Sherwin Reports Sales Increase for Q3
Global coatings firm The Sherwin-Williams Company (Cleveland) released its third-quarter earnings report for 2019 on Tuesday (Oct. 22), announcing an increase in consolidated net sales, diluted net income per share and net sales from stores located in the U.S. and Canada.
Consolidated net sales increased 2.9%, or $136.2 million, for the third quarter, to $4.87 billion, an increase that was attributed to higher paint sales in North American stores as well as selling price increases, though this progress was slightly offset by lack of demand in some markets outside the U.S. as well as unfavorable foreign currency translation.
Diluted net income per share increased to $6.16 in comparison with last year’s $3.72, and EBITDA increased 11.8% to $919.3 million, equating to 18.9% of sales.
Q3 2019 Report
“For the second consecutive quarter, all three operating segments increased segment profit and margin compared to the same period last year,” said John G. Morikis, Chairman and Chief Executive Officer for Sherwin-Williams.
“In the Americas Group, our North American paint stores generated strong growth in all regions and all customer end markets, led by double digit growth in residential repaint. With the strong volume, the team delivered incremental operating margin of approximately 37%, and we have opened 31 net new stores year to date.”
For the Americas Group, net sales increased 8.7% to $2.90 billion, which was largely attributed to higher paint sales across end markets in North American stores as well as selling price increases. For stores in the U.S. and Canada open for longer than a year, net sales increased 8.1%. Segment profit also increased $85.9 million to $663.7 million, and profit as a part of net sales increased to 20.6% compared to last year's 20.1%.
“In the Consumer Brands Group, sales decreased more than expected due primarily to softness in some international markets,” said Morikis. “In North America, we continued to strengthen our relationships with our largest retail partners. The team has done a nice job of controlling selling expenses, while continuing to realize synergies and improving year over year supply chain costs.”
Net sales in the Consumer Brands Group, in contrast, saw a 11.9% decrease to $678.5 million, which was largely attributed to comparisons to load-in sales for a 2018 customer program, the divestiture of the Guardsman furniture protection business during last year's third quarter and softer sales in end markets outside North America.
There was also an increase in segment profit, totaling $114.9 million over last year's $83.9 million. Better supply chain efficiency as well as good cost control were named as contributing factors, but these were partially offset by customer program investments. Segment profit as a percent of net external sales increased in the quarter to 16.9%, over last year’s 10.9%.
“The Performance Coatings Group was impacted by slowing industrial demand in some end markets, leading to slightly lower sales in the quarter,” said Morikis. “Despite the softer than expected top line, the team remained focused on controlling selling expenses, and with moderating raw material costs, good cost control and reduced impacts of acquisition-related amortization expense, partially offset by unfavorable currency translation rate changes.”
Net sales in The Consumer Brands Group, in contrast, saw a 11.9% decrease to $678.5 million, which was largely attributed to comparisons to load-in sales for a 2018 customer program, the divestiture of the Guardsman furniture protection business during last year's third quarter and softer sales in end markets outside North America.
Net sales for the Performance Coatings Group experienced a 0.3% decrease, to $1.29 billion, which was largely attributed to softer sales outside North America and unfavorable currency translation rate changes, though this was partially offset by an increase in selling prices. Currency translation rate changes made Group net sales by take a 1.6% hit, but segment profit increased to $137.4 million from last year's $104.9 million.
For the fourth quarter, Morikis noted that the company anticipates consolidated net sales to increase by a low single-digit percentage.
“For the full year 2019, we expect our consolidated net sales will increase by a low single digit percentage compared to the full year 2018,” said Morikis.
“We are updating our full year 2019 diluted net income per share guidance to be in the range of $17.07 to $17.47 per share. Diluted net income per share in 2018 was $11.67 per share, including a charge of $4.15 per share for acquisition-related costs and a charge of $2.71 per share for non-operating expenses. We are increasing our full year 2019 adjusted diluted net income per share guidance to be in the range of $20.90 to $21.30 per share, excluding charges for acquisition-related costs and non-operating expenses, compared to $18.53 per share for the full year 2018 on a comparable basis."