The Sherwin-Williams (SHW) Q1 2023 Earnings Call Transcript

For the period ending March 31, 2023

April 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's Review of First Quarter 2023 Results and our Outlook for the Second Quarter and Full Year of 2023.

With us on today's call are John Morikis, Chairman and CEO; Al Mistysyn, CFO; Heidi Petz, President and COO; Jane Cronin, Senior Vice President, Enterprise Finance; and Jim Jaye, Senior Vice President, Investor Relations and Communications. 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 two hours after this conference call concludes. This conference call will include certain forward-looking statements as defined under 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 up the session to questions.

I will now turn the call over to Jim Jaye.

James Jaye

Thank you, and good morning to everyone. Sherwin-Williams delivered excellent first quarter results compared to the same period a year ago. Consolidated net sales grew by a high single-digit percentage, ahead of our expectations and were led by a mid-teens percentage increase in our professional architectural end markets. On the Industrial side of the business, sales increased in all regions except Asia Pacific.

Gross margin significantly improved sequentially and year-over-year, driven by strong volume in the Paint Stores Group and effective pricing. Cost of goods sold includes higher inflation in wages and other employee-related categories, which were partially offset by a slight decrease in year-over-year raw material costs. We expect to hold the majority of the pricing we have put into the market, given the ongoing investments we have made to drive innovation, enhance services and secure the talent that provides differentiated solutions to help our customers reach their goals and drive their success.

Segment margin in all three reportable segments expanded sequentially and year-over-year. We also delivered strong double-digit growth in diluted net income per share and EBITDA. Additionally, we continue to execute on the portfolio realignment actions we announced late last year, including the divestiture of a noncore aerosol business, which closed on April 1, and our recently announced agreement to divest our China architectural business.