10-QPeriod: Q1 FY2023

SHERWIN WILLIAMS CO Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 25, 2023For Securities:SHW

Summary

Sherwin-Williams Company (SHW) reported strong first-quarter 2023 results, with a notable increase in net sales and diluted earnings per share compared to the prior year. Net sales grew by 8.9% to $5.44 billion, driven by robust performance in the Paint Stores Group, benefiting from price increases and higher volumes in architectural paint, protective, marine, commercial, and residential repaint segments. The Performance Coatings Group also saw sales growth, primarily due to pricing actions and acquisitions, despite some volume softness in specific sub-segments. The company demonstrated improved profitability, with consolidated gross profit increasing significantly and gross profit margin expanding to 44.5% from 41.1% in the prior year, largely due to successful pricing strategies across all segments. Diluted net income per share saw a substantial 30.5% increase to $1.84. While the company anticipates a challenging demand environment in the latter half of 2023, it maintains a disciplined capital deployment strategy focused on acquisitions, dividends, and share repurchases, supported by a strong liquidity position.

Financial Highlights

52 data points
Beta

Revenue

$5.44B

44.5% Gross Margin

Net Income

$477.40M

8.8% Net Margin

EPS (Diluted)

$1.84

Total Assets

$23.13B

Cash & Equivalents

$151.40M

Free Cash Flow

$88.20M

Financial Statements
Beta
Revenue$5.44B
Cost of Revenue$3.02B
Gross Profit$2.42B
SG&A Expenses$1.69B
Operating Income$839.40M
Interest Expense$109.30M
Net Income$477.40M
EPS (Basic)$1.86
EPS (Diluted)$1.84
Shares Outstanding (Basic)256.70M
Shares Outstanding (Diluted)259.70M

Key Highlights

  • 1Consolidated net sales increased by 8.9% to $5.44 billion for the first quarter of 2023, compared to $4.99 billion in the same period of 2022.
  • 2Diluted net income per share rose by 30.5% to $1.84, up from $1.41 in the first quarter of 2022.
  • 3Consolidated gross profit margin improved to 44.5% from 41.1% year-over-year, driven by effective pricing initiatives across all segments.
  • 4The Paint Stores Group showed significant strength with same-store sales increasing by 14.2% and overall segment net sales up 14.8%.
  • 5Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 26.7% to $878.2 million.
  • 6The company returned $458.2 million to shareholders through share buybacks and cash dividends during the first three months of 2023.
  • 7Acquisitions contributed 1.8% to overall net sales growth in the quarter.

Frequently Asked Questions

Net sales increased primarily due to selling price increases implemented across all segments. Additionally, higher sales volume in the Paint Stores Group, particularly in architectural paint, protective and marine, commercial, and residential repaint end markets, contributed significantly. Acquisitions also added 1.8% to net sales.

Profitability improved notably, with consolidated gross profit increasing by $368.0 million and the gross profit margin expanding to 44.5% from 41.1% in the prior year. This improvement was driven by successful selling price increases in all reportable segments.

Sherwin-Williams anticipates a challenging demand environment, especially in the second half of 2023, with expected softness in new residential and retail home improvement markets. Industrial end markets are also expected to face pressure due to slow economic recovery in Europe and China. The company plans to focus on recession-resilient markets, new account growth, and prudent expense management.

The company maintains a balanced capital deployment strategy, prioritizing business acquisitions, dividends, and share repurchases. In the first three months of 2023, $458.2 million was returned to shareholders through these methods. Sherwin-Williams reported strong liquidity with $151.4 million in cash and $2.228 billion of unused capacity under its credit facilities as of March 31, 2023.