Tariff Impact and Mitigation
Q: How will new China tariffs affect 2025 results?
A: We've been preparing mitigation strategies, including reducing our China exposure by 45% since 2018 , adjusting our sourcing footprint, engaging suppliers for partial offsets, and considering pricing. These actions will significantly mitigate our exposure and minimize the impact in 2025. Tariffs went into effect on February 4 ; mitigation will layer in over time, affecting profit margins being flat in the first half and increasing in the second half of the year.

2026 Margin Targets and Kichler Divestiture
Q: Can you sustain margin targets after selling Kichler?
A: Despite the sale of Kichler, we maintain our 2026 margin targets. Softer DIY volumes offset the mechanical margin improvement from the divestiture. In Plumbing, we're confident due to our efficient production system and strong productivity pipeline ; it's about maintaining momentum , and the business is running extremely well.

Growth Outlook for 2025
Q: What is your growth outlook for 2025?
A: We estimate the industry will return to growth in 2026. For 2025, we expect to be slightly down in the first half and see modest growth in the second half. Fundamentals like millennial household formations and housing stock age are tailwinds. We're focused on managing effectively in a volatile market.

Cost Inflation and Pricing Strategies
Q: How are cost inflation and pricing affecting 2025?
A: In Plumbing, we expect low single-digit inflation, including commodities and freight. While costs remain elevated, we anticipate pricing to more than offset the commodity headwind, resulting in a positive price-cost dynamic. In Decorative Architectural Products, we're seeing some upward pressure on raw materials like resins and TiO₂ ; however, we expect a flat price-cost dynamic due to arrangements with channel partners.

Cost Savings and Margin Expansion
Q: Will cost savings continue to drive margins in 2025?
A: Yes, operational efficiencies and cost savings remain a huge priority. We've expanded margins each of the last couple of years , and despite modest market expectations for 2025, we'll continue driving these initiatives to deliver margin expansion.

Acquisition Strategy and M&A Outlook
Q: What's your M&A focus and timing expectations?
A: Our strategy remains unchanged, focusing on bolt-on acquisitions in paint and plumbing. We're patient, seeking the right fit to leverage our channel expertise, brands, or technological advantages. The overall market remains soft with no significant change, so we can't specify timing between the front or back half of the year.

Supply Chain and China Exposure
Q: Are you reducing reliance on China further?
A: Yes, we plan to continue shifting away from China carefully, working with existing suppliers to protect quality and delivery. We're pursuing value engineering, cost sharing with suppliers, and have pricing levers to manage costs.

Innovation Pipeline and Vitality Index
Q: How is your innovation pipeline supporting growth?
A: Our Vitality Index remains steady at around 30% of products less than 36 months old. We focus on solving customer pain points, such as ease of use and efficiency, which customers are willing to pay for. This helps offset potential headwinds and supports margins.

Working Capital Management
Q: How is working capital expected to trend?
A: We anticipate working capital to normalize around 16% of sales in 2025. The reduction to 15% in 2024 was due to the Kichler divestiture. We remain disciplined, and efficiencies will flow through working capital, but it will scale with the business.

Market Share at Home Depot
Q: Any changes in share at Home Depot post-PPG divestiture?
A: We haven't noticed any material changes; things have been fairly typical.