Sherwin-Williams Company Earnings Call Nuggets: Promotions and Marketing Expenses, Same Store Sales Growth

On Thursday, Sherwin-Williams Company (NYSE:SHW) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Promotions and Marketing Expenses

P.J. Juvekar – Citigroup: Well, your SG&A spending was up almost 10% year-over-year. I was wondering if there was any pull forward of promotions or marketing expenses from spring season into 1Q?

Sean P. Hennessy – SVP, Finance and CFO: P.J., this is Sean Hennessy, and we marginally spent a little more SG&A on merchandizing and advertizing, but really no pull forward. I think that the advertising plan that we had planned in the first quarter we ended up doing, I think the majority of that when you take a look at that SG&A increases with the sales increase that we had, I think with hours in the stores and (indiscernible) putting more service hours in the store to make sure that the customer service is maintained. So, our SG&A did go down as a percent of sales. It did have an increase of the percentage you did mention. When the gallons are going that way you could the see us continue to our service in the store to make sure that the proper customer service is handled.

P.J. Juvekar – Citigroup: Secondly, what are you seeing in the DIY versus the contract channel and is the contractor business coming back sustainability in your opinion?

Christopher M. Connor – Chairman and CEO: Yes P.J., both of the segments as we commented had strong quarters for the Company. Speaking on our stores business, specifically the DIY business also enjoyed a double-digit sales, which is consistent with the performance we’ve been seeing in the DIY side of that now for the last five or six quarters. The good news in the quarter and the one that we’ve been saying should come in sometime was the strength in the contractor segment, again across all segments and for us that would be the new residential painting contractor, the commercial painting contractor, property management, residential repaint, all these segments are clicking and generating strong sales and volume gains.

Same Store Sales Growth

Kevin McCarthy – Bank of America Merrill Lynch: Chris, with regard to your same store sales growth of 20.4% in Paint Stores, will you elaborate on how much of that might have been derived from volume versus price in the quarter roughly?

Christopher M. Connor – Chairman and CEO: Yeah, I think we’ve been commenting Kevin that our price impact in the Stores business had been in the high single-digits over the last third quarter and fourth quarter of last year. That trend continued into the first quarter of this year. So, slightly more than half of that left for the Company in the segment for the quarter was volume.

Kevin McCarthy – Bank of America Merrill Lynch: Then given the trends that you’re seeing on raw materials, have you taken any very recent price actions since the 8% increase that I believe you’re implementing for Feb 1 or would that be likely in your view?

Christopher M. Connor – Chairman and CEO: No additional pricing activities taken probably since the February announcement through our stores. As is our practice, with the investment community we don’t preannounce any pricing activities. We cover that off of our customers first and then provide great transparency to you. So, no comments on that at this time.

Kevin McCarthy – Bank of America Merrill Lynch: Then finally, Chris, on the splits on exterior architectural coatings versus interior, I think you mentioned that both were up double-digits. Would you care to comment on the magnitude of that spread and how that would compare to normal trends with an eye towards disentangling the weather effects?

Christopher M. Connor – Chairman and CEO: Yeah, they were meaningless in the first quarter because historically our interior gallons are much, much greater as they should be at that time of the year the next year gallons of a percentage improvement one relative to the other kind of skews that. I think the point that we’d like to make sure that the investment community understands is that the interior gallons were up double-digit and that really gives us the confidence of the underlining strength in the market. So, extra gallons outpace there, it was a good quarter for that, but it’s the interior numbers that really drove the quarter.