Let Them Spit!

THE country’s largest paint maker Sherwin-Williams announced their second-quarter financial results last week, the company reporting that total revenue was up less than one percent. Despite price increases in excess of that figure!

Among the anchors on Sherwin’s bow was the Consumer Brands Group whose sales were down more than 10% despite rising prices. A shellacking for Minwax, Cabot’s, Purdy, Krylon and other brands of CBG sold mostly at home centers. The results reflecting “continued softness in DIY” according to Sherwin’s chief executive Heide Petz.  

In the crucial-to-dealers residential-repaint market segment, Sherwin reported a mid-single digit sales increase, an outcome Petz claimed was “strong evidence that we are continuing to take share in a down market.”

Which, it’s not!

Also reporting earnings last week was Masco, the private label manufacturer to the nation’s largest home improvement retailer Home Depot.  Masco reported that paint sales were off 7% for the quarter which after calculating for inflation amounts to a double-digit decrease in volume for the country’s fifth largest paint maker.

Masco’s results reflect weak demand for architectural coatings among DIY consumers according to the company, adding that that segment was down mid-double digits during the second quarter. 

Like Sherwin, Masco also flexed increases in their professional sales which were up mid-single digits, though the company stopped short of claiming any market share gains.

Perhaps more aware than Ms. Petz of the facts I’m about to spit?

Because to gain market share in the residential repaint segment as Ms. Petz claims to have done, requires Sherwin do more than just keep up with inflation. To gain share, the Paint Stores Group (PSG) must grow faster than their competitors in the professional architectural coatings segment. 

Primarily Benjamin Moore and their network of independent retailers.

But Petz reported that Stores grew just 3.5%–just half of Benjamin Moore’s growth rate once normalized for inflation. Making it far more likely that Sherwin is losing rezi-repaint share, despite Ms. Petz’s assertion!

Also at mid-single digits but unmentioned by Ms. Petz is the probability that Sherwin-Williams will face “financial distress in the next 24 months,” according to a web site which tracks such things.  That analysis reflecting Sherwin’s high debt load and the exposure to rate hike increases as that debt rolls forward.

And while I don’t find it likely such troubles will lead Sherwin into bankruptcy that same site pegs the odds of that eventuality at 7.1%, highest among American paint manufacturers!    

I Didn’t Say It!

On Tuesday I posted the final episode of my three-part podcast series THE Opportunists, highlighting three paint manufacturers who transformed their businesses after the “orderly wind down” at Kelly-Moore.      

I’m joined on the episode by Anthony Ward, president of Farrell-Calhoun in Memphis, Tennessee, more than 400-miles from the nearest Kelly-Moore store. 

Unlike Monte Lewis at Dunn-Edwards in California, from Ward’s distance he had no thought that he could hire a team of Kelly-Moore employees and take over their stores.

But when a team of Kelly-Moore employees approached him, he recognized THE opportunity!

I’ll let Anthony tell the rest of the story which he does on my vlog or on my YouTube channel.  If listening is your thing grab your hearing aid and do it here: my podcast site, Apple Podcasts, Amazon Podcasts, Spotify, and on Soundcloud.