The Sherwin-Williams (SHW) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 25, 2023 11:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning. Thank you for joining the Sherwin-Williams Company Review of Second Quarter 2023 results and our outlook for the Third Quarter and Full Year of 2023. This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com, beginning approximately 2 hours after this conference call concludes.

This conference call will include certain forward-looking statements as defined under the U.S. federal securities laws with respect to sales, earnings and other matters. Any forward-looking statement speaks only as of the date on which such statement is made and the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A full declaration regarding forward-looking statements is provided in the company’s earnings release transmitted earlier this morning. After the company’s prepared remarks, we will open the session to questions.

I will now turn the call over to Jim Jaye, Senior Vice President, Investor Relations and Communications.

Jim Jaye

Thank you and good morning to everyone. Joining me on the call today are John Morikis, Chairman and CEO; and Heidi Petz, President and Chief Operating Officer; Al Mistysyn, Chief Financial Officer; and Jane Cronin, Senior Vice President of Enterprise Finance.

Sherwin-Williams delivered excellent second quarter results compared to the same period a year ago. These results, coupled with a similar strong performance in the first quarter led to an excellent first half that exceeded the expectations we laid out back in January. Given the strong first half and current visibility into our second half, we are significantly increasing our full year guidance, which John will talk about in just a few minutes.

But first, let me touch on a few second quarter highlights. Consolidated net sales in the quarter exceeded our expectations and grew by a mid-single-digit percentage. Sales in all 3 reportable segments came in above our guided range. Gross margin significantly improved sequentially and year-over-year, driven by strong volume in the Paint Stores Group and moderating raw material costs.

Pricing discipline remains strong. SG&A expense increased over the prior year quarter, though the year-over-year percentage increase was lower than that of our first quarter. Excluding the impact of incremental acquisition and restructuring costs SG&A increased 8% year-over-year. Approximately 85% of that second quarter increase was related to investments in Paint Store Group long-term growth initiatives with the remainder driven by increases in compensation and benefits.