A Compliment for Heidi

Sherwin-Williams, PPG Industries and RPM International announced the results of their second-quarter operations recently, with little to distinguish between them beyond the name on the letterhead and RPM’s insistence that the second quarter is the fourth.  The result of that company’s use of a non-calendar-based fiscal year, which did little to help its performance.

And while they announced their news separately, they all shared the same result: flat sales volume net of inflation, which ran about 7% in paint for the first half of the year.  With all three preparing for continued inflation for the remainder of this year, which is already the beginning of next for RPM.  Inflation that, no matter when they book it, will keep downward pressure on demand for architectural coatings.  Demand which currently is neither flagging nor accelerating, though it does not feel like stasis.  Rather like the moment Wile E. Coyote outruns the earth, but before he begins to fall. 

You can catch the details of those earnings on my podcast this week, including an update on the Akzo Nobel Axalta merger, which recently cleared several hurdles on its transit toward consolidation, currently expected in the fourth quarter of next year.  Plus an update on Benjamin Moore and Pittsburgh and a few jabs at Sherwin-Williams CEO Heidi Petz, because she can spin a tale.  

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Which she continues to do throughout her webcast presentations, imputing truth to her fantastic statements, like the “widening gap” between Sherwin and its competitors which her own results demonstrate is not widening.  Amongst the drivel though was one upgrade to Petz’s customary lack of transparency, during her remarks about new store openings when Petz also mentioned the number of stores Sherwin has closed.  An ongoing activity for any retailer of Sherwin’s size, though not one this company generally mentions, allowing a broader analysis I’m sure the finance bros appreciated.

The company is on pace to open 80-100 new stores this year according to Petz, whose business model demands that expansion.  Now facing an economy where that may not be prudent, Sherwin is closing stores on the bubble, 57 of them so far this year.  Petz added that the company has also opened 45 of the new stores planned, netting the year at negative 12 with a plan to end it at positive 30. 

So maybe no Grinch this year.

Replying to an accusation of price-fixing, Ace Hardware filed a motion to dismiss the case against the hardware retailer co-operative, arguing that the plaintiff failed to even “plausibly suggest” any agreement among competitors to control prices.  And that there is neither direct nor indirect evidence of any “anticompetitive effects,” an assertion I agree with as I’m not aware of any item or market segment in our sphere where independents set the price.  Effects which will make this a difficult case to make, giving Ace some probabilities on this motion. 

The lawsuit is based on two purchases totaling just $71.42, making it harder to see how the plaintiff Sean Twomey suffered any harm.  In another filing, Ace claimed Twomey used his wife’s Ace Rewards account for both purchases, bringing the receipts which Ace claims obligate Twomey to make his case in arbitration as per the terms of service.  That motion likely a death knell for this case in federal court, which has more important things to worry about anyway. 

Though it seems that Mrs. Twomey might be coming into some rewards points.

Rolling Out Behr

Failing to keep up with the Joneses is Behr, which reported sales down 4% year-over-year despite the boost from inflation.  The eighth consecutive quarter of market share loss for Behr and the third to reach double-digits, as this one does when calculating for inflation.   A trend Behr has little chance of redirecting, as paint consumers continue to eschew the big box stores, ongoing since the onset of the pandemic.

With DIY sales down “high single digits” plus the inflation, Behr turns to the professional painter as the panacea for its laments, though I’m not expecting it to have any more luck with painters than its having with consumers.  With pro sales just barely keeping up with the pack, it’s hard to imagine Behr could ever become a player in this space.  They’re stuck with a brand painters have had decades to adopt and have chosen not to, trying to compete with Sherwin-Williams and Benjamin Moore, which continue to dominate this space.    

Leaving painters with better choices and Behr rolled out to dry.