcome for it for proceeds will be will be share buybacks at this time.
Speaker Change: Okay.
Speaker Change: We haven't we haven't announced any particular thing and from an M&A perspective, so <unk>.
Speaker Change: An announcement from our perspective, yes, we would follow our capital allocation framework and the and the proceeds would be allocated to share buybacks.
Speaker Change: Just to clarify we had about $150 million of net proceeds so that increased our capacity for share buybacks or acquisitions from 600 million to 750 and for the year.
Speaker Change: Got it understood and then just shifting over to.
Speaker Change: Vic arc and paint margins, specifically could you just kind of give us a bit more color on how.
Speaker Change: Overall core paint margins performed relative to your expectations at where we are in the price cost relationship.
Speaker Change: And in terms of the timing shift in marketing spend and cost savings.
Speaker Change: More color on expectations for for next quarter.
Speaker Change: Oh trends to date kind of compared relative to your expectations.
Speaker Change: Sure from a decorative architectural products segment perspective, our expectation for first of all we delivered what we would consider strong margins in the quarter at 18, 1% and.
Speaker Change: And we reaffirmed our guidance in terms of margins for the year at age improved approximately 18%.
Speaker Change: Effectively what that has driven based off of his cost performance within within our businesses within the decorative architectural products segment.
Speaker Change: We are facing a negative price cost relationship. So as we've mentioned before our pricing in our decorative architectural products segment.
Speaker Change: Is it expected to be down low single digits.
Speaker Change: Our commodity dynamic is roughly flat we are seeing some pressure from a commodity input perspective <unk> largely this year, our expectation is flat. So therefore, our price cost expectation for the year and what we saw this quarter was was down low single digits. So we're basically offsetting that headwind with regards.
Speaker Change: With our cost savings initiatives and expect in modest operating profit.
Speaker Change: <unk> expansion this year versus last year.
Is your question.
Speaker Change: It does thank you appreciate that sure.
Speaker Change: Your next question comes from the line of graphics choice with loop capital. Please go ahead.
Speaker Change: Oh, hi, Thanks, So I wanted to ask on pro paint and follow up on your share gain.
Speaker Change: There.
Speaker Change: Sure.
Speaker Change: This year are you gaining shelf space.
Speaker Change: Based on some of your share gains or is your outperformance really coming against the broader market.
Speaker Change: It's against the broader market I would say we've.
Speaker Change: Shelf space is really not that critical of an item. When you are talking about the pro segment, we've got sufficient and appropriate yourselves shelf space no real change in that.
Speaker Change: It's more about our offering.
Speaker Change: Ease of doing business the quality of the of the installation the ease of installation and the customer and consumer poll that Thomas from that strong Behr brand and our innovation. So those are all more on the determining factors in our salesforce effectiveness of course.
Speaker Change: Then shelf space per se.
Speaker Change: Okay, Thanks, and just kind of wanted to shift gears.
Speaker Change: And smaller parts of your portfolio on the wellness side.
Speaker Change: I'm, just wondering where you are seeing there considering it's a little bit more of a bigger ticket.
Speaker Change: Offering that you provided.
Speaker Change: Yeah sure it's Rick we are.
Speaker Change: We are seeing relative stability.
Speaker Change: Effectively we we don't disclose wellness performance.
Speaker Change: <unk> itself, but we're seeing stability in the performance and in line with our overall plumbing segment.
Speaker Change: In Q2, we saw some growth in <unk>.
Speaker Change: Wellness is weak.
Speaker Change: Disclosed in our prior call.
Speaker Change: We're seeing similar performance in Q3, largely I would consider a flattish now keep in mind in our wellness business. We did acquire Sona 360, So we're seeing the benefit inorganically in terms of growth year over year, but from an organic perspective, we're seeing.
Speaker Change: Rough stability and improvement so we're optimistic about the business, particularly going forward. We think the business is really well positioned in terms of.
Speaker Change: Its product offering.
Speaker Change: Complementary products now with the <unk> with the acquisition of <unk> 360, and we continued to gain share in the market and so we're well positioned.
Speaker Change: When the market does turnaround, but today I would characterize it as stable.
Speaker Change: Great No I appreciate that thanks.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Anthony Pettinari with Citigroup. Please go ahead.
Speaker Change: Hi, Good morning. This is Gregory on for Andy This morning.
Speaker Change: A lot's been discussed already but maybe just one on plumbing.
Speaker Change: Thinking about plumbing volume.
Speaker Change: You spoke about the solid performance in retail and E. Commerce channels I'm wondering if you can kind of discuss what you've seen.
Speaker Change: In wholesale and trade, specifically, where sentiment is and kind of your thoughts on inventories in that channel relative to historical norms for this time of the year.
Speaker Change: Inventories are really right, where they typically would be certainly Q3 is generally a strong quarter for us in terms of that segment and there is some inventory fluctuations associated with that so I would say inventories are where they need to be.
Speaker Change: Accounting for seasonal variation no no real change.
Speaker Change: They're the.
Speaker Change: Trade segment was down a little bit.
Speaker Change: Feeling a little bit of pressure on the sentiment as I talk to our customers and trade is really the same sentiment that we all share across the whole portfolio, which is this is a volatile market.
Speaker Change: It's certainly stable and trade there is nothing.
Speaker Change: That particular.
Speaker Change: <unk> concerns the channel from from the folks that I talked to other than the fact that it's on.
Speaker Change: Unpredictable.
Speaker Change: And the question is when will this turn is very much optimism in terms of the overall fundamentals.
Speaker Change: And we're putting a premium on having the inventories in the right spot being able and ready to respond with capacity.
Speaker Change: That's how I would characterize the trade channel.
Speaker Change: Understood. Thank you Mr all of them.
Keith Hughes: Mr elements my dad incoming Keith.
Speaker Change: Yes.
Speaker Change: Once again, if you would like to ask a question Steve You press the star followed by the number one on your telephone keypad.
Speaker Change: Yeah.
And there are no further questions at this time I would like to turn it back to Robyn Sandra Zhang for closing remarks.
Speaker Change: We'd like to thank all of you for joining us on the call. This morning and for your interest in Masco. Thank you and have a wonderful day.
Speaker Change: Thank you. This concludes today's conference call. Thank you all for participating you may now disconnect.
Speaker Change: [noise].