Good morning. Thank you for joining the Sherwin-Williams Company's review of fourth quarter and full year 2024 results and our outlook for the first quarter and full year of 2025. With us on today's call are Heidi Petz, President and CEO, Al Mistician, Chief Financial Officer, Paul Lang, Chief Accounting Officer, and Jim Jay, Senior Vice President, Investor Relations and Communications. This 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 the U.S. Federal Securities laws with respect to sales, earnings, and other matters. Any forward-looking statement speaks only as of the date of 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 the session to questions. I will now turn the call over to Jim Jay.

Thank you and good morning to everyone. Sherman Williams delivered strong fourth quarter results that concluded a record year for the company. In what remained a very choppy demand environment, full-year consolidated sales increased slightly, driven by our deliberate and targeted investment to gain share and overcome softness in core accounts. Our gross profit dollars and margin expanded, EBITDA dollars and margin expanded, and adjusted earnings per share grew by a near double-digit percentage to $11.33 a share. Consolidated sales in the fourth quarter increased by a low single-digit percentage, and gross margin improved slightly over a very strong level a year ago. As we expected and previously described, year-over-year growth in SG&A moderated to a low single-digit level. Adjusted earnings per share in the quarter increased by 15.5%. In terms of our segments in the fourth quarter, paint stores group sales increased in the range we expected, led by high single-digit growth in residential repaint and protective and marine. Consumer Brands Group sales decreased in the range we expected, all related to unfavorable FX, as volume and price mix were slightly positive. Within Performance Coatings Group, sales were slightly below expectations, as strength in packaging and coil was offset by softness in other divisions. Adjusted margin expanded year over year in all three operating segments. The slide deck accompanying our press release this morning provides more detail on fourth quarter segment performance. Let me now turn it over to Heidi, who will provide a few full-year 2024 highlights, before we move on to our 2025 outlook and your questions.

Thank you, Jim, and Happy New Year to all those that are listening. I hope you had a wonderful holiday season and are geared up for the year ahead. I know you're eager to get to our 2025 outlook, but first I want to take a moment to reflect on what our 64,000 dedicated global employees have achieved over the last year. I am proud of what our team has delivered in 2024. We entered the year amidst an extremely choppy demand environment that, quite frankly, never improved meaningfully. We knew this was a possible scenario, and we doubled down on controlling what we could control. We stayed true to our strategy. We made targeted investments, focused on share gains, and executed on our enterprise priorities. We continued to deliver innovative solutions for our customers. And in a disruptive, competitive environment, Sherwin-Williams stood out by being a consistent, reliable, and dependable partner. In addition to the strong margin expansion and earnings growth that Jim described a moment ago, It was another very good year of cash generation, which was $3.2 billion, or 13.7% of sales. We continued to execute our disciplined approach to capital allocation during the year, including $2.5 billion, which we returned to shareholders through share repurchases and dividends. In terms of CapEx, we invested $1.1 billion, including approximately $532 million for our new headquarters and R&D center, which we expect to begin occupying this year. We ended 2024 with a net debt-to-adjusted EPSA ratio of 2.2 times. Looking at our reportable segments on a full-year basis, paint stores grew by a low single-digit percentage. Residential repaint drove the segment growth and increased by a mid-single-digit percentage. This was strong performance given anemic existing home sales and is the clearest example of a return on our prior investments. New residential and commercial both increased by low single-digit percentages in a challenging rate environment. Flattish year-over-year segment margin reflects our continued growth investments, which we are confident will continue to drive above market sales over the long term. Consumer brands had a challenging year on the top line, with lower sales resulting from soft DIY demand and unfavorable effects. Adjusted segment margin expanded back to our target level due to higher fixed cost absorption in the manufacturing and distribution operations within the segment. At the same time, we maintained our investments to support our customers despite weaker-than-expected volume in North America. Performance coding sales varied by division and geography. Acquisitions added a low single-digit percentage in the year, but was offset by unfavorable price mix and FX. Coil was the strongest performer, driven by new account wins. We're also pleased with packaging, which returned to growth as we won new accounts and recaptured the majority of previously lost share, just as we indicated we would. Industrial wood was up mid-single digits, driven by an acquisition. Accelerated share gains and auto refinish were not enough to overcome softness in core accounts, driven by lower insurance claims. General Industrial, our largest division, remained under the most pressure during the year, with softness and heavy equipment demand. Adjusted segment margin expanded to 18%, the highest level since the Valspar acquisition in 2017. Throughout 2024, we continued to operate from a position of strength. In fact, our confidence in our strategy, along with our team's ability to execute, led us to increase several of our midterm financial targets at our Investor Day this past August. I am confident we will achieve those targets over time, given a more consistent demand environment. As we begin 2025, I am also highly confident that nobody is better positioned than Sherwin During our October earnings call, we were among the first to describe the demand environment as softer for longer, with an expectation that the first half of 2025 would likely remain choppy. Three months later, we have seen little evidence to change that view, and given the indicators that we do see, several end markets may not improve until 2026. On the architectural side of the business, residential repaint demand has become slightly more encouraging, as existing home sales have begun to show modest signs of recovery, and Harvard's lira index shows a return to very slight growth. Residential repaint remains our single largest share gain opportunity, and we significantly outperformed the market in 2024, given our targeted investments in sales reps, training, and digital tools, just to name a few. We would expect similar outperformance in 2025. Looking at new residential, year-over-year growth in single-family starts has been choppy over the last several months. Rate cuts have had little impact and mortgage rates remain well above 6%. We would expect to continue strengthening our homebuilder customer relationship to outperform the market. In commercial, we've been clear that we expect completions to be soft in 2025, as year-over-year multifamily starts have been mostly down by double-digit percentages since the middle of 2023. Even if commercial starts do pick up in 2025, which seems unlikely given a consistently soft architectural billing index, they won't turn into painting and completions until well into 2026. Property maintenance spending still appears to be idling in neutral. On the DIY side, we do not currently see a macro economic catalyst driving meaningful improvement in consumer demand. On the industrial side, the PMI numbers for manufacturing in the U.S. and Europe have been negative for multiple months, with Brazil and China being slightly positive. We expect COIL to grow again, driven by significant new account wins over the past year and a continued focus on new accounts this year. We're also confident in packaging growth as we gain share and support customers' conversion to our industry-leading non-DECA coatings by 2026 to comply with European Commission mandates. In protective and marine, the project pipeline remains solid, though the timing of starts remains variable. We expect auto refinish demand to remain choppy, driven by continued softness of insurance claims, though our shared gains should become more evident. Industrial wood will likely track with new residential, given the furniture, flooring, and cabinetry end markets it serves. We expect general industrial demand to remain soft throughout the year. In summary, the market is not going to give us a lot of help this year. We'll continue to remain very aggressive with a focus on helping our existing customers grow as well as focusing on targeted share gains. Against this backdrop, we are providing guidance that we believe is very realistic. Should the market be better than we are currently assuming, we would expect to outperform the guidance we are providing to start the year. Moving on to our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2025. The deck also includes our expectations for the full year, where consolidated sales are expected to be up a low single-digit percentage and diluted net income per share is expected to be in the range of $10.70 to $11.10 per share. Excluding acquisition-related amortization expense of approximately $0.80 per share and restructuring expense of approximately $0.15 per share, adjusted diluted net income per share is expected in the range of $11.65 to $12.05. This is a mid-single-digit percent increase at the midpoint compared to 2024's adjusted diluted net income per share of $11.33. We've provided a gap reconciliation in the Reg-G table within our press release. Our slide deck contains several additional data points that provide important context that I'd like to touch on here. Any comparisons described are year over year. From a sales perspective, I'll remind you that the Paint Stores Group implemented a 5% price increase effective January 6th. We would expect this to ramp up to typical 50-60% effectiveness over the next quarter. We also are implementing very targeted price increases in specific areas within our other two reportable segments. We expect the market basket of raw materials to be up a low single-digit percentage in 2025. We expect to overcome these raw material headwinds and deliver full-year gross margin expansion, driven by incremental 2025 pricing, simplification efforts across our supply chain, as well as our paint source group, which is our largest and highest gross margin segment, growing sales faster than the other two segments. We expect SG&A dollars to grow by a low single-digit percentage in 2025. This is a more typical level for us and less than last year's 5% increase. This year's increase includes $80 million of operating expenses for our new building, which will be weighted to our second half. We'll also continue to have some operating expense for our current building until we have fully completed our move. As always, we plan to control costs tightly in non-customer-facing functions, and we have a variety of levers that we can pull depending on a material change to our outlook, up or down. As we've previously described, interest expense will be up this year. This increase includes $40 million related to refinancing of debt at a higher rate, including $850 million in 2024, and approximately $1 billion expected to be refinanced in 2025. It also includes $20 million of interest related to financing activities of our new building. We expect to end the year within our current long-term target debt-to-EBITO leverage ratio of two to two and a half times. Other general expense items are expected to return to more historic levels in 2025 and increase approximately $75 million due to a gain on sale or disposition of assets of approximately $50 million in 2024 that we do not expect to repeat in 2025, and an increase in our environmental provision of $25 million. We expect to open 80 to 100 new stores in the U.S. and Canada in 2025. We'll also be focused on sales reps, capacity and productivity improvements, systems, and product innovation. Next month, at our Board of Directors meeting, we will recommend an annual dividend increase of 10.5% to $3.16 per share, up from $2.86 last year. If approved, this will mark the 47th consecutive year that we've increased our dividends. We expect to continue making opportunistic share repurchases. We'll also continue to evaluate acquisitions that fit into our strategy. In addition, our slide deck provides guidance on our expectations for currency exchange, expected tax rate, CapEx, depreciation, and amortization. Finally, I'll remind you that our first quarter is a seasonally smaller one. For that reason, we will not be making any updates to full-year guidance up or down until our second quarter is completed, and we have a better view of how the paint-coating season is unfolding. Our team is operating with great confidence and accountability as we begin 2025. As we have consistently said, it is only a matter of when the demand environment returns to greater strength, not if. And when that shift occurs, we expect to significantly outperform the market. In the meantime, we are not waiting. We often talk about how we operate, success by design. We have a clear and winning strategy. We have the best team in the industry, and we've made the right investments targeting specific markets and subsegments. We know how to deliver solutions for our customers that will make them more productive and more profitable. We continue to have significant new account and share of wallet opportunities in every business and region. We expect to continue winning more than our fair share of these opportunities. I also am highly confident that our enterprise-wide efforts related to talent, simplification, digitization, supply chain responsiveness, and sustainability will continue to deliver above-market growth. We get rewarded by overcoming obstacles, finding solutions for our customers, and delivering results. We are extremely well-positioned to continue delivering shareholder value, and that's exactly what we intend to do in 2025. This concludes our prepared remarks. With that, I'd like to thank you all for joining us this morning, and we'll be happy to take your questions.

Certainly. Everyone at this time will be conducting a question-and-answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset. if you're listening on speakerphone to provide optimum sound quality. We do request that each participant asks only one question. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Gregory Mellick from Evercore. Your line is live.

Hi, thanks. Good morning.

I wanted to follow up on the raw material expense as part of the guidance, expecting that to rise this year. What commodities or areas are driving that? Are tariffs in any way a factor?

Yeah, good morning, Greg. It's Jim talking. A couple different things to think about there. Yes, there are some tariffs that are embedded in that. Those are tariffs that are already in place, mainly related to Asian imports of epoxy, which came into effect September and November of last year. We're seeing inflation of low single digits in the raw basket. I would tell you that that is related to industrial resins, TIO2 is up a bit, solvents up a bit, packaging up a bit. In addition to that tariff that I described, we have potential for others. Those aren't in the guide right now on the raws. We'll see how that unfolds. I think you have to also think about some other factors. You know, you have suppliers with capacity, rationalization, and decommissioning of their plants, which puts pressure on price as well. So we'll see. Natural gas is up as well and trending upwards, which is another pressure point. So I think up low single digits to start the year and fairly spread out across the year evenly and fairly spread out across the different commodities. And, Greg, this is Al Mastishan.

The one thing I would add is the additional tariffs that we're tracking very closely that are not in our guidance, if those were to occur and they're significant, we would need to go and we're prepared to go out with additional price in specific markets and segments.

Got it. Thanks, and good luck. Thank you, Greg.

Thank you. Your next question is coming from Vincent Andrews from Morgan Stanley. Your line is live. Thank you, and good morning.

Can I ask about a couple of the special items that are in the guidance, particularly the $80 million associated with the new headquarters? I know we've talked a lot in the past about the CapEx and the sale leaseback associated with the HQ, but I think this is the first we've talked about there being such a substantial incremental cost to using this new facility. So I'm just curious if you can help us understand what those are. I don't know. In my head, I would think the new facility would be more efficient from an energy and a water and all that type of thing. So what's what's driving the 80 million and how much of it is one time in nature versus non-recurring? And then you also have a step up in the environmental spending. And I know that can be that can fluctuate year to year. So is there something special about the spend this year that may not recur next year or is this a new baseline?

Thank you. Yeah, Vincent, I'll start with a new building. And the way I think about it is this is a transition year for us as a company as we're not moving into the – we're going to start occupying the building as the year goes on. And as we talked about, this is predominantly second half loaded. I thought I'd be remiss if I didn't include some estimate in our cost base to say that as we get better line of sight on the timing of the occupying the building, we can refine that estimate on our July call. About 20, I'd say a quarter of that 80 are what I call transition costs, whether that is moving costs or decommissioning costs related to our old buildings. And yes, they are more efficient. For 90 years, that is fully depreciated. We've made, I would say we've made measured repairs to the existing building knowing we were going to get out of this building, but if you look at the depreciation and things like that, we'll get a better line of sight of that when we're completely into the building, new buildings, we're operating, and we can kind of figure out what's working, what's not working. So, these are estimates that need to be refined. The other comment I would make on the non-operating, our assumption is we're going to get back to a more normal environmental cost. These are going to be more first half of an impact because we had credits last year. We don't expect to repeat those. I don't think I would get progress on remediation and the further we get with remediation. So I think it's a normal expense.

Thank you, Vincent.

Thank you. Your next question is coming from David Begleiter from Deutsche Bank. Your line is live.

Thank you. Good morning. Heidi, on the share gain opportunity, can you help frame how that looks to you in terms relative to the PPG business? And looking back to last year, how much of the Kelly Moore business did you end up picking up? Thank you.

Yeah, good morning, David. Let me start with Kelly Moore, just because sequentially, obviously, that's, I would say, largely or significant behind us. I don't know that we shared a number, and I'm certainly not prepared to share a number today, but I would tell you, given how complementary that business model was to us relative to some of the key segments, I'll point to ResRepaint, we were able to, I think, be very well positioned. The team was very aggressive to make sure that we were focused on customer continuity and that we were the house that they wanted to transition to. So we're in a good position there. We expect that to continue with a run rate. As I look at the PPG sale, I would first describe that as an opportunity that we just came out of our national sales meeting and was able to address over 10,000 of our store managers, our reps. And I would tell you, ripe with opportunity is the general sentiment. When you think about breaking that down in terms of how we look at the share gain opportunity, I think you have to start by segment and also a little bit by region, size of contractor. We're largely focused with the crossover between property management, certainly commercial, new residential. So we're going to continue to be very aggressive to make sure that we are best positioned across those segments. I will also tell you, we are very focused on quality sales and making sure that we're targeting the customers that candidly value what it is that we do and what we bring to bear with our reps, our stores, our delivery, our tools, everything that we can put in front of them to make these contractors even more profitable than they are today is where we're going to focus. But there's a bit of a time lag. If you think about the speed in which we're able to pick up a res repaint contractor, while that's not easy and the team's working very hard to do so, you kind of see that return more quickly versus someone more in the property maintenance commercial space will be working on projects that just simply have longer lag periods. There could be bigger sized projects in play that are already committed to. So we're working really hard to really try to sync up as the market does recover. We'll see how the back half of 25 goes, but as we look into 26, we want to make sure that we are absolutely best positioned to take that share.

Thank you. Thanks, David.

Thank you. Your next question is coming from John McNulty from BMO Capital Markets. Your line is live.

Yeah, good morning. Thanks for taking my question. So I guess you sounded like there was at least a little bit of optimism in some of the paint store group and markets, particularly Resi Repaint. I guess, can you help us to think about what your customers are saying about their backlog? I know it's a seasonally kind of odd time or early time, but where is that optimism coming from? Can you help us to think about that?

Yeah, John, I'll start here. I think you're right. I mean, we did indicate there's moderate optimism, if I could kind of even moderate the word optimism. We're aggressively partnering with these contractors that are in the current environment while the market is still kind of choppy. You've seen, I'm sure, certainly the Lira indicators that paint's likely going to hold up overall over everything else. But I would tell you part of this is making sure that our teams are looking to intercept. As you look at our current res repaint contractors, our existing contractors, helping them growing their business, helping them market their business, helping them get more leads, close more leads so that they can become more profitable. And then in terms of pursuing share gains and new customers, there is a lot of disruption out there, and we are going to continue to be consistent laying in stores, reps, tools, making sure that they're prepared. But I'll hand it over to Al. Any additional comments you want to make here relative to some of the indicators?

Yeah, John, I think I just reinforced that we do. The demand environment will improve as the year goes on, And I'd highlight that, as we talked about on our third quarter call, as we talked about on this call, the first half is going to continue to be choppy, and it continues to ensure wallet activity that each of the teams have completed. And as you would expect, our earnings will be up year over year in our first half.

Thanks very much for the caller.

Thank you. Your next question is coming from Chris Parkinson from Wolf Research. Your line is live.

Great. So in addition to some of the growth spend in terms of stores and sales associates, you've also been spending a decent amount on, you know, product breadth and some new products and PSG and kind of, you know, getting up on some of the price points. And it sounds like you're pretty enthusiastic on some stuff in PC as well. Can I just ask, what are the two to three largest growth or opportunities that you see in 25 and 26 when you step back as CEO, just, you know, regardless of, you know, what the macro environment does? Where are you the most excited? Thank you.

Yeah, great question. I think there's a number of items I would point to where we see, you know, continued strength. We would expect to outperform res repaint. Again, I'm going to point to that as an example. You mentioned, you know, how we're looking at product introduction. It's a really good call out because when you think about not only the mixed benefit that we see from a margin standpoint, but our ability to bring solutions to these contractors that value productivity above all. You know, the cost of labor being a significant part of the total cost of the job. We're able to bring technologies. They are more in the premium space because they are absolutely helping these crews to save time, ultimately money on these job sites. And so there's mixed favorability, certainly which we love because we want to continue to stay kind of cutting edge as leaders and innovating in that space to help these contractors. So that would be the biggest piece. I think if you look on the performance side, similar to what I mentioned in my prepared remarks as well, I would point to coil and packaging as the 2-3 there. You've got a lot of focus here. Again, the market's not going to help us, but the team's been relentlessly focusing on new accounts, new business wins, fully expect us to continue to do that in both of those segments.

Thank you.

Thanks, Chris.

Thank you. Your next question is coming from John Roberts from Mizuho. Your line is live.

Thank you. Do you expect non-resi to be down all 2025, or do we have easy comps in the back end of the year where you might actually have some positive comps?

Yeah, you know, John, it's possible that we could have positive comps. You know, there's obviously a number of macro things that have to improve to help us, The biggest being, as you get into interest rates, and we've talked about property maintenance and we've seen, or the lack of investment, I should say, that we've seen, we're, again, cautiously optimistic as the year goes on. You'll see some of that improve. I think commercial, we've been very clear. We do expect to see that drop, and in our second half, knowing that, we've been really a new opportunity to hit the market.

Thank you. Your next question is coming from Josh Sector from UBS. Your line is live.

Hi, good morning. I wanted to ask on the CapEx guidance. So, I mean, a few things there. One, I guess the $200 million of building spend, is that because the cost of the headquarters is higher or are you now doing more or something different there? And then X that, even the $700 million guide is a bit higher than probably the $500 that we're modeling longer term. Is there more growth investments that you're doing that is worth calling out now? Or is there some reason why your sustainable CapEx should be higher looking two, three years out?

Yeah, Josh. New building, architectural capacity that we've talked about, about our Statesville factory initiative, talked about with the last thing I'd say is 50% of our CapEx has a return on it. And thank you, Josh.

Great, thank you. Thank you. Your next question is coming from Duffy Fisher from Goldman Sachs. Your line is live.

Yeah, good morning, guys. Question on price. So, last year you asked for five in February. This year you asked for five in January. So, can you do the after-action review? How much did you get last year? What was the shape of that kind of throughout the year would be one, then two. how much of that old price still gets anniversary this year,

and then does the shape of this year's price look different because you asked for it earlier, would you guess?

Yeah, Duffy, I think what we talked about on the price last year, let me start with that. It improved as the year went on, and we had talked about coming into our second half that we'd see a more typical effective rate. So I would say it probably took us longer than we had planned. And I would think learning from that, we really let in with a lot of discipline, training in the field, making sure we gave our customers enough lead time to get ahead of it. And I would expect that our effectiveness and price will be better earlier this year than it was last year. It still will take over the next quarter to get to the effectiveness we want, but you'll see a much better effectiveness in our first half this year than you saw last year. And then the annualization, yes, there's some annualization on the increase last year, and obviously because we went out earlier this year.

Thank you, guys.

Thanks, Toby.

Thank you. Your next question is coming from Gansham Punjabi from Baird. Your line is live.

Thank you. Heidi, as you kind of think about the six verticals within PSG, has your 2025 outlook changed in any material way versus your view when you reported 3K earnings back in October, especially in commercial maybe?

No, it hasn't. And I think Al characterized that really well just a few minutes ago relative to how we're looking at commercial in general. If the market does fare better than we're expecting, we expect to outperform the market. But I think this becomes a softer for longer with eyes towards 2026 at this point, Gancham.

Yeah, Gancham. I would just add, I think maybe the rate cuts that the Fed have been doing have not had the effect on the longer-term rates that we were expecting. Mortgage rates are still up in that high 6% range. All things that you're talking nuances related to where we were in October and today, but I think we're in line. Thank you.

Your next question is coming from Mike Sisson from Wells Fargo. Your line is live.

Hey, good morning. I wanted to get a better feel for maybe some of the headwinds in 25 in the sense that it doesn't sound like demand is going to be much better in 25 versus 24, yet in 24 you generated pretty good EPS growth of 10%. So, you know, if you think about 25, SG&A increase is going to be a little bit less year over year. You know, demand is going to get much worse. So just curious what else is sort of impeding, you know, better EPS growth. And maybe hoping your momentum this year would be kind of mirror our guardians.

Yeah, I don't know we're going to be that good as the guardians. But, yeah, Mike, I think, you know, we do have some headwinds additional to what we maybe would have saw in 2024. We try to call those out, one with higher interest expense, with the higher rates. You know, we refinance $850 million in third quarter of 2024 at a higher rate. Our expectation is the billion dollars we refinance in, you know, third quarter of 2025 will be at a higher rate, plus the financing of our new building is a headwind. The non-operating costs getting back to a more normal level is a headwind. And we're not hiding behind those, Mike. We fully saw it coming. Performance with managing our SG&A. Yeah, we got a little bit.

And, Mike, I would add, just from an operating perspective, I think two of the macro headwinds that certainly we're not immune to, single-family housing starts have been down year over year for three consecutive months and five of the last eight months. So we're managing through that. And then the multifamily housing completes are slowing given some extended periods of soft start. So there are dynamics that we're going to continue to fight through and compete within them, but I think there's certainly no lack of headwinds as we enter the year. Got it. Thank you. Yes, Mike?

Thank you. Your next question is coming from Jeff Sikoskis from J.P. Morgan. Your line is live.

Thanks very much. Some building products companies have talked about adverse weather, and certainly it's been cold. When you look at your first quarter or you look at January, is that something that's affected you relative to last year? And then for Al, in the consumer brands group, the margins for the first three quarters year over year relative to last year were up about, you know, 10 percentage points. And in the final quarter, they were up maybe two. Were there LIFO true ups or some LIFO dynamic that led to the sort of change in margin differential in the fourth quarter?

Yeah, Jeff, let me start. You know, the cold weather is, you know, we expect that. Where we kind of, yeah, we have more coal there. We annualize.

From Chuck Sarankoski from North Coast Research. Your line is live.

Good morning, everyone.

We've got some very favorable demographic indications for future housing demand. And Heidi and Al, how might you expect it to evolve on the existing home sales and new housing starts without substantial changes in mortgage rates? Because they just don't seem to suddenly move. And as you indicated, they haven't been responding to Fed cuts as expected. So what might be the scenarios you see that the housing markets could improve on the supply side?

Yeah, Chuck. I think you're absolutely right in the sense that as existing home turnover has been backwards over 36 months in a row, there's pent-up demand that because household formations continue to be strong, they're still over a million, million one. We've started this. Life goes on. People get married. People have children. And that just creates more pent-up demand, which may mean, you know, Chuck, which may mean that interest rates don't need to get back to, you know, we were thinking, boy, you'd have to get back to 5% before you start seeing some movement. We saw interest rates drop into that, or 30-year mortgage drop into that, you know, 6%, 6.5% range, and we saw a nice uptick in existing home turnover. So I think we might see a different view of the world, a slightly higher interest mortgage rate gets people to start moving and turning homes more, which would then really impact res repaint, industrial wood, or coil business on the appliances side and things of that nature. I just think as we see it, as we put it out in our guidance, more second-half kind of impacts. It just takes, even when an existing home starts to turn or to fail or new residential picks up, it just takes time to filter through to the painting side of that.

And in the meantime, I think what's really important in terms of kind of what we can control in this environment, I'll take you back to where we started last year with this, it's when, not if. In the meantime, as we focus on partnering, you know, from an existing home sales, res repaint contractors, and they'll take you to our national builders or regional builders on the new res side, you know, making sure that we are partnering with them in new and innovative and creative ways to really help them solve for their biggest pain point, obviously, which is affordability, as we all know. So I do think that it's masked now because the market hasn't moved. But when the market does move, Chuck, I'm very confident that we're going to be able to demonstrate a different level of partnership with these builders as a result of the team's effort.

Thank you.

Thanks, Chuck.

Thank you. Your next question is coming from Mike Harrison from Seaport Research Partners. Your line is live.

Your line is live.

Hi.

Good morning.

We haven't really talked at all about labor costs yet today. I was wondering if you can comment on how changes in immigration policy could impact your business as well as that of your paying contractor customers to the extent that changes in policies could lead to some impacts on labor availability.

Yeah, good morning, Mike. I tell you that it's not a new topic for us. I think, you know, 150-year-old company, we've certainly seen a lot of administrations. And I do think with what we're seeing here, you know, we've been looking at solving for helping our contractors work through some of these challenges that might be, you know, it's too early to tell how this is going to impact, you know, the country, let alone our industry and our company. But I would tell you what's most important for us, regardless of where that does go, is we're going to continue to stay laser focused on helping our customers be productive. And so if I take you to a job site and you think about a constrained labor, we've got the crew on site, our number one job is to get these contractors and applicators on and off the job site as quickly as possible. So that impacts everything from application to touch-up, avoiding having to come back on a job site. And so the controllables, again, what we are already doing and will continue to do, are focusing on the right technologies that help these contractors be efficient. We are investing, of course, in our delivery and our service so that we can be accurate and precise in terms of delivery timing so we're not putting contractors in a position where their crews are idle and waiting. Certainly our field reps that we've laid in, this is really critical in terms of problem-solving real-time, contractors having access, again, so that they're not waiting idly and have crews waiting. So there's a whole host of investments that we've been putting behind this. Now, if and when and how this impacts us, again, too early to tell, but we're going to make sure that we're best positioned to help our contractors to be prepared and for them to win in this environment.

Thank you, Mike.

Your next question is coming from Mike Lighthead from Barclays.

Your line is live. Great. Thanks. Good morning, everybody. I just wanted to drill into the Paint Store's 2025 sales guidance of up low to mid singles. Is it fair to think of price at sort of the higher end of that low single digits and then maybe volume probably at the lower end of that low single digits? And then within that volume, is there a meaningful dispersion in your expectations between, say, the five or six different verticals within the segment.

Yeah, Mike, I think you're correct. I think price will be stronger than volume the year. I would say res repaint, you know, we'd expect to be at or above the high end of that range, continuing the market share gains and momentum we experienced in the second half of 2024, which was actually up a high single-digit number. I think Heidi talked about the other verticals we we do think new res maintains you know a positive momentum and throughout the year and then I think commercial property maintenance she touched on both of those the two I would would also touch on P&M within our paint storage group I do think upload low to mid and then DIY I mean I think it's gonna be flash in the great thank you

thanks Mike thank you your next question is coming from Arun Viswanathan from RBC Capital Markets your line is live great thanks for taking my question good

morning just curious you know if you think about Q1 obviously impacted by weather you know maybe you expect kind of the q2 to q4 kind of sales growth to be above q1 levels and and and if so would that be the same for all of the segments or you know mostly for PSG thanks yeah run it I would say you know

it's not I wouldn't point to the weather in our first quarter our first quarter a small quarter you know I think it's a continuation of the choppiness we saw on our fourth quarter and then as the year unfolds you're going to see varying degrees across the segments let's be clear res repaint we are very confident you're going to see consistent mid single-digit growth if not improving I think between the other paint storage group segments I think we just touched on those that New Res I think is pretty consistent, except for commercial as the year goes on. I think within our industrial businesses, we're very excited about our packaging group and the improvements we saw in our fourth quarter and the continuation of that, not to mention the European standard and regulation that goes in the first half of 26. So we are going to see customers converting to our non-BPA. I think we've talked about auto refinish and our optimism and, you know, North America and that consistency of that team in 2025. And then industrial wood, we've talked as new residential and it really impacts and seeing the biggest headwinds. They take longer to come out of that, and I'm not expecting.

Thank you, Arun.

Thank you. Your next question is coming from Alexey Yefremov from KeyBank Capital Markets. Your line is live.

Thank you. Good morning. Well, hopefully sales and demand improve in 2026 or perhaps later. Can you tell us what kind of demand improvement can you current footprint of stores and associates accommodate before you need to ramp up as G&A investments? So would it be 5%, 10% and then you need to ramp up as G&A or perhaps a higher number?

i'll start i'll ask al to come in i would tell you we have the capacity i think the fact that you know again the market's not going to help us we're out aggressively focused on taking share we've got the capacity relative to stores having said that we're going to continue you know as part of our capital allocation that al laid out laying in 80 to 100 new stores throughout the year and that will be largely focused on geographies where we know we have opportunity to grow and win, but by and large, I don't know that there's a magic number per se. I mean, our ability to help these contractors to grow is within our capacity. Our ability to help our contractors travel from store to store is well within our capacity. Yeah, the only thing I

would add to that, Alexia, think of it as, from a rep standpoint, it's a really variable kind of cost that we can ramp up as we see, I think Heidi said it, that gives us great capacity to handle any res repaint or other segments. Thank you, Alexi. Thank you. Your next question is coming

from Kevin McCarthy from Vertical Research Partners. Your line is live. Yes, thank you and

good morning. I have two questions, one for Heidi and one for Al. Maybe to start off with Heidi on On the subject of pricing, I think you mentioned in your prepared remarks you're pursuing increases in consumer and performance coatings in addition to the paint store hikes that we already talked about. Can you elaborate on that? How would you characterize prospects for positive pricing contributions from those two segments in 2025? And then for Al, what is the level of foreign exchange drag that you're baking into your guide in light of the recent dollar strength? Thank you.

Yeah, thanks, Kevin. I'll start. The comment that I shared relative to pricing for the segments is that it would be very targeted within the segment. And so you look at that through the lens of regions and geography. Obviously, we're not going to announce here today what those specific actions are, but where we know we need to get priced, we're going to be very aggressive and make sure that we do so.

Yeah, Kevin, I think on a consolidated basis, about 1%. But when you really break that out, it's more teams, in which case maybe mid-teams impact on Latin America, which translates to about a mid-single-digit impact on consumer. and then roughly a 2% impact.

Kevin, I would just add, you asked about the specific pricing. I'd point out in the slide deck, there's a slide that may be very helpful in there that for the year breaks out volume price, FX buy segment. So you might want to use that as a guide.

Thank you very much.

You bet. Thanks, Kevin.

Thank you. Your next question is coming from Adam Baumgarten from Zellman & Associates. Your line is live.

Hey, good morning, everyone. You talked about gross margin expansion in 25. Can you maybe put a finer point on the magnitude you're anticipating and that's embedded in your guidance? And also, should we think about that as relatively even across the quarters or more second half weighted?

Yeah, Adam. You know, I will not give you an exact number, but, you know, gross margin expansion to be – let me put it this way. It'll be less than it was in that volume in Peru. The price increases continuing, as we've talked about, self-help initiatives with simplification, acquisition synergies.

Thank you.

Thanks, Adam.

Thank you. Your next question is coming from Garrick Schmoise from Loop Capital Markets. Your line is live.

Hi, thank you. In consumer brands, just wondering if you could speak to how DIY and propane volumes were in the fourth quarter in any color on how you expect them to trend in 2025 would be great.

So I'll start with DOI. I think we've covered this earlier, certainly weaker than expected. I will share, given from a CBG standpoint, the importance of these customers' strategic partnerships that we have, continue to invest in making sure that we are taking their success and our success, and this is really important that we're laser-focused on ensuring that as the market does recover, that we and they are best positioned on that run-up. In terms of Pro Who Paints, I'm going to

leave that over to Al here. Yeah, I think the Pro Who Paints we are under pressure in our fourth quarter. I think, you know, that being said, we've maintained our investments in the Pro Who Paints, It's understanding that, you know, we don't react to a short-term headwind. We stay focused on the longer term and fully expect as, you know, think about it as a paint store. Existing home turnover improves. We ought to see pro paint improvements in that segment and also DIY improvements in that segment as the year goes on. And that's kind of how we laid out the plan.

Thank you. Your next question is coming from Patrick Cunningham from City Investment Research.

your line is live. Hi, good morning. I'm curious on the latest thoughts on the M&A pipeline. Should we maybe expect less of a focus on M&A this year, given some elevated capital spend and markets relatively challenging? Any update to your thinking on some of the more sizable

coatings businesses that are coming to market? This is a really consistent approach that we take here. We're always going to be looking. I don't know that I would characterize this as more or less within the year, I think it would be a very steady hand at understanding where our portfolios are, where we want to drive growth within the portfolio by segment. And if there is opportunity to accelerate our strategy, whether it's a technology, a brand, or a region, we're always looking. But we will go back to our capital allocation policy in general. Absent all the items that I'll walk through, we'll look at that. But we absolutely do not need M&A to grow. We're going to continue to focus on putting our foot on the gas where we know we have a right to win today. But should something attractive come along, you can assume that we're going to take a look at that.

Thank you, Patrick.

Thank you. Your next question is coming from Steve Byrne from Bank of America. Your line is live.

Yes, thank you. I had a follow-up on the labor pool. Just curious whether you're hearing from your paint store customers anywhere in the country in particular where they're already seeing an impact of the deportation initiative on their labor pool. And if this is a realistic impact this year, do you think that it might be more impactful on the pro that paints and maybe shifts more to the paint store's business or might it shift more to DIY? Any thoughts on that and or regional impacts in your view?

Steve, I think it's too early to tell. We're not hearing, by and large, we're not hearing, frankly, a lot of commentary about this impacting contractors on the store side or the Pro-Paint side relative to their labor pools. It does certainly reinforce, I think, our position in the market to be able to get ahead of these issues and focus on productivity. I think this just continues to put us in a leadership position there. In fact, I can tell you I've been out with over a dozen customers since the start of the year, and if there's one theme that's consistent, it's an acknowledgment that you guys are there when you say you're going to be there. Who would have thought simply doing what you say you would do would be a differentiator? But the fact that we're staying true to our focus on solving for their profitability and their productivity, I think that positions us very nicely to be able to help if and when and how this does impact them. In terms of any kind of toggling or switch between stores and consumer and propane, I don't see that happening in any material way. I think that that's going to be a dynamic that will impact everybody kind of equally.

Yeah, Steve, the only thing I would add to that, to think that there'd be a shift back, you look at over a long period of time, the trend from do-it-yourself to do-it-for-me because of some of the macroeconomic situation we have in the U.S. with an aging demographic, the average age of a home in the U.S. is 40 years old, which makes for more complex type of renovations or projects. because there's a lot of equity in homes that allow people to view it as an investment. And there's this trend of... Thank you, Steve.

Thank you. Thank you. Your next question is coming from Aaron Ciccarelli from Barenburg. Your line is live.

Good morning. Thanks for taking my question. Perhaps can you elaborate a little bit on the level of profitability of your market shares gains? Would it be fair to assume that these new accounts come at least at the beginning at the lower level of margins? Thank you.

Yeah, Aaron, I wouldn't make a broad statement like that. I think there's a lot of different activities around new account activation, and depending on where that account is in their maturity level, and they may come in from a competitor and want a similar price point until they understand all the benefits, services, quality, delivery, that ecosystem that we talk about, our ProPlus app, and then those are the accounts that we're able to move up because they begin to sense and value what we have to offer. But I would not make a blanket statement and say all new accounts are that way.

In fact, I would go so far as to say, Al made a great point on the maturity of the contractor. Residential repaint being a great example where oftentimes coming in new, trying to learn, and our teams are able to intercept them early in that maturity curve, even all the way through to helping them present themselves a professional bid, making sure they've got the yard signs, they're marketing their business, and when they see the value, everything that Al talked about, are focused then on selling them and putting them into better product and technology that they're going to make them even more efficient certainly benefits everybody as well.

Thank you, Aaron.

Thank you. Your next question is coming from Eric Bossard from Cleveland Research Company. Your line is live.

Thanks. Two things. First of all, I'm curious in terms of price mix, if you're seeing any sensitivity across the architectural business on the pro side or on the consumer side, trading down or anything you're doing in an environment where there's greater price sensitivity. I know that people pay for value and productivity. That's a given with Sherwin. Anything different you're observing or planning for in that area?

No, Eric, I would tell you, if anything, it's the opposite, and you said it really well, the value and productivity. As we continue to launch new products, as we continue to focus on getting our contractors on and off-job sites, I think it works candidly the other way. And I would say that's true, certainly on the pro side, pro who paints, and the consumer side.

And then secondly, in terms of the incremental spend on reps and on the selling effort, helpful to see that that spend is moderating a bit in 25. In terms of the payback, any sense or guidance you can give us in terms of the payback curve as you've added them and invested in them? Are they up at full impact in 24 or a payback effort that shows up in 25? Any thoughts about how you think about the return dynamic from that investment?

Yeah, Eric, you kind of broke up, but I think what you're asking is the timeliness of getting a return on our reps. And as you know, they're predominantly repaint reps. And I think we get a return on those in, you know, one to two quarters. as, and I think about as density within a market, because what we're able to do in our densest markets is take an existing res repaint territory that gets up to a high number of accounts, high level of sales, terrifically successful. We're able to split that territory, seed some of those accounts that maybe weren't getting the attention that, quite honestly, they deserved. We put a new rep in there, and they both grow the return on our rep. Thank you, Eric.

Your next question is coming from Lawrence Alexander from Jefferies. Your line is live.

Good morning, and thank you for taking my question. This is Carol Jung for Lawrence Alexander. Maybe just come back to a more general question for the FUILA25. What has to go right for you to hit the high end of the guidance, and what might go wrong given the soft turf of a longer environment? So we look at the lower end of the guidance.

Yeah, I think where we're going to be within the guidance is going to be.

Thank you.

Thank you. That concludes our Q&A session. I'll now hand the conference back to Jim Jay for closing remarks. Please go ahead.

Yeah, thank you, Matthew. As we outlined today, we expect the macroeconomic environment to remain choppy in 2025. No surprise there. But at the same time, and I think Heidi said it very well at the beginning, we're not waiting. We're relentlessly pursuing those opportunities that we do see. It's all about success by design, and we have a very proven track record here. We've got a clear and winning strategy, the best team. We've made the right investments, and we know how to deliver the solutions for our customers that are going to make them more productive, more profitable, which is really important in this environment. Nobody's better positioned than Sherwin-Williams to win in the marketplace and deliver that consistent shareholder value, and that's exactly what we plan to do here in 2025. As always, we'll be available for your follow-up calls, and thank you again for your interest in Sherwin-Williams. 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.