Raw Material Cost Outlook
Q: Will raw materials be down mid-single digits next year?
A: Sherwin-Williams expects raw material costs to be down low single digits in 2024, with about 85% of that benefit occurring in the first half. They are not assuming another material drop in costs as the year progresses, basing their outlook on current indicators. ,

SG&A Expense Increase
Q: What's driving the SG&A jump and its impact?
A: Approximately 70% of the adjusted SG&A increase is attributed to operating segments, mainly the Paint Stores Group, due to adding 76 new stores and additional reps. The remaining increase is from compensation, including stock-based comp. These costs will annualize in the first half of next year, and the company expects to return to more typical SG&A investments in 2024.

Pricing Actions and Implementation
Q: How will the 5% price increase be realized?
A: The 5% price increase effective February 1 is expected to have a rollout similar to past increases, reaching similar effectiveness with consolidated price up low single digits. The increase addresses prior cost inflation, including wages, and is essential to continue offering differentiated services and solutions. ,

Residential Repaint Volume Outlook
Q: What's the expectation for residential repaint growth in 2024?
A: The residential repaint market is expected to be flat, but Sherwin-Williams anticipates mid-single-digit volume growth by taking market share through investments and focusing on contractor partnerships. They don't see downside risk and are confident in their ability to outpace the market. ,

Gross Margin Expansion Drivers
Q: How will volume, price, raws, and mix affect margin expansion?
A: Volume, particularly in pro architectural sales, is the primary driver of gross margin expansion. In 2024, price will have a greater impact than raw materials, and focusing on higher-margin segments will contribute to improved margins. ,

Potential Share Gains from Competitor's Exit
Q: Does Kelly-Moore's exit present a share gain opportunity?
A: Yes, Kelly-Moore's exit creates a void that Sherwin-Williams sees as an opportunity, especially on the West Coast. They plan to be very competitive and aggressive in capturing that market share.

Under-absorption and Supply Chain Normalization
Q: Will under-absorption impacts reverse in 2024?
A: Sherwin-Williams expects to return to a normalized production schedule in 2024, allowing for more efficient plant operations. This should lead to improved performance and help reverse the under-absorption impacts experienced in 2023.

Mix Shift Opportunities
Q: Which markets offer the greatest ability to drive mix shift?
A: There's significant opportunity in residential repaint to drive mix improvement by focusing on premium products that enhance contractor productivity and profitability. Contractors are receptive to higher-quality products that save time and labor costs. ,

EPS Outlook Variability
Q: What could offset expected EPS growth despite sales guidance?
A: Volume is the biggest variable affecting earnings. Choppiness in demand across segments and regions could impact operating margins and leverage. Better-than-expected volume would lead to higher EPS than currently guided.

New Residential Market Timing
Q: What's the lag between housing starts and paint sales?
A: The typical lag between a housing start and the paint sale has extended from about 4 months to 6 months due to factors like labor shortages. Improved new single-family starts will likely result in stronger sales in the second half as projects reach completion.

Property Maintenance Segment Decline
Q: What's causing the decline in property maintenance?
A: Property maintenance was down low single digits in the quarter due to tough comparisons but was up mid to high single digits for the year. The company is positioned to benefit from upgrading properties and expects to continue taking share.

DIY Market Weakness
Q: Why is DIY weak in both Paint Stores and Consumer Brands?
A: In Paint Stores, DIY caters to a unique, higher-end customer and represents a small portion of business, especially during this time of year. In Consumer Brands, the DIY market is choppy, and the company is working closely with retail partners to strengthen this segment.

Contractor Backlogs and Remodel Activity
Q: What's the update on contractor backlogs and remodel activity?
A: Contractor backlogs and repair and remodel activity are normalizing. Visibility is limited, but the current state is stable, and more information will be available in the next quarter or two.

Customer Order Patterns into Spring Season
Q: What are expectations around customer orders into the spring paint season?
A: Expectations are for a normal seasonal improvement. Alignment and partnership with retail customers have never been better, and the company anticipates normal order patterns into the spring season.

CEO's Perspective and Strategy
Q: Do you bring a different perspective as the new CEO?
A: While sharing common values with the previous CEO, Heidi Petz brings different perspectives due to her background. She believes in the company's strategy and aims to build on the strong foundation, continuing to drive growth and strengthen the model.

Magnitude of Share Gains and PSG Guidance
Q: Can you help us understand the magnitude of share gains in Paint Stores Group?
A: The company is taking share across segments, including New Residential and Property Management, by securing incremental agreements even in challenging times. They expect Paint Stores Group to be at the upper end of sales guidance, driven by share gains.

SG&A Leverage Outlook
Q: Will SG&A leverage return to positive in the future?
A: The company expects SG&A leverage to improve as the market normalizes and demand increases, leading to positive leverage in future years like 2025 and 2026. They will continue investing strategically to drive long-term growth.

Paint Stores Group Top Line Guidance
Q: What's anticipated from growth investments in Paint Stores Group?
A: Significant investments in segments like residential repaint are expected to drive share gains and volume growth. The company is posting mid-single-digit gallon gains and believes no one is better positioned to help contractors grow their businesses.

Feedback on Price Increase and Mix Experience
Q: What's the feedback on the price increase and any mix shifts?
A: Conversations with customers about the price increase focus on ensuring they understand the reasons and are prepared to pass it along. There's an emphasis on premium products, and contractors are adopting higher-quality products for efficiency and profitability.

Underperformance in DIY Segment
Q: Can you contrast the reasons for DIY weakness in both segments?
A: In Paint Stores, DIY is a smaller, higher-end segment and is particularly small during this time of year. In Consumer Brands, the DIY market is choppy, and the company is aligning closely with retail partners to address challenges and opportunities.