The Sherwin-Williams Company reported first-quarter net income of $32.6 million, a 13% decline from the first quarter of 2009, as sales weakness and the effects of health-care legislation weighed on earnings. Sales for the quarter rose 1%, to $1.565 billion.
The company said net income included a one-time increase in tax expense of 10 cents per share related to the Health Care and Education Reconciliation Act passed by Congress on March 25. Sales benefited from favorable currency translations, but were negatively affected by a decline in domestic paint sales volume, the company said.
For the company’s Paint Stores Group, sales for the quarter declined 5.4%, to $850.9 million, compared to the first quarter of 2009, while earnings fell 15.5%, to $47.8 million. Sales were affected by a decline in paint sales volume and corresponding weakness in non-paint sales, the company said. Key factors in the earnings decline were lower sales volumes and raw-material cost increases.
Consumer Group sales rose 1.4%, to $292.1 million, compared to the first quarter of 2009, while earnings rose 19%, to $37.5 million. The increase in sales was attributed to new-product introductions, while soft DIY demand exerted a negative effect on sales at some retail outlets served by the segment, the company said.
Global Finishes Group net sales rose 16.2%, to $421.1 million, from the first quarter of 2009, due primarily to favorable currency translations and higher paint sales volume. Segment earnings were $23 million, a sharp increase from $5.3 million for the prior-year period.
Review and outlook
Chairman and CEO Christopher M. Connor said sales for the quarter were “slightly stronger than we anticipated, although domestic demand remains soft.” He said Paint Stores Group volume decreased at the lowest rate since the fourth quarter of 2008, due to improvements in certain architectural segments.
For the Global Finishes Group, Connor said growth was solid for architectural, OEM, and automotive finishes sales volumes, while Consumer Group operating results improved due to “disciplined cost management” and prior-year site rationalizations.
Connor said the company opened three net new locations in the Paint Stores Group and one in the Global Finishes Group during the first quarter. For the year, he said the Paint Stores Group is expected to open 40 to 50 new stores while slowing the rate of closings of redundant-store locations.
In a forecast for the second quarter, Connor said the company anticipates a sales increase in the “high single-digit percentage” range compared to the second quarter of 2009. He forecast net income per share for the second quarter of $1.55 to $1.70, compared to $1.35 per share in 2009.
For full-year 2010, the company is anticipating a sales increase in the “mid-to-high single-digit” percentage range. The forecast for net income was raised to a range of $4.20 to $4.60 per share, up from $3.78 per share in 2009.