The Sherwin-Williams Company Reports 2023 First Quarter Financial Results

Ein Geschäft von Sherwin-Williams. © RiverNorthPhotography / iStock Unreleased / Getty Images

PR Newswire

CLEVELAND, April 25, 2023

CLEVELAND, April 25, 2023 /PRNewswire/ -- The Sherwin-Williams Company (NYSE: SHW) announced its financial results for the first quarter ended March 31, 2023. All comparisons are to the first quarter of the prior year, unless otherwise noted.

SUMMARY

Consolidated net sales increased 8.9% in the quarter to $5.44 billion

Net sales from stores in U.S. and Canada open more than twelve calendar months increased 14.2% in the quarter

Diluted net income per share increased 30.5% to $1.84 per share in the quarter compared to $1.41 per share in the first quarter 2022

Adjusted diluted net income per share increased 26.7% to $2.04 per share in the quarter compared to $1.61 per share in the first quarter 2022

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased 26.7% to $878.2 million in the quarter
Reaffirming full year 2023 diluted net income per share guidance in the range of $6.79 to $7.59 per share, including acquisition-related amortization expense of $0.81 per share and restructuring expense of $0.25 to $0.35 per share

Reaffirming full year 2023 adjusted diluted net income per share guidance in the range of $7.95 to $8.65 per share

ORGANIZATIONAL AND REPORTING CHANGE

Effective January 1, 2023, the Company changed its organizational structure to manage and report the Latin America architectural paint business within the Consumer Brands Group to more closely align demand and service model trends with its current business strategy. The Latin America business was formerly part of The Americas Group, which has become the Paint Stores Group concurrent with this change. The Company will report segment results for the newly realigned Paint Stores Group and Consumer Brands Group, for both current and prior periods presented, beginning with the first quarter of 2023.

CEO REMARKS

"We delivered strong results in the first quarter, with higher than expected consolidated net sales, sequential and year-over-year expansion in gross margin, and double-digit percentage growth in diluted net income per share and EBITDA," said Chairman and Chief Executive Officer, John G. Morikis. "Segment margin expanded sequentially and year-over-year in all three of our reportable segments. We also continued to invest in growth initiatives across the business during the quarter while returning cash to our shareholders through an increase in our quarterly dividend and an investment of $301.7 million to repurchase 1.3 million shares.

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"In the Paint Stores Group, sales in all end markets were up double-digit percentages, driven by strong volume and led by protective & marine, property maintenance, commercial and residential repaint. In the Consumer Brands Group, North America DIY sales remained soft, while our Pros Who Paint business was up by a double-digit percentage. Sales were also up by a double-digit percentage in Latin America. Demand remained soft in Europe and China. We're pleased with this Group's progress on the previously described portfolio realignment. In April, we completed the divestiture of a non-core aerosol business and finalized an agreement to divest our China architectural business. In the Performance Coatings Group, sales were up in all regions except Asia Pacific. Growth was strongest in Automotive Refinish, which was up by a mid-teens percentage, followed by low-single digit increases in General Industrial and Coil Coatings. As expected, Packaging was down, impacted by very difficult comparisons, as was Industrial Wood, given weakness in residential end markets."

FIRST QUARTER CONSOLIDATED RESULTS

	Three Months Ended March 31,
	2023	2022	$ Change	% Change
Net sales	$ 5,442.4	$ 4,998.7	$ 443.7	8.9 %
Income before income taxes	$ 614.8	$ 461.1	$ 153.7	33.3 %
As a % of sales	11.3 %	9.2 %
Net income per share - diluted	$ 1.84	$ 1.41	$ 0.43	30.5 %
Adjusted net income per share - diluted	$ 2.04	$ 1.61	$ 0.43	26.7 %

Consolidated net sales increased primarily due to selling price increases in all segments and higher architectural sales volume in the Paint Stores Group, partially offset by lower sales volumes in the Consumer Brands and Performance Coatings Groups. Acquisitions increased consolidated net sales by 1.8%, while currency translation rate changes decreased consolidated net sales by 1.0%.

Income before income taxes increased due to selling price increases in all segments and higher sales volume in the Paint Stores Group. These factors were partially offset by increased investments in long-term growth initiatives, lower sales volumes in the Consumer Brands and Performance Coatings Groups, and higher employee-related costs.

Diluted net income per share included a charge of $0.20 per share for acquisition-related amortization expense.

FIRST QUARTER SEGMENT RESULTS

Paint Stores Group (PSG)

	Three Months Ended March 31,
	2023	2022	$ Change	% Change
Net sales	$ 2,859.1	$ 2,491.3	$ 367.8	14.8 %
Same-store sales ⁽¹⁾	14.2 %	3.8 %
Segment profit	$ 526.7	$ 428.8	$ 97.9	22.8 %
Reported segment margin	18.4 %	17.2 %


⁽¹⁾	Same-store sales represents net sales from stores open more than twelve calendar months.

Net sales in PSG increased primarily due to higher sales volumes across all end markets, as well as selling price increases. PSG segment profit increased due primarily to higher paint sales volume and selling price increases, partially offset by continued investments in long-term growth strategies and higher employee-related costs.

Consumer Brands Group (CBG)

	Three Months Ended March 31,
	2023	2022	$ Change	% Change
Net sales	$ 872.7	$ 852.2	$ 20.5	2.4 %
Segment profit	$ 93.8	$ 81.5	$ 12.3	15.1 %
Reported segment margin	10.7 %	9.6 %
Adjusted segment profit ⁽¹⁾	$ 113.8	$ 100.9	$ 12.9	12.8 %
Adjusted segment margin	13.0 %	11.8 %


⁽¹⁾	Adjusted segment profit equals Segment profit excluding the impact of restructuring costs and acquisition-related amortization expense. In CBG, restructuring costs were approximately $1.0 million in the first quarter of 2023 and acquisition-related amortization expense was $19.0 million and $19.4 million in the first quarter of 2023 and 2022, respectively.

Net sales in CBG increased primarily due to selling price increases and strong growth within Latin America, partially offset by lower sales volumes in all other regions. Currency translation rate changes decreased CBG's net sales by 1.7%. CBG segment profit increased primarily due to selling price increases, partially offset by lower sales volume and inflation in wages and other employee costs. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 220 basis points in the first quarter of both 2023 and 2022.

Performance Coatings Group (PCG)

Three Months Ended March 31,

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