The Sherwin-Williams Company (NYSE:SHW) Q1 2015 Earnings Conference Call - Final Transcript
Apr 16, 2015 • 11:00 am ET
Thank you. At this time, we'll be conducting a question-and-answer session (Operator Instructions) Ghansham Panjabi, Robert W. Baird.
First off, can you just touch on the competitive environment in the paint industry in the U.S. Just anecdotally there seems to be a lot more of a promotional focus this year across many channels. Just wondering what you are seeing?
Yes, Ghansham, I don't think that we're seeing any more aggressive promotional activity than we would typically would at this time of year. We're kind of entering into the start of the paint season and that's pretty typical for our industry to -- and send traffic and value them with promotions. Pricings are holding as you can tell by our margin improvement. So, I think it's pretty much business as usual.
And then just in terms of the timing that you called out in the HGTV load-in, can you just kind of give us some more color on that, what drove the shift specifically?
So, we're very pleased and confident in the roll-out and our revisional projections. And what's happened here is that we gave some initial thoughts on how this thing would roll out. The quarter happened to land in the midst of a pretty major roll-out. So, there are some stores that are shipping week, maybe two-weeks later than the original plan. But it's nothing we're concerned with, and we're very confident in the direction and the roll-out and the way it's going.
And just one final one, if I could, on what you are seeing, if anything different on wage inflation for your U.S. stores.
Our wage inflation has been pretty standard for a long time, Ghansham, based on a formula we look at given the current market indices we adjust our annual compensation. Those wages have increased on average 2% to 3% per year for our employee base for many years as they will again this year.
John McNulty, Credit Suisse.
So with regard to your 2Q guide, it's implying a pretty significant lift in the margin on a year-over-year basis on the operating side. So I guess I'm wondering if you can walk us through some of the puts and takes on that, is it just you will finally have the Lowe's platform kind of out and ramped up? Or I guess how much of it is being -- is it just the end of some of the Comex headwinds from last year? If you could walk us through some of the major puts and takes that really give you confidence to hit that kind of a margin level, that would be helpful.
This is Sean Hennessy. Good morning. When you look at the second quarter and when you look at that guidance going from $2.94 to the midpoint of $3.80, our margin -- I don't think you can get into that kind of the range with that kind of sales gain without having margin expansion. And the operating margin expansion, I think, is going to be