I'd Like to See You Prove It
On my podcast this week I delve into the third-quarter earnings announced by big paint in October, including RPM, Behr,PPG, AkzoNobel, Axalta and Sherwin-Williams. Adding Graco for good measure, believing pump sales to be among the industry’s best fortune tellers—with results in Q3 further making that point.
Across that cohort, demand for architectural coatings remains soft, with none of the group outperforming the rate of inflation. With the possible exception of PPG, which is perhaps receiving its first dividend on its architectural coatings divestiture. That divestiture left more than 75% of the company in the high-performance segment, which continues to outperform architectural coatings, despite suffering higher inflation.
Big Paint’s worst results came from Behr—again—with the company reporting that it continues to bleed market share in the DIY segment. For the fourth consecutive year, with many quarters recording sales dropping in double digits. Results which do not seem to sound any alarms in the suite of CEO Jon Nudi, who blames the nosedive on slow housing turnover. While that may be a contributing factor, it’s not Nudi’s biggest problem. That remains Benjamin Moore’s presence on the shelves at Ace Hardware, which shares a demographic with Nudi’s only customer, Home Depot. Consumers who since the pandemic have been showing a preference for Ace’s smaller footprints and more convenient locations, significantly contributing to Nudi’s laments. An effect likely to continue unless Nudi has a plan to stop his paint from sagging, which reviving a pro paint initiative will not be enough to do.
It’s been 18 years since Behr announced that professional painters would become its priority, an effort which left the company insignificant in that segment, though Nudi continues to claim that the company is gaining share. Which may be mathematically possible, considering that they started at zero. Leaving Behr making paint for two segments that don’t want it and painters reaching for the brand only when their customer demands it. Which happens less frequently each quarter, exposing Nudi’s paradox: that without the DIY consumer, Behr is as dead as Rosencrantz and Guildenstern—and just about as useful.
I Should Have Thought of this Myself
Sherwin-Williams was sued last week for nine violations of California’s labor law—so de rigueur it barely seems worth the mention. Though this case may prove a harbinger of new troubles for Sherwin, which already has enough to worry about in its relationship with its employees.
The plaintiff in this case chose to name both Sherwin-Williams and the District Sales Manager (DSM) as codefendants, a far more aggressive posture than just suing Sherwin-Williams, as is more typical in these cases.
Attorneys for Sherwin will defend the company’s interests, including the District Sales Manager, for as long as their interests align. When they don’t, like the plaintiff, the DSM will be pushed out the door. Another victim of Sherwin’s toxicity and perhaps on the hook for a judgment in this case and the cost of their own defense, which could easily reach six figures. A devastating blow for employees making less than that each year and one which leaves them in legal peril should their relationship with Sherwin-Williams ever sour—oblivious to the fact that it already has. So badly that this DSM now needs two attorneys to represent him, including one of his own choosing. Paid for by Sherwin-Williams because it was their malfeasance which brought this trouble on, though I’m not expecting them to do it. Perhaps spawning a whole new class of victims: employees who sue Sherwin to recover legal fees paid while doing their jobs the way CEO Heidi Petz told them to do it. Making this legal maneuver potentially incendiary, leaving me seething I didn’t think of it myself.
Members of the AllPro group met in Las Vegas last week, where they heard from Benjamin Moore CEO Dan Calkins, who was not there to discuss how things were going at Ace, though there is some overlap between the groups. Most AllPro members though are traditional paint and decorating retailers, as likely to sell wallpaper and flooring as they are to sell hardware. The Marines in Calkins’ fight for market share in rezi-repaint, which represents an estimated 75% of that group’s purchases from my former boss.
Calkins shared his bullishness for the channel, despite macroeconomic concerns for demand and inflation. Confidence that comes from his network’s resiliency during this economic downturn, in part due to the limited exposure to Heidi’s two biggest problems: the commercial and new residential segments, which most dealers eschew. So that dealers I’m in touch with share that business remains strong, though most complain they’re working harder to reach their goals. And they’re facing margin pressure as a result of inflation, which is not expected to get better anytime soon.
