Good morning. Thank you for joining The Sherwin-Williams Company's review of First Quarter 2024 Results and our Outlook for the Second Quarter and Full-Year of 2024. With us on today's call are Heidi Petz, President and CEO; Al Mistysyn, Chief Financial Officer; Jane Cronin, Senior Vice President, Enterprise Finance; and Jim Jaye, Senior Vice President, Investor Relations and Communications. This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com, beginning approximately two hours after this conference call concludes. This conference call will include certain forward-looking statements as defined under U.S. federal securities laws with respect to sales, earnings and other matters. Any forward-looking statement speaks only as of the date on which such statement is made and the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company's prepared remarks, we will open up the session to questions. I will now turn the call over to Jim Jaye.

Thank you, and good morning. In what is a seasonally smaller first quarter and with continued demand choppiness in several end markets, Sherwin-Williams delivered consolidated sales within our guided range, gross margin expansion and diluted earnings per share and EBITDA growth. Throughout the quarter, we continued to execute on our strategy, demonstrate our value proposition with current and prospective customers and position ourselves to take advantage of disruptions in the market. While our results were at the lower end of our sales expectations, we remain confident in our full year outlook and there is no change from the guidance we provided in January. We also remain highly confident in our differentiated business model and we are well positioned as the painting season begins. While uncertainties persist in the macroeconomic environment, we see opportunity. We are encouraged by pro architectural sentiment in April and customers in several end markets are optimistic about an improving demand environment as the year progresses. Competitor decisions coupled with our recent growth investments are enabling us to continue penetrating our targeted end markets at multiple levels. We expect share gains and returns to become more and more evident as the year progresses. Consolidated sales in the quarter were at the low end of our range, driven by lower than anticipated volume, primarily in Paint Stores Group against the strongest comparison we will face this year followed by Consumer Brands Group in North America. Contributions from price were modest, as expected and we are now seeing our recently announced increases in Paint Stores beginning to ramp more fully in our second quarter. Gross margin expanded 270 basis points year-over-year to 47.2%. Higher SG&A in the quarter reflects the deliberate and accelerated investments in growth we made in the second half of last year and which have not yet annualized. EBITDA margin improved by 60 basis points to 16.7% and adjusted diluted net income per share increased 6.4%. We also maintained our disciplined capital allocation approach and returned $728 million to our shareholders through dividends and share repurchases during the quarter, an increase of 59% year-over-year. Let me now turn it over to Heidi, who will provide some commentary on our first quarter results by segment before moving on to our outlook and your questions.

Thank you, Jim. We are successfully implementing our strategy, which at Sherwin-Williams we do with a very forward-looking and aggressive approach. While market conditions are choppy and may give others in our industry a moment of pause, let me be clear, we are not pausing. So this morning, I'm going to talk as much about our results as I am about what we're doing to ensure the momentum of our company not only continues but accelerates our ability to widen the gap between us and our competition. So let me start with the results of the first quarter. As Jim mentioned, our first quarter is a seasonally smaller one and our results do not necessarily dictate how our full year will unfold. While our sales came in within our guidance, it was at the lower end of our range. Going forward, I believe in our differentiated strategy, our deeply experienced leadership and our team's ability to execute in lockstep with our customers to deliver above market growth. Here are several of the leading indicators that give me great confidence that we continue to strengthen our position. For example, we increased the number of exclusive national contracts we have with homebuilders and property management customers in the quarter. New accounts and active purchasing accounts in our stores are up significantly from a year ago. Paint Stores Group rep call activity and unique accounts calls are also up in the quarter. Foot traffic in our stores is up and our net promoter score is at an all-time high. And we're seeing multiple share of wallet and meaningful new customer wins across our industrial businesses. These are just some of the factors we expect will translate into strong performance as the year unfolds. As far as specifics on the first quarter, I'll begin with the Paint Stores Group, where sales increased by 0.5 percentage against a mid-teens comparison. We are not satisfied with this level of performance as volume was basically flat in the quarter. Exterior paint sales were pressured by challenging outdoor painting conditions in some geographies. As we've demonstrated in the past, we expect to see the benefit of our focused investments unfold throughout the balance of the year. A few strong weeks in June can more than offset first quarter challenges. Price was up modestly related to our February 1 announced increase. We are now seeing a ramp to typical effectiveness as our second quarter moves forward. Segment margin decreased to 17.2%, reflecting flat volume and the higher year-over-year planned growth investments. As a reminder, Paint Store sales were up by a double-digit percentage in every customer segment in the first quarter a year ago. In this year's first quarter, pro sales were led by residential repaint where gallons were up mid-single-digits. We see this above market growth as evidence that our increased investments in this segment are already beginning to deliver a return. Commercial and protective and marine grew modestly in the quarter. New residential was down as expected, but there is momentum in single-family starts that will increasingly turn to completions as the year progresses. Property management was also down driven by delays in CapEx projects even as apartment turns remained steady. From a product perspective, interior paint sales increased by a low-single-digit percentage while exterior sales decreased modestly. Encouragingly, spray equipment sales were up mid-single-digits in the quarter. We opened seven net new stores in the quarter and expect to open 80 to 100 for the full year. Our doors are open. We are laser-focused on the momentum we have created serving both existing and new customers. We'll continue to win business and take share based on our differentiated solutions. Moving on to our consumer brands group, sales decreased by 7.1% in the quarter. Lower volume and the impact of divestitures were partially offset by selling price increases primarily in Latin America. Sales in North America decreased by a high single-digit percentage, as our strategic partners manage the timing of their seasonal inventory build. Outside of North America, sales increased by a double-digit percentage in Europe and a low-single-digit percentage in Latin America. Adjusted segment margin which excludes acquisition related amortization expense expanded to 20.9%. This was primarily driven by improved manufacturing and distribution fixed cost absorption, moderating raw material costs and improved results in Latin America and Europe, partially offset by lower North America sales volume. Sales in the Performance Coatings Group were in the range we expected with continued choppiness across each of our businesses and regions. Lower volume was partially offset by growth from acquisitions. Sales growth in Europe and Asia was offset by decreases in North America and Latin America. Adjusted segment margin, which excludes acquisition related amortization expense improved to 17.1%. This is the fifth straight quarter this team has delivered year-over-year segment margin improvement and again reflects the disciplined strategy to growing operating margin in the industrial business to mirror that of our architectural business. Industrial wood led the growth including the impact of recent acquisitions. Coil also delivered solid growth. Auto Refinish was flat against a mid-teens comparison. We are confident recent share wins driven by our differentiated service and technology will begin to show up more meaningfully as the year progresses. Packaging was down as expected with improvement expected in the back half of the year. General industrial was impacted by lower demand in all regions. Moving on to our guidance for the second quarter and full year. First, I want to talk about our global team. It always comes down to our people. Our team is highly engaged, aggressive and acting with determination and urgency. They are focused on the right priorities and this will become more and more visible in our results. I would bet on this team all day, every day. Second, on our January call, we acknowledged there are uncertainties in the economy. We don't expect to get material help from the macro environment this year, but a few bright spots are emerging. Single-family housing starts have improved and this will increasingly turn to completions as the year progresses. Existing home sales are unlikely to get much softer. Last week's LIRA report from Harvard indicates that the remodeling outlook continues to improve with declines easing and momentum building later in the year. On the industrial side, the manufacturing PMI has stabilized or improved in several regions. Third, we are tilting the table in our favor by controlling what we can control. Year-to-date, we have signed 56 new exclusive national account agreements in Paint Stores Group primarily in new residential and property maintenance. We also have increased sales rep call activity and unique accounts called significantly. We have a robust plan and aggressive field activity to engage customers of competitors who have recently closed their doors or are otherwise distracted. As I said earlier, our doors are open. We are not distracted. You can expect us to be very aggressive here. In addition to our stores platform and team of experienced reps and store managers, we're driving customer stickiness through our digital initiatives. In March, we had the highest number of pro plus users ever engaging with our platform, along with a near record number of new registrations. We have opened our Tournus France packaging plant which will support customers converting to non-BPA coating to meet the European Commission's 2026 mandate. We expect on multiple new infrastructure and mega projects that are gaining momentum. And we're introducing multiple new products in both the architectural and industrial businesses to drive our customers' success. Obviously, we're not going to share everything that we're doing for competitive reasons, but you can be certain that there's a long list of actions that we are taking in addition to these items. The key takeaway is this, at some point the demand logjam in multiple end markets is going to break. We will be there to capitalize. We're very confident it's a matter of when, not if. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the second quarter of 2024. The deck also contains our full year sales and earnings per share outlook, which again is unchanged from what we provided in January. We expect to provide an update on our 2024 full year outlook when we report our second quarter results in July. Our slide deck also provides guidance on our expectations for raw material costs and other items helpful for modeling purposes. All of these remain unchanged from our January call as well. As you can see, we have high expectations of ourselves. Our team is aggressive, determined and focused on the right priorities. I want to be clear, we are playing to win. We know our strategy is the right one and we have demonstrated for decades that it works. We expect to outperform the market and we are confident our differentiated solutions will continue to drive our customers' success, while also rewarding our shareholders. This concludes our prepared remarks. And with that, I'd like to thank you all for joining us this morning. We'll be happy to take your questions.

Your first question is coming from Vincent Andrews at Morgan Stanley.

Heidi, I know historically the company doesn't like to talk about weather and use it as an excuse, but maybe you could comment on it a little bit since it was in your deck and you brought it up. Just curious how much you think you may have lost from an exterior days perspective and how much you think you might make up in 2Q? And related to that, you did mention that you were disappointed with results in the quarter and PSG did come at the low end of your range. So I just want to clarify whether that was all weather-related or whether you felt like the execution could have been better in the quarter and you're looking to course correct as you move into 2Q?

I would say weather plays a role, but that's not an excuse. We're not going to just blame weather; we aim to create our own opportunities at Sherwin-Williams. While it's not entirely about returns, I believe much of this is simply delayed activity. Spending considerable time in the market with our team and various customers, both current and potential, I've received consistent validation for our distinct distribution strategy, particularly our specialty paint store model and the quality of our people and product availability. These aspects are crucial in the current environment. A few points give me confidence as we move forward; being accessible, dependable, and ensuring consistent execution across our stores are essential as we head into the rest of the year. Weather is indeed a factor, and the market's fluctuations will vary by segment. I'll ask Al to provide more insights, and then I'll add some further comments.

Yes, Vincent, this is Al Mistysyn. We discussed at the beginning the weaker than expected exterior sales, which were impacted by the difficult outdoor painting conditions. As shown in our slide deck, our Southeastern division, which is our largest sales division, underperformed in the first quarter, which is usually not the case. In the commercial sector, we experienced slower exterior sales, property maintenance, and protective and marine segments got off to a slower start than anticipated. We believe these jobs and projects have simply been postponed, and while not all will be completed in the second quarter, some will carry over into the second half of the year, but we are quite confident about this. One notable point that Heidi highlighted in her opening remarks is that while we anticipate the repaint market to be flat for the year, thanks to our investments, we saw a mid-single-digit increase in the fourth quarter and a similar increase in the first quarter. Additionally, when looking at the quarter on a same-day basis, March turned out to be the strongest month for the Paint Stores Group in the first quarter, and we anticipate that this momentum will continue into April.

One piece I would add just on the residential repaint side, I'll said this, but remind all of us obviously that we not only do we think it will be flat and we had mid to high in the range. But we're looking at our comparisons are not only indicative of now, but also previous year with a pretty aggressive comp last year. And I do think it's evidence that we're making the right investments here. Delivering this above-market growth, we expect to continue to do so here. We're taking this segment very seriously as you can think about the value proposition that we have designed specific for this segment, not just the products but certainly the services, everything that we're doing to try to continue to help this contractor be as successful as possible. And I think that's what you're seeing now in this above-market growth relative to the resi paint.

Your next question is coming from Greg Melich from Evercore ISI.

I wanted to follow-up on the margins, specifically gross margin. I think you mentioned that there was some operating leverage in the Consumer Brands Group, but volume was flat or disappointing. So just like could you put that together and maybe help us understand, was there any benefit to gross margin from manufacturing or was it all price versus raws in 1Q?

Yes, Greg. It's primarily moderating raw material costs and modest price increases in Paint Storage Group. And also as another tailwind is that Paint Stores Group volumes were higher than the other segments, which has a higher gross margin in the company. So those are the primary drivers of the year-over-year improvement. The call out on the higher fixed cost manufacturing affected the Consumer Brands operating margin and including the gross margin, but that was offset by other segments. And if you recall, I did talk about this on our year-end call that I expected our global supply chain to improve performance throughout the year in 2024. I also if you recall, I talked about it on our financial community presentation last August that our consumer operating margin was under pressure and underperformed due to the supply chain inefficiencies. We've experienced choppy production swings that negatively impacted our cost plus higher wages, energy, and other costs. And so as we typically do. And so as we typically do annually, we update our product costs. As we do expect to continue to see improvements in incremental cost per gallon with our global supply chain, continuous improvement, and simplification efforts. There is an impact on Paint Stores Group and PCG. I talked about not getting into the detail of that on our year-end call, and it's really not a material impact in the quarter. It is on consumer because it's a small quarter for consumer. But if you look at Paint Stores, as we talked about that's volume-driven and the incremental investments in SG&A. On PCG, we're still in the high teens performance, nice improvement year-over-year, and we'd expect that kind of performance as the year goes out.

Your next question is coming from Jeff Zekauskas from JPMorgan.

In the first quarter in Consumer Brands, you earned roughly $170 million in EBIT adjusted. And normally the Consumer Brands business is seasonally weak in the first quarter, that is your sales, whether they grow a little bit or whether they shrink a little bit are higher in the second and third quarter. So from a logical standpoint, should it be the case that you earn at least as much in the Consumer Brands Group in the second and third quarter as you did in the first?

Yes, Jeff. While we don’t provide operating margin guidance by segment, I can say that we anticipate sequential margin improvement in the second and third quarters due to the seasonal increase in architectural sales in those periods. I expect that North America sales volume will be less of a challenge in the second quarter compared to the first quarter, with our guidance indicating that consumer sales will decline by low-single-digits in Q2. I also believe that higher fixed cost absorption in manufacturing and distribution operations will continue throughout the second and remaining quarters of the year. I agree that we should revert to our typical bell curve regarding the seasonality of architectural sales, increasing in Q2 and Q3 and then decreasing as usual in Q4.

Your next question is coming from David Begleiter from Deutsche Bank.

Heidi, you mentioned you won 56 new exclusive national account wins. Is that a big number? Is that a small number? What was it last year or maybe the average of the last three years? And is there a dollar amount associated with that 56 win number?

I won't share the numbers, but I appreciate your question. What I would tell you it's material. And I would also tell you that it was also, it's evidence of our ability to put on display what it is that only Sherwin-Williams can do relative to servicing these contractors, certainly both from a new residential and a property maintenance standpoint in a way that only a specialty Paint Store can do. And so it's a function of our footprint of our team, of the expertise that we have, not just on a broad base nationally leveraging that platform, but our ability to be nimble and local and support the needs of these local contractors. So I think what you're seeing, it's a material pickup, but it's evidence of our value proposition and what we're able to do uniquely in the market.

Your next question is coming from John McNulty from BMO Capital Markets.

Could you provide an update on the raw material environment? You've maintained the year’s outlook, but it seems like the situation is mixed with oil prices rising while many derivatives remain stable. TiO2 is somewhat uncertain. Can you elaborate on how you're viewing your raw material basket right now? Are things mostly stable, or are you starting to notice inflation pushing prices higher, or are some materials still decreasing? It would be great to get more insight into the raw material situation.

Yes, sure. This is Jim. Yes, maybe I'll just talk start with the first quarter our basket was down year-over-year mid-single-digit percentage and that's likely the biggest benefit of the year also down slightly sequentially. Where we saw the biggest benefit in the first quarter was monomer, resins, solvents and TiO2, I would say was flattish year-over-year. You look out for the rest of the year, 2Q raws still down probably low-single-digits year-over-year, a little bit less benefit than what we saw in 1Q. And then in the back half of the year, I think it's just down slightly flattish in the back half year-over-year. So that full year right now, we're still looking at down low-single-digits for the year. We'll see if there's some upside as the year progresses, but right now we're still in that down low-single-digit. Your question about some of the commodities specifically, John, crude right now $80, $81 a barrel, that's up year-over-year and since December, but it's still down from where we were in the fall when it ran up into the 90s. Propylene has ticked up sequentially here. Now it's sort of flattish year-over-year. And then I'd say on TiO2, we're seeing some of the producers do a little bit of restocking, but the true end demand in some of these markets is still choppy. Their utilization rates are picking up a little bit. They're seeing some lower input costs. I'd say for us, we expect to still see a little bit of moderation in TiO2 and the other thing that's out there always is China. And with their domestic demand in China being softer, they're exporting a lot of that and I think that's going to continue to put some pressure on the demand environment for TiO2. So summarize it, still down low-single-digits for the year, a bit in 2Q and then flattening out.

Your next question is coming from Chris Parkinson from Wolfe Research.

So can you just give a little more highlights on your projected market share gain? All of us obviously have a thesis across the sell side community as well as the buy side community. But it seems three things are going on. You have the inflection of historically low single-family inventories potentially. Obviously, rates will have to do with that. You have a demographic advantage in many ways. And then also you have the underlying share gain narrative versus not one, but now 2 of your competitors. So has your spending plans actually evolved or changed over the last 6 to 12 months? Or is this something where you're kind of further positioning and further thinking about things as it relates to an eventual inflection in your outlook for '25 or '26 and onward?

Yes, Chris, I don't think our spending thesis has changed yet. I think you look at what we talked about on our second half and our year-end call, leaning in with additional investments or accelerated investments to influence the share gains and accelerate the share gains that we expect to see and we saw that with res repaint. I think as we get through the second quarter, as we've typically done, we'll look at the indicators, market indicators and what we see happening not only in the second half of 2024. But to your point looking at the first half of 2025 look at the trends and volumes, the trends in our growth margin and as we have done not just in 2023 but in the past, we believe that we have upside in our volumes, upside in our gross margin we will lean in and add more investments than we would normally do or typically do. Because of the confidence we have in our strategy, because of the confidence we have in long-term new single-family construction and need for housing in this country and as interest we talked about this on our first quarter call. As interest rates moderate, we would expect to see existing home sales improve. We'd expect to see an acceleration in new single-family starts and in property maintenance improved CapEx. And we will be better positioned as those turn to get a greater share of that market.

Chris, I would add to that as well. Just to reiterate what we said earlier, it's not a matter of if it's when and spending a lot of time strengthening our position in the market. We pointed to a few examples. I shared some of the indicators that gave me a lot of confidence. I'll just give you a bit more color here. If you think about the short-term, executing some actions here. You mentioned increased call activity but the other way to think about this is because of our controlled distribution model. As you well know, we own that data. We're unleashing our selling team right now on the world's largest database of painting contractors. So the team is out hunting in a very surgical and targeted fashion. We're not guessing where to spend time or energy. We're being very prescriptive in terms of where we want the team focused. So I think in terms of my confidence relative to how the team's hunting. Our new account activation and mentioned earlier on the unique accounts, but also a significant increase in our active accounts, we're also working hard in the store and with our reps and our managers, getting paint out of the bucket, getting products into the hands of these painters and the pro who paints. So in the short-term, making sure we're very clear and deliberate about how we want to go into the painting season. And when you think about some of these actions that are going to impact the long-term, that give us a lot of confidence in market share is investing a lot in these activities, such as specifications, applications and then working with owners to make sure that the projects are meeting their expectations. So there's a lot of factors here that we're making sure that we're continuing to control what we can control, which is strengthening our position coming out of this, we will be in a position to take Alpha's gross share.

Your next question is coming from Josh Spector from UBS.

I wanted to ask a question on pricing and first, I guess, what was the realized price in the Paint Store Group, specifically in first quarter and how do you expect that to roll into the coming quarters? So it sounds a little bit more phased in your description of that. So do we see in 2Q or 3Q kind of the full impact of that pricing rollout?

Yes, Josh, we discussed this during our first year-end call. As a reminder, we implemented a 5% increase on February 1, and we indicated that we would realize the full price increase over the next couple of quarters, which is consistent with our typical approach before COVID. In our first quarter, we saw a 0.5% increase that was fairly evenly split between price and volume, and we expect the price to increase further and fully materialize as we approach the end of the second quarter.

Your next question is coming from Mike Harrison from Seaport Global.

One of your competitors announced a strategic review of their architectural business. I think you guys have alluded to their challenges, helping to drive some customer wins. But I'm just curious, are there parts of this business that you will consider looking at and have you ever acquired paint stores as part of your store expansion efforts? Where are you always new builds or kind of new storage rather than acquiring?

The answer is no. We view this as an acquisition without a cash outlay. There is considerable excitement about the opportunity to showcase our value proposition in the market. I believe there’s a lot of confusion stemming from some of these decisions. However, this is our chance to reinforce the consistency and reliability of Sherwin-Williams. When customers choose to partner with us, they can trust that we will support them at every stage, whether it involves product, project planning, or bidding, and we will assist them in being successful. The stability and continuity of our strategy are evident, and this is our chance to continue demonstrating that.

Yes, Mike, we have purchased store chains before. The last one I want to say was PPI, which was a part of COMEX, and that was back in 2010. I think as Heidi mentioned, we're confident in our strategy in opening 80 to 100 stores is like acquiring a small store chain in the U.S. as it is. So we're happy with that strategy, and we'll continue executing against that.

Your next question is coming from Patrick Cunningham from Citi Investment Research.

There still seems to be quite a bit of choppiness in general industrial and packaging. What are your expectations for volumes for the year? And how much do you expect to outperform from share gains? And then maybe just across Performance Coatings broadly, what are your expectations for pricing for the year, given there might be some indices rolling off, but maybe some targeted price increases as well.

Yes. I'll take the first piece of that relative to the segments and some of the outlook, and then I'll hand over to Allen on some of the pricing. I think if you look across the board, packaging, auto refinish, industrial wood, coil, and P&M. I would say there's upside to all of that there's absolutely choppiness. If you look at this a bit more by geography, I would say that that's true. GI certainly continues to be, as we said last quarter, the most under pressure segment. But if I just start with packaging, we said this in our prepared remarks, while the sales were down in the quarter as we expected. There were some customers, some of our customers out there that were required to make a short-term commitment proud and we’re really proud and excited that our plant in Texas is back up and running. As Allen mentioned earlier, plant in Europe is now to regain these customers through the use of our non-BPA coating, which is a superior technology allows our customers not only to be faster and more efficient more profitable, but also to be more sustainable as a result of this advanced technology that we have in the market. So there's a lot of excitement in terms of what we can do to take this technology and a more global basis to support our customers and their sustainability agendas. Automotive refinish, we've talked about this our installed continued to be up double-digits in North America. We are taking share. There's a unique technology and service that we're offering together. So it's the package along with our ability to leverage our automotive branches, much like our Paint Stores Group to provide that consistent and reliable service. So another point of differentiation is something that we're really proud of. And I don't think everyone can say that they're taking share here. We know the customers that we're winning. We know the competitors we're taking business from. And we certainly know the volume we're gaining. So these numbers will clearly evident as the year unfolds. We've got a lot more work ahead but we're winning with small customers. We're winning with medium-sized customers, and we're finally winning with large customers here. Just briefly on Coil, mentioned this earlier but North America is holding up a bit better than other regions. We have had some significant new business wins in North America. There's some positive tailwind as it relates to nearshoring. Mexico is helping to create some demand here. Industrial wood, another positive story here for us. We believe that the market has bottomed out in all regions to your point demand does continue to be choppy going into the second quarter. Some of the recent acquisitions, Sika and Oskar Nolte, EBITDA dollars and percent continue to be ahead of plan. So we're seen this is very accretive to the industrial wood program and we're chasing new accounts pretty aggressively and we expect a lot more as, again, as the year unfolds. And I won't go into much detail on general industrial that that's choppy and down in all regions, and we're continuing to fight hard to make sure that we best position ourselves as we recover there.

Yes, Patrick, our guidance for the second quarter indicates that volumes will be down in the low single digits. This suggests that our volumes for the first half will also decrease in the low single digits. For the full year, our guidance remains flat to an increase in the low single digits. This means that our volume in the second half must be flat to an increase in the low single digits.

Your next question is coming from Aleksey Yefremov from KeyBanc Capital Markets.

You mentioned momentum in homebuilding as homebuilding customers and new residential. To what extent have you sensed any change among this set of customers was latest volatility in rates. Has the optimism basically maintained the same level or has it moderated perhaps?

Yes, I'll take that, Aleksey. I think the sentiment among our homebuilder customers continues to be very positive. Matter of fact, I was in Texas traveling with our national accounts team earlier in the quarter and spoke to several of our customers down there. And they remain optimistic about where things are heading. The rate environment, we'll see how that plays out. It seems to change month-to-month of what's going to happen there. But I think Al started to hit some of the demographics that are there driving people to need a place to live are intact. And I think also what you're seeing a little bit is people may be adjusting some of their expectations around what type of a home they might be able to afford or buy and the homebuilders are working to drive affordability and we're part of that as well.

Your next question is coming from Ghansham Panjabi from Baird.

Heidi just follow-up on the last question. You gave us a fair amount of color on how Sherwin is positioned based on your various internal initiatives, but has your outlook for any of the various PSG verticals changed in any meaningful way versus your initial view coming into the year? And then just a second question, maybe for Al in terms of free cash flow allocation in context of a fair amount of debt coming due between this year and next year and how are you kind of balancing buybacks versus debt pay down?

No, I don't think anything has materially changed. Again, as you look segment by segment, I'd point to Protective & Marine was a segment certainly that we see upside. And I think I'll use them as an example because there continues to be demand strength in all markets. Some of the projects have been delayed, so there's been some timing issues here. But think when you look at the visibility that we're gaining relative to some of these mega projects, we're launching some pretty significant new technology into the market this year in fire and flooring and protective coatings, which is an indicator not just of our incremental investment, but I think some good upside. Having said that, I want to go back to where I started which is there's nothing that's materially different from where we came in last quarter. But again, as rates fluctuate as some of these jobs pick back up, then we'll be back out in July if there's any more upside than what we're at today.

Yes, Ghansham, I would say that I feel very good about our strong net operating cash flow generation for the year. You saw us return a big increase in shareholder cash and dividends and buybacks in our first quarter. I think when you look at our debt, I do expect our total debt to remain flat in 2024, and we'll refinance to your point the $1.1 billion of debt maturing, albeit they'll be at higher rates, likely will take out short-term debt and then mature it out as we see fit. But just to reiterate, I mean, we're going to stick to our capital allocation philosophy. We've been very disciplined about that. We invest in CapEx. We paid the dividend, which was a nice increase of over 18% our first quarter. We expect that to continue. And then absent acquisitions, we're going to buy our stock back. And I do expect to be in that 2 to 2.5 debt-to-EBITDA target range by end of the year.

Your next question is coming from Michael Leithead from Barclays.

On SG&A, I think first quarter was up about 6% year-on-year. Is that roughly in line with the rate of wage inflation you're incurring? Or how should we think about wage inflation relative to other growth investment drivers in that year-over-year increase?

Yes, Mike, I think about it this way. The wage inflation is for 2024 is more typical to prior years. So think about a low-single-digit impact. I think what you're seeing in our first quarter, the start of the annualization of the accelerated long-term growth investments we made in the second half of last year. As you recall, on our year-end call, I said I thought SG&A would be up a mid-single-digit percentage for the full year with the first half being above that range because we're annualizing the investments that we made in the second half and then that will level out in the second half of this year.

Your next question is coming from Adam Baumgarten from Zelman.

I just say I don't know if you mentioned this, but could you give us an update on how the Pros Who Paint business did in the quarter? I know you mentioned DIY was soft, but maybe some color on Pros Who Paint.

Yes. I think certainly, there's a bit of a challenged quarter, I would say, is maybe the best way to characterize Pro Who Paints in the first quarter, which was below our expectations. But we have a lot of confidence in our investments and I would also say a lot of confidence in our strong alignment with our retail partners. I don't know that the alignment has never been in a better place, gives us a lot of confidence that we are going to continue to grow share in this space for the balance of the year. But no doubt, we've got some work to do here.

Your next question is coming from Duffy Fischer from Goldman Sachs.

Can we drill down our margins in PSG I would assume you got a little price, raw material was a meaningful benefit. So I have a hard time attributing to decline from those increases to the negative margin wholly to your growth investments. So were there other things besides the growth investments that were negative in that segment, maybe the transfer from segment to segment on the paint, which was basically the benefit you saw in consumer? Or anything else that's pulling down the margin other than the growth investments?

Yes, Duffy, it's primarily volume. As we have talked about in the past, volume is the single biggest driver of operating margin leverage in, I'd say, all of our segments, but for sure, in our Paint Stores Group. So that's going to be the majority of it. And then yes, we also have an impact from the investments we made but we do expect to continue to get a return for those investments as the year progresses.

Your next question is coming from Michael Sison from Wells Fargo.

I guess sort of a follow-up on that is as you get into 2Q, 3Q, 4Q for PSG, do you expect segment profit to turn positive? And for the full year, will segment profit growth?

Yes, on all of that.

Your next question is coming from Kevin McCarthy from Vertical Research Partners.

Maybe a two-part question, if I may, on Paint Stores Group. First, with a few more months in the rearview mirror, would you comment on where you think U.S. architectural industry gallonage came in for 2023 and where you think it might track for this year? And then the second part would be to do with Protective & Marine coatings. Crafting your segment guidance for PSG, do you think Protective & Marine is likely to grow faster than your paint stores sales or slower or on par? How would you characterize that given the commentary around timing and slower start and so forth?

Yes, I'll start with the P&M piece, and then I'll hand it over to Al. We look at some of the gallons year-over-year. I think you said it in your question, it is timing. And I think with some of these project delays we don't believe in any regard that they have gone away, it's simply timing. And as I mentioned earlier, what gives us confidence is our increased visibility into some of this project work. So again, the team is working hard to make sure that with some of these launches, we are best positioned in the industry. So when the timing does recover, we're at the front of that line. And then I'll hand it over to Al to talk about your question relative to.

Yes, Kevin, we expect P&M to grow faster than architectural because we anticipate new residential demand to be softer in the first half and stronger in the second half. We previously mentioned that commercial performance looked strong in the first half, but that may have shifted slightly due to project delays we've seen in the first quarter. Some of this may carry over into our third quarter this year. However, we remain very confident in P&M and its strength. Regarding industry volume, we think 2023 might see a slight decline, while 2024 could stabilize, especially since new residential demand was significantly down. We expect things to improve as we move into 2024, leading to a more stable performance.

Your next question is coming from John Roberts from Mizuho.

Is the delayed property maintenance activity delayed into the June quarter, so that's in your guidance for the June quarter? Or are there more significant delays going on because of the mortgage issues with some apartment buildings and commercial properties?

Yes. I think from project delay relative to what we saw from weather in the first quarter, we'll see those pick up in the second quarter and into the third quarter. As far as CapEx projects, we talked about this on our first quarter call. As rates moderate, we do expect to start seeing CapEx projects improve both rates and lending gets easier at lending standards ease up a little bit. John, we don't have material growth impact in our forecast for property maintenance CapEx growing a significant amount in our second half. So turns are going to continue to improve. And then as CapEx returns will benefit with that as a slight tailwind.

Your next question is coming from Garik Shmois from Loop Capital.

You mentioned there was some impact in Consumer Brands in the quarter due to limited inventory build. Is there any way to size if that was material to the quarter or would you expect any restocking in 2Q and maybe speak broadly to any opportunities for restocking across your network?

I'll start with that and ask Al to jump in. I would say we're not going to obviously comment on materiality because that's certainly something we would ask our customers to comment on. But I think it goes without saying that as we've all come through the last few years, wanting to come into the season in a very strong position is a signal that there's opportunity ahead. And Alan, anything you'd want to add to that?

Garik, I mean, think about our first quarter as a small quarter for consumer in North America and it ramps up as the architectural season ramps up. So we have seen this in the past and it's not overly material. You think about a couple of percent on $800 million, it's not huge.

Your next question is coming from Steve Byrne from Bank of America.

You made the comment about your sales forces out there hunting for new accounts. And clearly, that's been the model. My question for you is, how are you incentivizing that or driving that with your investments? Is it headcount related? Or are you doing something to drive more servicing to existing accounts? And is this really to drive share gains? Or can this also drive mix shift to higher-performing products?

I would like to share a few thoughts. We frequently refer to the term ecosystem when discussing what we aim to provide for our contractors. Essentially, it encompasses everything you've mentioned. When examining the representatives and our range of digital tools, our objective is to meet contractors at their specific stage—whether that's their business maturity, selling cycle, or growth plans. This approach varies by segment, as the requirements of contractors differ between residential repaint, new residential, and commercial projects. Thus, we are investing in ensuring our team and digital tools are ready to support and engage these contractors effectively. While we won't delve into too many specifics for obvious reasons, when we're out actively seeking new opportunities, it's indeed a precise approach. We possess the data, we have a well-prepared team, and we utilize the appropriate tools to enhance our team's efficiency and contribute to our customers' success.

Steve, the only thing I would add to that is we often talk about surveys painting contractors and the number one driver of their loyalty is who helps them make the most money. So the more reps we have in the field and our ability to spend more time with those painting contractors and doing demos with higher-quality products we can show them the efficiencies that they can gain so that they can grow their top line and their bottom line with the same number of painters because the labor markets haven't improved dramatically. So that's a value add that I think we can provide.

Your next question is coming from Arun Viswanathan from RBC Capital Markets.

Just maybe two questions on Paint Stores Group. So first of all, historically, I think you've been underpenetrated on the West Coast. And given one of your competitors now there has shut at stores. Is that something that you could maybe pivot and increase your store openings towards? And then my second question was basically on growth and margins. So it looks like you face your easiest comps in the second half in Paint Stores Group. Last year, you were up 2% to 4% or so in those quarters. So would you expect to be up kind of mid-single-digits in Paint Stores Group in the second half of this year towards the upper end of your full year guide for sales?

Yes, Arun I'll start with the first one, and then I'll hand it over to Al to cover your second one. And by the way, nice job getting two questions into the one question. You did that really gracefully. So on the first one, yes I think your point on what was happening in the West. We've recognized the Kelly-Moore closure. And I would tell you that we have long and aggressively competed against Kelly-Moore with a lot of respect for them as a competitor. We are well positioned and are already beginning to serve some of their former customers. We expect to gain continued share here. We're not going to comment on the potential size of the gains. But as I said earlier, you can expect us to be very aggressive. And I wouldn't look at this through the lens of opening new stores necessarily there. I think when something like this happens in our industry, we want to make sure that we're very thoughtful about where real estate makes sense for us, talent that we've taken the steps and the actions to take the best of and we're ready to go.

Yes, Arun, I think you're right. We would expect that our second half would be in that mid-single-digit range. Of course, as we see the summer selling season unfold. We'll look at those trends, look at indicators and certainly give an update to the street on our July call as appropriate.

Your next question is coming from Laurence Alexander from Jefferies.

Just a quick one on industrial coatings, can you just characterize the landscape for bolt-on M&A how appealing it is currently and our multiples in discussions starting to drift down?

Yes, Laurence, as you mentioned, in this uncertain environment, we are seeing multiples begin to decline, along with a smaller pipeline compared to what we typically observe in a growing market. That said, we are confident in our industrial strategy. We are actively looking for bolt-on acquisitions that align with and enhance that strategy. As market conditions improve and there is clearer potential for growth, we will be well-positioned with our balance sheet to pursue any acquisitions that align with our strategy.

Your next question is coming from Eric Bosshard from Cleveland Research Company.

I wanted to ask about SG&A that you're making to gain share. Al, you talked as rates moderated and there were some conversation earlier about improving remodel in the second half. And obviously, I think Heidi you said it the question is when. In a scenario where perhaps rates don't go down and the remodel doesn't improve. Do you sustain the investment? Is there a point where you tap the brakes a little bit on the investment that you're being made, and what is in that scenario, a bit of a slower environment? And then the second is, once we cycle this incremental investment, do we get back to where SG&A grows lower than sales?

So Eric, no, we don't see a situation or an environment where we pull back. We're confident again in our strategy. The comment we made earlier is these are very focused investments. And so we're not trying to be all things to all people, water all the trees. But where we know we've got points of differentiation that are meaningful in the market. You can expect that we'll continue to be very bullish there. So no, I don't see us pulling back in any regard there. And Al, I'll let you speak to the rates relative to the what’s in.

Yes, Eric, as you know, we are focused on growing our operating margin. This can happen through gross margin expansion or by leveraging SG&A. Whenever we experience significant gross margin expansion, we take the opportunity to accelerate our investments because we have confidence in our strategy. As rates decrease, we anticipate improvements in existing home sales and new single-family starts, along with capital expenditures related to property maintenance. We expect to see SG&A leverage in 2025 and 2026 moving forward.

Your next question is coming from Aaron Ceccarelli from Berenberg.

If I understood correctly, you mentioned that traffic in your PSG reached an all-time high in March. Which part of your retail network do you believe has the most potential for increased sales density or traffic? Are there any of your retail stores that are not performing as well as you would like? I would like to understand where the opportunities lie.

It's a great question. I would say the opportunity continues to be significant. While there are opportunities in every segment, the largest opportunity for us remains in residential repaint, where we have gained more market share. I believe this is in addition to the already robust growth we are experiencing. Therefore, I don't see this additional traffic correcting any issues; rather, it will help us outperform in the relatively flat environment of residential repaint today. It will be beneficial, and we are confident this is indeed an opportunity, as I mentioned earlier, with increased call activity and a rise in unique and active accounts, indicating that we are capturing more market share.

That concludes our Q&A session. I will now hand the conference back to Jim Jaye for closing remarks. Please go ahead.

Yes. Thank you, everybody for joining our call today. I think you heard that the team is very aligned, very confident in our strategy and what we're doing. We've made the right investments, and we're driving those solutions for our customers. And we're pretty confident that you're going to see as the year unfolds, those share gains and those returns become more and more evident. The other thing I would do is just remind you, we will have our annual financial community presentation this year in Boston. That's on August 29. And in addition to Heidi and Al, you'll hear commentary from our group presidents as well. So additional information on that will be coming out some time soon. So look for that, please. And as always, thanks for your interest and we'll be available for your follow-up calls over the next several days. Have a great day.

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.