Sherwin-Williams Company (The)

Q2 2021 Earnings Conference Call


spk_0: the morning thank you for joining the sherwin williams companies are review second quarter two thousand and twenty one results in our outlook for the third quarter full year of two thousand twenty one well as on today's call or january guess chairman president and ceo alma fission cfl jane groaning senior vice president corporate controller and gym jay senior vice president investor relations and communications the suffers call is being webcast simultaneously in the snowy mode by issue direct by the internet at www dot sherwin dot com an archive replay of this webcast will be available at www dot sherwin dot com beginning approximately two hours if is conference call concludes this conference call will include certain forward looking statements as defined own view under us federal security laws with respect to sales earnings and other matters any for looking statements speaks only as as a day and with such statements made that accompany undertakes no obligation to update or revise any forward looking statements weather as a result of new information future events or otherwise full declaration regarding forward looking statements as provided in the company's earnings release transmitted early this morning at the company's prepared remarks will open the session the questions oh they'll turn the call to jim jay
spk_1: thank you and good morning everyone sherwin williams delivered very solid results in the second quarter we continue to operate in a very dynamic environment where demand was robust across the majority of our business raw material inflation remain persistently high in the effects of winter storm yuri continue to have an impact on the entire industry supply chain and product inventories amid these challenges we raised our sales expectations and or june eight endless day in we delivered on those targets are gross margins were under considerable pressure in the quarter given the sustained higher raw material costs however as we have demonstrated in past inflationary cycles we are fully committed to upsetting these costs and we announced additional pricing actions in the quarter which will be realized as the year goes on despite the near term gross margin compression adjusted deluded net income per share in the quarter grew by a double digit percentage and iba expanded by a high single digit percentage let me briefly summarize the quarterly numbers all comparisons and are prepared commentary this morning or to the second quarter of twenty twenty unless otherwise specified starting with the top line second quarter twenty twenty one consolidated sales increased sixteen point nine percent to five point three eight billion dollars this is the single largest revenue quarter in the company's history supply chain constraints negatively impacted sales by approximately three a have percentage points split evenly between the americas group and the consumer brands group consolidated gross margin decreased three hundred and twenty basis points to forty four point eight percent driven by raw material cost and for nation outpacing are price increases near term in a return to a more normal mix gross margin increased ten basis points compared to the second quarter of twenty nineteen sg and a expense as a percent of sales decreased one hundred thirty basis points to twenty six point seven percent consolidated profit before tax increased seventy one point eight million dollars or nine point six percent to eight hundred and nineteen point two million dollars the second quarters of twenty twenty one and twenty twenty included seventy eight million dollars and seventy five point one million dollars of acquisition related depreciation and amortization expense respectively excluding these items consolidated profit before tax increased nine point one percent to eight hundred and ninety seven point two million dollars deluded that income per share in the quarter increased to two dollars and forty two cents per share from two dollars and sixteen cents per share a year ago the second quarters of twenty twenty one in twenty twenty included acquisition related depreciation and amortization expense of twenty three cents per share in twenty one cents per share respectively excluding these items second quarter adjusted deluded earnings per share increased eleven point eight percent to two dollars and sixty five cents per share from two dollars and thirty seven cents per share he but i grew to one point o five billion dollars in the quarter or nineteen point five percent of sales net operating cash grew to one point two billion dollars in the first six months of twenty twenty one an increase of eleven point eight percent compared to the same period and twenty twenty looking at our operating segments sales came in much as we anticipated with very strong growth and are pro architectural and industrial businesses and as expected a historically more normal the i why segment margin was under pressure in all three segments primarily due to significantly higher year over year raw material costs or additional price increases which are still being implemented were not enough in the near term to offset the higher material costs sales in the americas group grew twenty two point six percent segment margin decreased thirty basis points to twenty three point five percent as operating leverage from the higher volume and selling price increases or offset by the higher raw material costs sales in the consumer brands group decreased twenty five point four percent including four percentage points related to the wattle divestiture adjusted segment margin decreased six hundred and eighty basis points to nineteen point seven percent of sales resulting primarily from lower sales volume and gross margin pressure related to hire raw material costs partially offset by selling price increases and good cost control say live in the performance coatings group exceeded our expectations and increased forty one point three percent adjusted segment margin decreased sixty basis points to thirteen percent of sales as operating leverage from the higher volume and selling price increases were offset by higher raw material costs let me now turn the call over to john murray regan's for additional commentary and second quarter and our first half along with our guidance for the third quarter in full year twenty twenty one john
spk_2: thank you gym and good morning everyone let me begin by frame me my comments with some key themes first demand is very strong cross the majority of our business and we are aggressively pursuing growth opportunities to while industry supply chain constraints are continuing to impact production and sales nobody has more assets and capabilities and your whims to keep their customers impede and on the job three we are aggressively combat in raw material inflation with significant price actions across each of our businesses we will continue to do so as necessary and last we've seen this movie before there's no better or more experienced team in the industry to manage to the current environment we remain extremely confident we will emerge from these current challenges a stronger company with stronger customer relationships and with continued strong value creation for shareholders my deep thanks goes to all sixty one thousand members of our team who are doing an amazing job in some pretty challenging circumstances right now seem to a nice job of framing up the second quarter at a high level in in a moment i'll get into some additional color for each of our segments but first i'd like to make a comment on our first half given the impact of the pandemic on our results in the second quarter year ago twenty twenty one first have consolidated sales increased fourteen point seven percent or one point two nine billion dollars adjusted pbt increased twenty three point five percent or three hundred and three point three million adjusted pvt margin was up one hundred twenty basis points to fifteen point nine percent of sales and adjusted deluded net income was four dollars seventy one cents per share an increase of twenty six point six percent this is a very strong performance especially in light of the much higher than anticipated raw material inflation we've seen and the supply chain challenges we've described now returning to segment performance in the quarter in the americas group second quarter sales increased twenty two point six percent the impact of unfavorable currency translation was not material same store sales in the us and canada where up nineteen point three percent we generated strong double digit growth across all of our pro and markets in tag and the second quarter residential weeping tags largest business with the fastest growing we expect this momentum to continue contractors are reporting solid backlogs and interior and exterior work we're both strong or commercial business was the next fastest growing and is gaining momentum as we expected projects continue to resume at varying paces and comparisons are favorable over the remainder of the year property maintenance it also gaining momentum apartment turns a return to travel in office and a favorable comparison all contributed to our growth we expect to see continuing improvements as a year progresses new residents or remained in other areas drink for us you housing permits and starts had been training very well since last summer and customers are reporting solid order race well so encouraged by growth in our protective marine business with our return to growth with oil and gas customers and continued strength and flooring vision highway and pharmaceutical applications
spk_1: and finally as expected idea why does this was down significantly after five consecutive quarters of double digit growth notably all tag architectural businesses delivered growth over the second quarter of two thousand and nineteen
spk_2: from a product perspective sales in both interior and exterior paint were up by double digit percentages what interior been a larger part of the next additionally this is the fourth consecutive quarters break women sales increased by double digits this continues to be a very healthy sign of recovery as contractors typically invest in this type of equipment in anticipation of salad the man we realize nearly two and a half percent of price in the second quarter resulting from our february one price increase
spk_1: given a persistent raw material inflation we are experiencing taken out an additional seven percent price increase last month that will be effective august first
spk_3: would expect the combination of these february in august price increases to result in a mid single digit percentage of price in the third quarter and better than that in the fourth quarter putting our full year price realization for tag in the mid single digit range will continue to evaluate additional pricing actions
spk_1: as needed
spk_2: we open twenty three net new stores and a quarter and have opened thirty four net new stores here today
spk_1: along with these new stores we continue to make investments and sales reps management trainees innovative new products he cameras and productivity enhancing services to drive additional growth
spk_2: to provide a full a picture of how this businesses performing a close out my tag discussion with a few comments on the first half sales are up fifteen point nine percent versus the first half of twenty twenty and segment margin is up one hundred and ten basis points twenty one point six percent of sales
spk_1: a metric we pay very close attention to the number of new accounts which are up nearly thirty percent in the first half this is a clear indicator of terrific opportunities ad
spk_2: on a two year stack basis sales are up forty percent compared to the first half of two thousand and nineteen or an average of seven percent annually while above market growth segment margin expanded two hundred and forty basis points over the same two year period
spk_4: moved onto our consumer brands group sales decreased twenty five percent in a quarter he a positive impact at one point five percentage points related to currency translation
spk_2: and he negative impact of four percentage points related to the while divestiture pricing was positive as expected are the allied business return to more normal levels to them by consumers returning to work and difficult comparisons to the prior year we're encouraged by growth in our european and asia pacific businesses which were both up double digits in a quarter in in are pros who paint category
spk_1: though these areas of strength were not enough to offset lower north america the i i demand
spk_2: while it was a challenging quarter for sure it's constructed to look at this business over the first half given the unusual d i y dynamics related to the pandemic over the past year adjusting for the divestiture waddle the business is only down low single digits compared to the first half of twenty twenty encouragingly the first half of twenty twenty one is up mid single digits compared to the first half a twenty nineteen and adjusted segment margin is up one hundred and eighty basis points over the same period
spk_1: we think the comparison to the first half of twenty nineteen better indicates the progress we're making and growing this business and improving his performance
spk_2: as you know our global supply chain organization has managed within the segment this team continues to do incredible work in navigating the industry wide raw material supply chain disruptions caused by winter storm uri
spk_1: we are working collaboratively across our business to support our customers and keep them painting
spk_2: last me comment on second quarter trends and performance coatings work
spk_1: the industrial recovery appears to be enforced way
spk_2: the momentum we've seen since the third quarter twenty twenty continued and accelerated in the air second quarter group sales increased by more than forty percent you could a a currency translation tailwind of six percent a quarter price was positive and all regions and all divisions generated ralph regionally cells in a quarter growth fast as in europe followed by latin america asia pacific and north america every division in a group grew by a strong double digit percentage driven by robust underlined a man new customer wins share wallet games and favorable comparisons to last year second quarter
spk_4: i'll start with industrial what division which again had the highest growth rate in the group
spk_2: this is the third consecutive quarter of double digit growth in this business and sales were positive in every region new residential construction continues to drive robust demand for our products and kitchen cabinetry flooring and furniture applications general industrial the largest division other group posted it's second consecutive quarter of double digit growth and sales were positive in every region a customers are reporting the growth they are seen as being driven by to and market demand rather than temporary image or restocking sales were strong across our customer segments including heavy equipment building products containers and general finishing automotive or sales increased by a strong double digit percentage miles driven and collision shop volume remain below pre pandemic levels new installations of our products and systems in north america remained very strong this is a good indicator of further momentum in our business our code his business remains a consistent performer sales grew by strong double digit percentage and were positive in all regions this team continues to do an excellent job at when a new accounts in all regions construction and appliances lead to go our packaging team generated double digit growth against a high single digit comparison last year and sales were positive in every region
spk_1: demand for food and beverage cans remains robust and are not bp a coins continue to gain traction with existing and new customers
spk_2: as i did in the other two segments let me speak to perform as coatings first half performance where sales were up twenty six point four percent versus the first half of twenty twenty adjusted segment profit increased eighty one point three million dollars or twenty five point seven percent
spk_1: adjusted segment margin was basically flat which is encouraging given that this group has seen the highest level of raw material inflation in the company or today
spk_2: on a two year fact basis tcg first half twenty twenty one sales are up fifteen percent compared to the first half of twenty nineteen or an average of seven point five percent annually again while above market growth adjusted segment margin is down just forty basis points over the same two year period encouraging performance given this business has faced the most significant raw material place year to date before moving onto our outlook let me speak to capital allocation year to date we have returned a little over one point nine billion dollars to our shareholders in the form of dividends and share buybacks we've invested one point six billion to purchase six point four million shares in an average price of two hundred fifty seven dollars and twelve cents we distributed two hundred ninety seven point seven million dollars and dividends an increase of twenty one point two percent
spk_1: we also invested one hundred and fifty one point four million in our business to capital expenditures including approximately seventy million for our building our future project we in the quarter with a debt to adjusted ebitda ratio of two point four times
spk_2: turning to our outlook we expect robust a man in all north american pro architectural and markets to continue through the second half though comparisons become more challenging and continue tightness in the supply chain will remain he had one we expect the i why demand to continue to moderate as consumers return to work in comparisons will remain challenging into twenty twenty two we expect industrial demand will remain strong over the rest the year
spk_1: as we describe last quarter we've been highly proactive in managing the supply chain disruptions to provide product to our customers
spk_2: we expect to be in a make and ship mode until the seasonally slower fourth quarter when we expect to begin building inventory we see the current challenges as an opportunity to drive even greater engagement with our customers we're leveraging oliver assets including our store platform or fleet or distribution centers in more to let us come up with unique and creative customer solutions that others simply can't and the costs of the equation while macho inflation has not moderated driven by continued supply chain issues and surge in demand as a result we are raising our raw material inflation expectations to be in the mid teens for the year and increase from our previous range we anticipate year over year inflation in the third quarter to be higher than it wasn't a second quarter with only slight improvement in the fourth quarter as the man remains high we continue to have great confidence we will offset these higher costs with the incremental price increases we announced in all businesses during the second quarter we are prepared to implement additional increases should they be necessary we recognize the timing of price realization will continue to put pressure on margins in the near term
spk_1: over the longer term we expect margin expansion
spk_2: against this backdrop we anticipate third quarter twenty twenty one consolidated net sales will be up by mid to high single digit percentage compared to the third quarter of twenty twenty we expect the americas group sales to be up by a mid to high single digit percentage with pro sales at or above the high end of this range and yeah why sales returning to a more historic level
spk_1: we expect consumer brands fails to be down by a mid high teens percentage he could in a negative impact of approximately five percentage points related to the wild divestiture
spk_2: and we expect performance coding sales to be up by a high teens to low twenties percentage we expect raw material availability to continue to improve throughout the quarter
spk_1: embedded in our guidance is a slightly smaller impact from raw material availability then we experienced in the second quarter
spk_2: for the full year twenty twenty one we expect consolidated net sales to be up by a high single to low double digit percentage
spk_4: we expect the americas group to be up by a low double digit to mid teens percentage consumer brands group to be down by mid to high single digit percentage including a negative impact of approximately four percentage points related to the while divestiture and performance coins good to be up by a low to
spk_2: he's percentage we expect eluded net income per share for twenty twenty one to be in a range of a dollars and one sent to eight dollars thirty one cents per share compared to seven dollars and thirty six cents per share earned and twenty twenty four year twenty twenty one earnings per share guidance includes acquisition related amortization expense of eighty cents per share and a lot on the lot of divestiture thirty four cents per share
spk_1: on an adjusted basis we expect four year twenty twenty one earnings per share of nine dollars and fifteen cents to nine dollars and forty five cents an increase of thirteen point six percent to midpoint over the eight dollars and nineteen cents we delivered and twenty twenty
spk_2: let me close with some additional data point that may be helpful for modeling purposes
spk_5: we expect these by the more gross margin contraction in our second half compared to our first half due to higher raw material costs product and customer mix returning to more normal levels and a more difficult comparison year over year partially offset by additional selling price increases implemented across all of our businesses in a second half
spk_2: half of the year we expect to see some contraction and for your gross margin given a lag between pricing realization and the rapid and greater than expected increase in raw material costs as we capture price and inflation abates we expect to see gross margin recover and then expand overtime just as it has in previous cycles
spk_1: we expect to see some contraction and our second half operating margin do the contraction and gross margin partially offset by levers and as she in a due to the strong sales growth
spk_2: we expect our full year adjusted operating margin to be approximately flat with twenty twenty with a nice improvement compared to twenty nineteen the level of operating margin performance compared to last year will depend on where the range are consolidated sales perform in were raw materials trend to the second half the year we will continue making investments across the enterprise that will enhance our ability to provide differentiated solutions to our customers we expect to return to our normal cadence with around eighty new stores open in the us and canada and twenty twenty one lhasa be focused on sales reps capacity and productivity improvements systems and product innovation he also plan additional incremental investments in our digital platform and the home center channel these investments are embedded in our full year guidance we expect foreign currency exchange to be a tailwind of approximately two percent for the full year expect our twenty twenty one effective tax rate to be in a low twenty percent range
spk_1: we expect for year depreciation to be approximately two hundred eighty million dollars and amortization to be approximately three hundred and ten million the cap acts and interest expense guidance we provided last quarter remain unchanged
spk_2: we have twenty four million dollars a long term debt do and twenty twenty one expect to increase the annual dividend per share by twenty three point five percent per share with a full year we expect to continue making opportunistic share repurchases
spk_1: will also continue to evaluate acquisitions that fit our strategy
spk_2: we delivered an excellent first half and despite considerable supply chain an inflationary headlines we're maintaining our previous for your guidance and expect to deliver another very strong year we remain highly focused on providing solutions to our customers
spk_0: that concludes are prepared remarks with that of i to thank you for joining us this morning and will be happy to take your questions thank you at to sign on have a conducting a question and answer session if you might ask a question please style on your telephone he pad and a confirmation telling indicator line and clashing here he press start your he later another question from the kill objection three and take our equipment living a third to pick up the handset before pressing the starkey
spk_6: thank you and our first question comes from line of concha punjabi a fat the ship your questions
spk_7: becky the morning everybody
spk_6: morning answer
spk_2: morning i have for twenty twenty one sales ah yeah specific to tag vs you most recent guidance a can just take us to which and markets are driving that incremental upside handle and he also said that prompt your prices are not moderating but if they started to stabilize or is that not the case at this point
spk_4: i got on the me take up a swipe at the verse party a question i ask how the talk about the second who's going to be an easy swipe across the first piece because across the tag business if i understand your question which segments are going to be driving that business it's it's every one of our professional segments and we that great confidence in the demand that the that we see in that business we spoke last quarter last couple of quarters about our expectations as it relates to d i y that they would likely revert back to the mean are the norm and that from a market perspective that we would be in a terrific position to be able to capitalize on the business as a started a shift in the these pro segments we didn't expect it to be perfectly smooth just waving and from one to another but in fact these pro businesses are showing terrific demand and we're excited to be in the position to be able to capitalize on those
spk_2: we think the control distribution model that we have with a the of the rap that we have and even as a these challenges are challenging times with some of the supply chain issues that that were working closer with our customers in the developing a level of loyalty that we've not seen before we before dawn it our our ads
spk_4: the couple comments as to why i made those those the that was statements regarding the relationship with our customers
spk_2: we stay very close to our customers and right now we've just gotten some terrific feedback on the research is a relates to our loyalty with our customers
spk_8: as it speaks to the pro business with set records during these challenging times with our contractors highlighting our ability to respond and work with them during these challenging issues
spk_2: in the fact that are wrapped and managers are there with them close to the customer has allowed us to be responsive to them keep them in paid
spk_9: predominantly better than anyone else and in that combined with the demand we feel good position as to really come through this in exit this stronger than than we are today and gosh in the said that out on the raw material advocate side we're out saying that or third quarter is gonna be the highest year over year
spk_1: in in that coming in and a second quarter we thought the second quarter will be higher year over year i saw like moderation there but we also thanked the fourth quarter we should see some moderation and raw material
spk_9: up the costs are higher an industrial but significant across all of our business and that is why we were out price increases krakow businesses the announced a up august first pricing senate percent price increase and tag at were out across our businesses and all our region to recoup
spk_6: the a significant romeo rent material inflation as you're a cough yeah we're going to see some short term contraction and gross margin but as pricing catches up with those raw material increases will start to fear recovery and then as raw materials moderate will start getting at
spk_10: a gross margin expansion don't forward
spk_0: perfect thanks so much
spk_11: next cancer
spk_1: a next question comes line of chapstick ask us with a jp morgan to save the question
spk_9: ah thanks very much
spk_1: and when hi good morning as a person that there were raw material shortages that you endured in the quarter and to have an estimate of perhaps your lost sales because he didn't have sufficient raw materials and when you think about your last sales how you allocated among the groups
spk_9: yeah jeff
spk_11: on a consolidated basically we think the raw material shortages were
spk_9: a headwind of about three point four percent on the consolidated now split pretty evenly between our tag in our consumer brands segments there was an immaterial impact on our performance coding segment thank you for that and in consumer brands on it is that the area where where you're wrong material your price raw material capture is likely to be flung you know jeff i think what
spk_2: you know each other across consumer each of the that we had a lot different categories and businesses i would say that the team is implemented right thing
spk_1: across all those categories their price effectiveness is similar to where we're at and tag and there are more pride than account off that the additional raw material basket increases that were saying that i'd say that the from our perspective our actions are right and why
spk_9: mine in that our customers response was pretty much in line with what we expected we've we've always said that we don't try to run for the perfect quarter we're working with our customers on both the tag consumer while and even the pc decide on on how these price increases roll him
spk_1: we will get the price increase in our goal is to to do that way that allows us to to retain the customers who him to do that we work with them but we have absolute confidence in our ability to do do both of those two to with a price in and keep the customers
spk_12: at the only other commenter with make on that japanese the on the lag i think if you look at the operating margin comparison vs last year it's very difficult because about the just the very high volume strength he saw the second quarter but if you look at the first half
spk_9: our first half and consumer are operating margin was still are almost one hundred eighty basis points versus the second first half of two thousand and nineteen so i think because of the way the
spk_11: a year
spk_13: raul now i think a better comparison with each to the first half of nineteen and in with maintain that margin
spk_14: and that ah three and a half percent fail the increase in the first out versus first that making okay thank you so much
spk_1: thank you jeff i next question has commission i have john wick nothing with the will capital markets pacific crest yeah thanks for take my question out when now when we think about the the various buckets for raw materials what it's resin our t out you were packed in our would have the i guess as you look forward other ones where you expect to see relief and can you speak to one is that you think elect their there gonna be sticky here for wow can you can you help us to think about that yeah sure john your we look at the the basket what we saw the second quarter was really the inflation was being driven by higher costs for monomer residents solvents and packaging materials mom is john legend the inflation was highest in the performance coatings group given their greater exposure to that side
spk_2: we did guide here that we think the third quarter is going to be the highest year over year raw material inflation and only modest relief maybe in in the fourth quarter so i think a lot of those that i just mentioned could remain sticky it's and the t i o two psi that been largely stable for the most part a little bit of inflation but not not not we're we're seeing the pressure so we're it's gonna continue to be a challenging environment on the rise
spk_14: but as john mention in l mention in their remarks you know we're very committed on this writing initiatives that we have been very aggressive were out across the businesses feel very good about our believe offset those dollars during the year
spk_2: you could be look historically where we've we've seen no going back in time you where the industry took a little bit of a delay in two thousand and sixteen and in the experience are we going there without lot of leadership and this company that's been through that experience as well well as others in the determination the we have to stay ahead of the i think is this herbal right now with the performance and are operating margins and performance coatings reflecting the already aggressive actions are taken place to offset that we're we're very committed to this we're going to stay very focused in who believe will say that of the pricey you got a fair fair enough and then maybe just as a follow up on that on the supply chain issues were either you lost some business were or couldn't meet the needs arm or a you know something your competitors how i guess how should we think about i'm a about the the potential for share change or is it is it's something where you see it is you know ten
spk_15: february last business or gained business or is this something where it could be a little bit sticky i guess how should we be thinking about as we look forward think you should look at it as we're going to win share game during this time that there might have been some transactions some projects are some element of a project that we might have lost that you as i mentioned just briefly
spk_2: or a moment ago you are researchers indicating the way in which were handling this an immediate talked briefly about that the transparency with we're working with our customers
spk_3: the responsiveness that we're working with our customers there have been as the i'll mention
spk_2: little bit of challenge and dealing with them of these customers but we have great confidence in power responded and how are dealing with our customers that lead us to believe and in the mood customer sat scores that that we're getting from our customers oh really indicate the fact that the the way we're handling this it is allowing us to add them to to come out of this with greater stickiness the new account growth that we're experiencing right now to record the year to date performance and new account activity in in we're stepping into this with customers while roping new accounts with them we're we're getting them at this point to try new products you know and in that trial in itself down the road will lead to a more projects with those customers so and got great confidence that as we come out of this you're going to see that same coil spring that we've exited other and a challenging times uncoil
spk_16: in the we're going to accelerate that you can see that not only in in what i thought about in the research but
spk_0: you know as our competitors continue to closed doors and close territories and we continue and thus to
spk_17: number of areas were take advantage of this market and we we actually as as difficult as the times are these are the best times for our company we expect come out of the stronger
spk_9: great thanks very much for the college next question comes in line of bob court with goldman sachs please see the last like a good morning data hoping you could help us figure out the math to get that mid teens inflation cover can you tell us what your raw materials are as a percentage of your total cards yeah thought of the
spk_17: robert periods or about eighty percent of our or a pot
spk_2: tell you we need to get about fifty percent tribe and fifty percent of the raw material increase to cover the dollars and up my expectation that we will cover the raw material increases dollar for dollar in the full year little bit behind the first half catch up in effect that but full year well off that raw material increased off dollar and then maybe dovetailing are not john's question i would guess he has the largest paint company certainly in north america you did where you are you able to leverage preferential supply relationship so you had better availability think than your competitors well we work closely with our suppliers and around that they they they approach that we're taking here is that the yolk many of them are and unique situations as well
spk_4: we we clearly have worked with our suppliers to put ourselves in a position to to leverage our supply chain working with them in a way that they can accelerate our ability to serve our customers so on the one friend from incoming raw materials we're working closely with them were unique and the fact that we have our own fleet of
spk_9: of the vehicles with eight hundred sixty tractor tractors in two thousand one hundred trailer that we use
spk_1: to exploit once receive these raw materials into our plans and the me many cases right now right from our plans to customer project so it's the entire or as the entire supply chain by the we're working on to to expedite cut out as many days as possible and to serve our customers and in that that trans
spk_18: the as we communicate to our customers is exactly why i mentioned earlier we know that we're going to come out of this with the with shaggy it's a bad guy anything thing i would add to that really utilizing our goal of of scale or flood prior or global relationship to look for additional ah supply opportunities big
spk_0: can you know where investing ah capital the half the an additional fifty million gallons of capacity coming online over the next few quarters and where the demand environment and it's it's well above where our initial forecast for raw material supply would be coming into the season so as we can get additional
spk_19: raw materials will convert those raw materials faster as we cannot of the third quarter for the fourth quarter you you can expect it will the building inventory and are going into the first quarter off a building additional a mentor to get ready for next selling season and twenty twenty two great thanks to help expand next question be coming from the line of true and patterson with wolf research to see if the question
spk_9: a good morning everyone thanks for taking my questions either at first on perfect are on performance coatings he you know you all suggested that we are raw material inflation will be heaviest than the thing make it could you just help us gauge the magnitude of inflation and in c d vs your mid teens
spk_1: ah company inflation guidance
spk_9: and know specifically performance coatings i know you're taking actions pricing actions boat with when do you expect to get kind of price cost neutral on a dollar basis in that segment yeah yeah trim at it
spk_1: yeah we talk about mid teens and young or industrial businesses on the business of the in the high teeth maybe a low twenty than and young seen some moderation in the fourth quarter you know to talk about the price cost dynamic i think it's important to look at the first half operating margin because it's a little bit of a a goofy year last year
spk_9: yeah i think the team done a tremendous job many painting their first half operating margin in a significantly higher raw material costs environment and in the first half and it's the highest and in the company of talked about in there working well their customers to keep up with a strong man while having to implement the selling price increases thought that that raw material inflation when you look at our first half adjusted operating march in it's down just can basis points the first out last year and down just that forty basis points the first half of two thousand and nineteen and if you put this in perspective if you look go back to two thousand and sixteen through that two thousand and eighteen and a raw material flash nary environment that wasn't as significant as were experiencing a day in our industry are operating margins lot declined significantly from sixteen to eighteen on a pro forma bases including a full year about our answer of land and then as we start selling prices increase in they caught up raw material inflation raw materials moderate was finally started seeing opera archon expansion in are in two thousand and eighteen i think what them for it and us this question at or a financial community presentation and just and answered it the right way we have been more aggressive and in getting price into the market faster and at at a higher pay than as we've seen these rom at mature this raw material flesh and in we are getting leverage on a stronger by volume so along with our continuous improvement mindset and other or
spk_19: their actions that we're gonna be taking it gives us great confidence in getting to the hygiene the low twenties actually come out of this raw material inflation and back environment so yeah how long the inflation laugh
spk_20: dictate somewhat how long it's gonna take us to get back are operating margin of we are in a much better position today than we were in a few years ago
spk_9: okay okay thanks for that and then i'm on the yeah consumer brands group i especially a private while in north america you know the i'm just hoping you can help us workers and the moving parts there be no the supply chain constraints on which are impacting fails you all have the divestiture it seems like a pro side of the businesses is healthy and in north america consumer a trying to understand how core d i y
spk_21: why demand trended through the quarter and how it plays in peer full year guide it seems like the at at least the the deceleration in the eye why should start to improve as we move through the quarter just trying to understand some and moving parts there yeah
spk_9: truman and limit
spk_12: to comment that you know what we expected the i why would return a more normal levels as the your progress
spk_9: and and we were very confident and that other segments particular and tag with a commercial property maintenance would more than offset that slowdown so yeah we took our our consumer brands for yourself guidance said down to to mid thigh teens and while taking that the americas grew up from low double digits to timidity than any you're absolutely right when you look at the comparison
spk_1: a year over year
spk_19: at or second or third quarter they're going to be the toughest or fourth quarter get get get slightly better but i think it's important to look at it from an architectural market perspective and then give you look at the combine architectural business with set expected the first half of the of loaded double digits and we were right there with our consumer and tag business
spk_22: third with that it we expect it or second half to be amid midnight i single digits vs last year and with their tag and cpg sale guidance or for your second half within that range
spk_0: so from architectural perspective we believe we position the company strategically to take advantage of the different shifts in the market the position as the capitalize on the shit so and and plus you look at the return to growth industrial
spk_23: yeah we're just really excited about our full year sale gotta be a high single digits alone double digit in a at really turbulent the market okay thanks you guys for the time and good luck in the our upcoming quarter like a german and ask a question is coming from of a rune fascination with of argosy capital markets the subject
spk_2: prefacing my question album ah and i yeah impressive results i guess in the face of the rum translation so i guess just i wanted to ask about overall market growth i you know you continue to a very really well and and resin repaint and it's setting up for and as you just know that kind of i tell ya icing on the low double digit and and tag so i guess next year you will be facing a tougher cough their you'll you'll be facing yeah potentially a slightly more team of a cop and and d i y and consumer and and performance as well so how are you thinking about kind of i ongoing sales growth and your business sanguinary still kind of thinking that heroin is in a position to grow and and a half or two times the market in and tag ah and then maybe performances is more in line with that kind of industrial production ah and then consumer kind of settled back and kill i'm kind of three for thirty four percent d i y on a ranch or are you thinking about the different segments as far as growth kind of an hour or more meat mid term basis
spk_4: there are really take a quick swipe your in and our own threaten them to give you some macro numbers i would say that we absolutely agree with the book projected growth rates to continue to exceed the market in you i remind you use rez repay this is the tip of the spear and your conversation
spk_2: we were now five consecutive years of double digit growth and residents will repay we don't see that slowing down in fact or expectations of heidi in in or day organization has to continue to accelerate their growth for making we believe some terrific investments in that business stores reps products the or digital platform the number of areas though that we continue to invest yes and the face of adversity in some cases but as i mentioned earlier that's what we believe helps us to accelerator these challenging times particularly given some the moves of our competitors so we're excited about the growth opportunities
spk_4: there to accelerate in the other the gym the to talk about some of the macro numbers
spk_2: across the the business but when i look at the professional segments inside our take business we're excited about he's one of those in and before gym kicks off you you also mentioned the pc t side we have very high expectations were just invented his team we've we've got some really good momentum there are focus here we believe is unique we try to bring differentiated products and solutions to our customers
spk_3: and we believe that the combination of about bar sherwin her technology portfolio is is really starting to allow us to to harvest some of the great work both companies had done individually in a way that's very unique in this clearly visible through out the different segments particularly if you look at automotive that
spk_1: the apple will you know that we're beating the market with the combine technology that that two companies are brought together so than the in the idea of consumer reverting back in the low single digits is probably a good model number two years that we absolutely believe that are tag and pct businesses will be outpacing the market yeah and it out to just play about residential retained you think about that remind you again as us our largest segment and tag it's also the space where we have the most opportunity again share so we feel really good about residential repaint i think if you look at some of the market data that's out there it's very supportive you know for sample existing home sales continued be very strong we look at the leading indicator remodeling activity that's accelerating into twenty twenty two remodeling market indexes all time highs right now so ready repaint no no reason for us to think of that snacking gonna continue to be strong and the new residential side you're hearing news about labor and materials being a little bit of a governor but i think that could have the effect of extending that cycle and if you just look at the raw numbers on starts they're still a very significantly year over year both on single family and multifamily you've got historically flattish mortgage rates and
spk_4: in consumer confidence still strong and household formation is that we always talk about sell on a new read the side very good
spk_2: commercial just touching on after a second that was our second fastest growing market in the quarter and as we've come out of covert vaccines are in place people returning their work a commercial if if help lot of momentum right now you're seeing other indicators like the architecture billing index for example that are very supportive
spk_23: so we feel very very good they're even property management her as people returning to travel return offices that very nicely in the quarter and then maybe to close out with the industrial business we look at lot of different indicators as you know there's a lot of different divisions in that segment but the the manufacture during the pm eyes up in every region with feel very good about that and we've often said you know
spk_9: in regions outside of the us are opportunities are huge for marketshare again so we feel very good about are continuing to outgrow the market in in tag and inner peace eg business and as we've said consumers probably going to start to return no more normal that up but i would add even on a consumer side we are committed we we believe that we can help our customers set up performed the market so while it might revert back more into or a normalized run rate we want in and will be working on and investing with our customers to help them outpaced that market and lee that we've aligned ourselves very well with our customers they share that desire to continue to grow market share and that we're investing in that business and and believe that we can help them out the market as well okay thanks for that and then just as a quick papa maybe i could ask our on that on have a cat couple deployment side am it sounds like you know you've completed some buyback activity but that's that's still gonna be your main use of cash and is that accurate outside of your internal investments and ideas i am an environment tat still showing very high valuations are not attractive or out and it's comment on your your is of kashmir yeah and i think you know we've been very consistent our capital came out the
spk_24: yeah john talk about the strong as generation of first half and the return
spk_1: the billion nine to are on my nine nine or shareholders and different than shop and buy backs
spk_9: you know a and i think i want to make a point that you know we we don't need to make acquisitions i think you know i talked about this honor our up financial community presentation and you look at our our growth from two thousand nineteen and twenty
spk_1: and we've average debt if a two point three have had an average growth rate or eight hundred million eyes and recursion it just it
spk_2: pvt six hundred and forty nine seventy seven percent flow through are operating margins up strong and so i would say what we don't have a gun to wear a hat will continue to look for opportunities for emanate and or that fits our strategy but i think it's important to note that the will continue to invest our long term organic
spk_4: growth opportunity than and yeah i think that the a great way to deploy cash we talked about the architectural capacity improvement yet packaging capacity increases coming in and others but that i think we get more leverage on the organic growth
spk_2: and this just purely emanate but
spk_3: after them and a we will buy or stop back and and the second guy a of the a great response and and i also do want to a local or on the emanate strategy that hour or two
spk_4: while we don't feel as though we have a gun to our that we do think that there are opportunities out there and we think that there are several deal that we're working on it could be completed this year but they're going to be disciplined
spk_25: the deal that we can bring value to our shareholders or we're not trying to be everything to everyone everywhere
spk_0: oh we're looking proactively for targets that as l mention fit our strategy and those a be areas it would fill necessary geographic gaps were not just though in a dark at a map you're trying to figure out where we're not
spk_26: it'll could bring technology that can be leveraged across the platform
spk_27: or could fill a void of of other types of us serve our customers so we absolutely believe that there are emanate targets out there that are a good fit that we can get at a the proper value in fairness to the sellers and to our shareholders and meanwhile we don't feel as though
spk_26: were out there you're just trying to buy a book a bit as business or that we could demonstrate go we have growth opportunities and were actively pursuing those organica
spk_4: thanks lot
spk_2: i got a room and expression caution land of duffy fisher with barclays this issue
spk_4: eric i'm one of ours
spk_28: a duffy
spk_29: first questions just round raw materials and this spikes a little bit different than just a straight supply demand tightening with the freezing cold it is is doing anything to change your strategy on how you want a source raw materials either integrating upstream more yourself to do more the resins diversifying producers diverse find yoga
spk_2: fees should we expect to see any meaningful change structurally on that side no duffy we have a a terrific and an experienced team in both procurement and and technical as well as our supply chain and as you would expect know with veterans that if you know twenty five plus years of experience will look at a lot of things differently i don't know that anything that we want to talk about right now i don't think structurally up to be concerned from a capital standpoint the were changing the model of the business but that you should expect in our customers should expect us to be thinking about how to protect them going forward and will be taking those necessary steps that but i don't think that of a call like this we want to define what those steps or fair enough and then i'm can you talk about both your ability and your customers ability to attract new talent to hire people is were growing into this and and what you're seeing on labor inflation
spk_4: yeah i'd i'd say
spk_2: we have seen a slight uptick in the in some ways a area some pressure where we feel that pressure were taking the steps to secure what we believed to be our most important resource are people
spk_4: remind reminded that we have a terrific turnover rate not between seven and eight percent on average so we recruit and higher of the right talent we train them we give them the resources to win and then they become the reason for our success and we're very proud of our team
spk_26: as a result of that in the fact that they have success in a career path
spk_30: are people tend to stay in fact over a third of our employees have ten or more years with the company
spk_0: in we think that's very important so while we're making some adjustments were necessary
spk_31: we we believe that they the right investments to make and we do we do believe that as a result of this retention
spk_32: were able to respond with experience employees that can serve their customers as far as that materiality of them of of the of the movie that were making into responded as pressure i don't think it's material the sense of a modeling was i did but we are taking the steps necessary and and in some cases in a mood making the financial moves to to recruit and retain a town that we need right thanks guys
spk_4: thank you duffy
spk_1: next question comes from line of my santa claus foreigner businesses hey guys i'm
spk_2: the and sounds like they're they're the painter the pumpkins gonna be a lot higher the sharon maybe the high summer than at get just curious you're given how our our high the inflationary five minutes then the in away from it you'll do fall like why do you feel it sounds like you feel pretty good that a you'll keep that pricing level and and margins could expand your really exponentially versus what the seen a starkly and then i any worries that that that the price of the pain can as a a cause and demand destruction given that i know it's not the biggest part of a pain project but just just any thoughts there oh as he was a good remember is that the cards are the cost of the p to the toilet project is a relatively small percentage aged eighty five percent of the painter's cost is in their labor and so weird
spk_9: you been in in developing innovative products to help them upset that labor costs in while many of them are able to hire and secure the town that they need many are bringing on new unskilled the
spk_1: people the and training them and so the cost of a good gallon of pay that can help them produce a nice finished product that their customers will enjoy overall the relatively small percentage of their cost of goods so they are they are responding or the favorably to higher quality products and just a moment ago i talked about you know our labor in our willingness to to hire recruit and retain a talent and and in some cases paid a little bit more and and in which we have to consider that as as well as our labor as as was our customers you know that we look at that cost of
spk_9: the retention that i just described in that gets factored into all the pricing decisions that we make there are plenty contractors are doing the same and so we're trying to offset some of their costs
spk_33: the peters with higher efficient project through quality products and while we're trying to do the same to our customers as we're experiencing some labor cost increases were trying to offset that with deficiencies in our plant in our stores to minimize the impact of labor on the wrong
spk_2: price increases that were out there seeking to imagine you know we we do believe we're in a similar environment that we were it faith thing in two thousand and ten thirty two thousand and twelve are we at implement six price increase in a twenty two month
spk_34: carried it off at the six significant raw material increases by we we continued to invest
spk_0: ah in our long term growth opportunities adding one hundred sixty plus the store airing over two hundred sixty wrapped in our north america paint sort of at three year period as well as other customers solutions
spk_35: and we and we did see the benefit in atlanta bottom line and as raw materials moderated of two thousand and ten to sixteen north america paint stores grew by am high single digits which with a multiple the market tanked segment operating margin grew over some almost seven hundred basis points and on a consolidated basis
spk_36: we grew by hi single digit percentages and even a margin increased almost five hundred basis points we expect to see similar types or a result as a commodity but i think the key there is week we continue to invest and so were were willing to accept a little less than a leverage on as dna it including and our second half the sheer but i think it's important that we show our customers that in in good and difficult times were investing in their business to make them successful
spk_9: i thank you mike i'm a national absolutely shocked that your first question wasn't about the guardian name them and let me down there thanks where got thank mike our next question sky from the line of david begleiter with deutsche bank pacific ocean i thank you john allen not last question for back that twenty can't quite twelve time period
spk_2: the retaining a party at a price increases on raw started coming off and a say we retain the majority of i'm david
spk_36: as as our customer base especially look at our largest segment i then example residential repaint
spk_9: yeah caught that a gallon pan and ampersand hurt their costs and once they get the cough into their beds they can have that on and especially you know it's john talked about moving customers up to higher quality products and we do see a trend when we're in an inflationary my environment that customers moved to a higher quality product to to get the benefit of the efficiency which way of far outweighs the cost of that gonna paint even when you compare it to what they read previously to to the current product so we do expect to retain of a jury and of of the pride not just an architectural but i also an industrial the industrial of a threat but i think the important metric that we track closely as our ability to help our customers make more money so in that process our entire focus when you when you look at the investment that were making the services that we're providing every gauge that we have every resource of
spk_37: we do it always ends up with are we helping you make more money and as it is as important metric and in our decision making
spk_38: under threat and just on a price impact my back half year he gave us the a the expectation for tag boy expecting oh how sweet look at that cause your brand for performance cuttings price makes expectations that back half the year
spk_0: yeah and as with talked about david thoreau harder to take that tenant look at the different businesses to the even within the different categories with and consumer but you would expect to see a similar my traded that we expect to see a similar
spk_1: range within and summer and a higher range and pc game just because of the the raw material basket be
spk_39: a higher on our industrial businesses and and just timing on industrial you know
spk_1: tag it is more uniformed and timing lives when they go out price where whereas the in or industrial businesses by business by region or staggered across
spk_39: different timelines but you can expect to see a higher a cadence for our industrial businesses in the second half
spk_4: got it thank you very much thank you david
spk_2: the question commission line of steve phone bank of america this to your question
spk_4: the slinky unlike some of your peers
spk_2: when the inflationary in burma really started escalate you you made the decision
spk_1: to basically send the message to your pro contractors that you weren't gonna raise price for a few months
spk_4: what with the decision to drive loyal loyalty me
spk_39: the being that many of them had in already one contracts and had i had a price or something in those contracts and so forth what what what that part of that decision and if so do you think that it was successful do you think that you gain market share among that pro contractor
spk_2: customer base because of that decision
spk_4: yes with great certainly and i would do that one hundred percent of the time i do it again tomorrow and if we have to in the future will likely take the same approach
spk_0: our loyalty in our ability that even execute the effective price increase with our customers increases dramatically as a result of that so without question
spk_40: and town he also made a comment earlier about in a backlog from your contractors who is robust
spk_2: you qualify that new you do have data that would that would compare that backlog today versus say where was no no couple years ago is it is it is a meaningful different we do we are they see our own system that we use proprietor rebuilt in the week we do keep an eye on that it is a very strong period and backlog and we're not going to share any more details on the specifics but i speak with gray confidence in the backlog thank you
spk_4: you bet
spk_2: the next fashions come for nine of kevin mccarthy with vertical research partners this is he the russians thank you are john and you're prepared remarks you made a comment that new account activity is up nearly thirty percent in the first half of the year can you elaborate on that are at how does that compare to long term historical averages for example and is there any way to translate that level record level of new account activity and to what it might mean for future volumes or future share against rings sample
spk_4: i'll give you a little color we're not going to get into any specifics and the metrics were conversion but i would tell you that it is a a very high very high number in comparison i would say that there are teams are are take leadership
spk_2: all the way through to though that are closer to our customers are doing a fantastic job and in all the questions have to be you know how you doing this given some of the shortages in raw materials and in the fact is is that we've been very open with our approach compared to our competitors and we were our early with transparency i think many of our competitors were in denial that first some of our competitors were asking why no one else is tommy that back some of them said it might be a week or two and we were out with very truthful with our
spk_40: this do what we expect and i give a procurement team and our supply chain team great credit for the kurds it took to come in to this morning that we're in today and explain how this was going to fall out and how quickly or commercial teams took that to the market
spk_41: face to face with our customers with full transparency to help them run their business
spk_4: and the written that i say that why i think that's important
spk_2: is that wow many of our competitors were in this denial in may have thought that they were going to be in a competitive advantage for whatever reason ultimately from a customers perspective they lost credibility
spk_4: and in in our teams now or out talking to customers who may in the past have had loyalty that kept them from from using other suppliers suddenly we're getting the the phones getting answered any and were helping
spk_2: are people to be in front of those customers that that offer that terrific opportunity now as i mentioned you know right now we might be just simply in the trial mode because the supply chain issues are real man were taking care of our existing customers with great focus and and were able to talk to these new customers about you know that alternate supply and the importance of that and in getting them to try product in some cases it simply in the back of our own stores in some cases it's one room on a on a project that we know
spk_4: with great certainty that this is the most important step in the process and this trial is an exciting step and we look for to a greater conversion going forward so earlier i was asked is do we feel as though we're going to come out of this with with market share games and i hope everyone heard a carpenter which
spk_2: i answer that because of that terrific risk respect for our leadership team and all the way down to the part timer there are store their from these customers introducing new products the new solutions that are going to help these customers make more money were determined to do just that
spk_4: thank you for that up my second question relates to our performance coatings if we look across the major categories their packaging would cry all refinish general industrial etc
spk_42: ah can you give us a sense for which of those businesses have crown the most horses pre pandemic wobbles and which might remain the most depressed such they have more potential for for rebound gone forward
spk_2: that's a really interesting question i'd say that
spk_4: where might answer that is that we see terrific growth and all of them
spk_2: i may i could just been to those quickly in the packaging business we do believe that the unique technology that we brought to market will help us to continue to grow i'll mention that cap exit were putting into this business we are investing along with our customers
spk_43: in additional capacity and we think that are our be seventy is a very unique product it's a plugin a product with plug and play performances
spk_40: is they adopted and to existing can making equipment and helps our customers with the speed so the efficiency of the application is terrific
spk_44: gives great flavor protection the product about food and beverage and that's really the next generation of the not bp a a technology so it's it's and i'm from taking packaging first and get into little that marked up because while it's easy to talk to that model it's the same model that were using in every segment
spk_0: to help differentiate our teams from our competitors so when you look at at g i as an example or industrial what we're looking at it and not only the technology but the supply chain how do we take the the time that it takes to get product in little that down to what might have been we
spk_45: aches in the days him and instead of the of thousands of gallons of of the required orders to you know fifty gallons or hundred gallons to put them in business faster with less working capital or coil businesses are are doing a fantastic job of introducing technology and speed or automotive i talked earlier about the that combine technologies between the sherman him in their vows bar technology it's helping throughput with each of their customers
spk_2: of the of the be more productive in our protective a marine business to get assets more that i'm sorry to get assets back in played faster so
spk_4: we ask that question quite honestly it's hard to answer you know which offers the greatest opportunities adjusting bends was in the room with me right now i'd look him in the eye and i time i have expectations for every one of those businesses to go in go excessively and at the expense of our competitors that's an outta thank you very much excalibur
spk_2: honest question shumlin of pj you have a car with sitting up to see a question
spk_1: yes hi good morning part of an afternoon i should say and are and i'm looking at the been business has so far off to up your competitors and their margins are much lower yeah margins gonna held up i'm and i'm sure your presumably impacted by the same shortages are are of raw materials like epoxy the nice a sign it
spk_9: is your impacts are likely to be delighted to take you or are there other factors that have said you are your armor to an impact by date a started maybe turns out i have i miss anything at a part of it as mix of business and we've been very selective in our strategy and on what we pursue
spk_46: and we pursue businesses that that are interested in him cody and solutions that will help them make more money not necessarily just commodities so you're not going to see us and
spk_47: areas where it's it's it's just that commodities so we've we've actually walked away from some of those businesses and leave the focused on on areas that are
spk_45: or more high value so we often talk about bridge and highway your to see us on the high value bridge area as an example as opposed to other areas that are just low margin commodities
spk_2: and i and i think that plays an important part in the alignment and i are approaches just that we want to be partners with our our customers help them to be more successful and in return they understand that our ability to serve them and make them successful comes at a cost to us and our shoulders and we share that reward elderly or to that and that the only thing i'll say pj's wheat we would expect to see control improvement in in in their performance coding segment operating margins to the second half
spk_4: and even our to got a tougher cop ah second half versus the first half still work see strong i am and our our sales return to more what i would say a mark and sister normal levels quarter to quarter so yeah are all year
spk_2: cell data that blow twenty or signage imply that a back half an hour and a high keen to talk about a third quarter be up hygiene below twenty so and and it about a strong i am getting leverage on as tonight but it also the commitment that this team need to getting paid right into the market
spk_48: timely and aggressively to ask that those rom a trap raw material inflation and and like i said earlier you know that this is not we learned a lot and in two thousand and sixteen seventeen eighteen at at his team and now delivering on and in in executing from that learning saw another
spk_49: read that right now
spk_0: gunnery that about
spk_4: a great great and their my second question is can talk about your digital efforts that may have accelerated through the pandemic how much of your a contractor customers and ordering online and getting the pain delivered to the job site thank you
spk_34: yeah i'd i'd say that we're seeing strong utilization and and i would say an increase in all the metrics and the categories and we track and in the platform i'd say is
spk_23: providing a service option that makes are pros more efficient in utilizing all our resources so unlike others who might be trying to a digital platform as the model ours is unique and that it brings everything to bear so we want our customers utilizing our stores are wraps
spk_9: and the platform and we believe the the model that we have is very unique and how and you calculate and capsule the capulets all of that in the in a one off right this platform weekend so we're we're not going to talk specifically about sailed on platform on the digital platform verse in the store by phone or through the rap what it quite frankly we don't discriminate against any of those orders will take them off of we want them utilizing any resource every platform that they feel as comfortable or trying to do is make it easier for them to this digital platform i will allow them access to their pricing their project their orders and they can connect that business with as twenty four seven
spk_1: and through the platform and as they prefer to come into the store and have a cup of coffee with the best friend behind the counter we encourage that as well
spk_4: thank you
spk_2: expedia the next question is when a line of john roberts city vs this issue the questions thank you i'm john on the guardians i don't think club dale right to use the guardian brand at all in ohio so maybe there's an opportunity there and yeah or maybe i don't either
spk_4: the only that the only that ever guardian goes out and that that i gave from john roberts not a hero
spk_50: that
spk_51: is it unusual in the june quarter for interior to be larger than exterior and was that a mix head when and the quarter since exteriors typically more expensive than interior
spk_0: now i would say it it it kind of that that makes returned are more normal level and i think typically we start off
spk_52: interior dexter maybe for the line in the out orders were the exterior and the midwest then and east or lack thereof prevalent and then as you get for the to middle quarter that a trans fat a closer to three to one to two and a half to one am i think we in that were closer to two and a half to one
spk_28: on on on fire and then trucking constraints were cited as a big head went by some your competitors what were you able to use the trucking fleet many different ways here to help mitigate the shortage of that i know you pick up some of your robert charles that you distribute but i enough very able to pick up by the raw materials and somehow mitigate afraid as an issue
spk_2: yes we were and we plan to continue to use them as creatively as possible just as we do every asset and john
spk_53: this has given us an opportunity and we have a terrific fleet or just played at the runs a girl supply chain whose team has been really creative so it's it's not just the tractors and trailers which is a great question that you asking that we're using or distribution centers are fat manufacturing
spk_2: our stores everything in a very unique fashion and
spk_42: in some this has been you know on the fly and we will continue to or
spk_2: improving our ability to do that in again will come out of this better as a result of we're learning a lot about our supply chain in our abilities to be able to leverage it and will be better coming out as as a result good thank you my score thanks yeah
spk_3: or next question is coming from the line of my harrison with the for research fires dishes or requests
spk_53: hi good afternoon
spk_2: ah of was one i think and talk about the consumer strength ah that you were seeing in europe and asia it is that are are a product of the i while remaining stronger for longer in those regions are over the comp sci fi or ah i also know that you've made some changes and york strategic approach to those international my it's but maybe comment on what you're seeing in terms of of demand trends internationally and the consumer business a job and i like a dead say that it's a little bit of everything that certainly the the region of particularly in china if you look at the doubled as a decline in two thousand and largely related to quote to cover it had an impact on us i i will point out that we did improve profits even in that kind of environment
spk_4: so in china we continue to focus on the by you gov with the recovery further defining are operating model in that region with a strong half and twenty twenty one when i going to give guidance by business but but you know that this is as i've said before an area that that were looking long term and i wouldn't suspected him next quarter that business is going to move the needle one way or the other but you know if you look next decade it might and so that's the way we're we're running as business and we have expectations for by an admin is deemed to continue to to really drive through the strategic decisions that were making their in
spk_39: and we're looking long term there and europe
spk_0: and so we continue to build around our kingfisher relationship
spk_4: this the team in europe is delivered a double digit increases twenty twenty so two persons are love bit more challenging here and twenty twenty one and we did have a very strong start in twenty twenty one they have a terrific leaders here in europe one of whom we just brought to the us to take a very important role for us he did such a wonderful job there and very strong strong leader and again speaks to the death knell leaders going to backfill him that's a very strong as well so i think both of these businesses are in a relatively small and nature but the new good opportunities for us and and we're managing accordingly
spk_2: i think son and then i also a mask about inventory levels have big box retailers such if if we were able look at the point of sale data is that pretty similar to what you're seeing ah in terms of the the consumer business saw revenue decline ah you seen retailers still i'm working a restock her or is they're actually some d stocking happening as that the i why demand ah it's is normalizing in oh my god i'd i'd prefer that our customers talk to their plans as a relates to inventory i will say that we're working hard and will be working hard to the bouncer the year too continue to improve our ability to serve them very important focus of ours i'll mention the incremental investment that we've made of bring out about fifty million gallons of capacity that that certainly will help this business as well as it relates to their inventory decisions and what they do i don't know that that appropriate for us to comment on that i would tell you that we're working hard to be a able to continue to improve our position with them should they decide to or to pull and more a toy going on hi thanks very much you bet
spk_3: next question coming on line of in st andrews has and family to specifically
spk_0: ah hi thanks just adjust to point out in the past you've talked about quitting sales are and and stores business and and control indicator of of a box of backlog arm is that trending and mine with your expectations or as a inflicting in that yes it is double digit growth
spk_9: speak with a good speak to the confidence that the that are caterers have some were excited about it i can actually to fun and any issues with any customers committee about labour availability of the season just given come here and up across the board anything with painters yeah i'd say labour continued to be a discussion and nearly every market that i've been in as as gym mentioned in one of his responses way we feel as though that is serving as a bit of the governor and you know a point out that while labour is an issue i believe every professional segment in tag at a doubled it again so they're finding a way to continue to have to go but it is an issue and again all of these challenges all of this adversity we don't ask for this adversity but it does play to our advantage the does allow us to serve our customers in a way that helps them through these challenges if they run short on people are have to move from one project to other another any of that turmoil on the part of our customer
spk_1: please write to the raptors they're working with that customer the store manager locally that has the capability to serve their customers so labor is an issue is one of many and we try to work with our customers in a way that they can help them make more money working through it fisher thanks are much better than
spk_9: next question tunnel and of great malik with have requires i your i a thanks ah my question was on the yeah a cop sales trend if you if you look at the at that celebration and i go was from sixteen percent two year to around twelve percent in the second quarter is that is that really all just ah dp supply availability of rise was at the main reason for the deceleration
spk_54: your your target and attack greg correct just like an attack specifically at it that to your stack
spk_0: yeah i think part of it is a he had a a tough her car
spk_2: you know
spk_55: and gilligan are you you'll get the way or two thousand and nineteen unfolded
spk_4: we can have a better second quarter and then when you look at the way we add a fight on a we had a headlands in the second quarter yet we talked about a three point four percent hand land in and raw material availability in her second quarter that impacted us
spk_56: so it yeah it it cannot
spk_4: a day the term wonky by the way that the to your stack came out in there with cannot
spk_57: at of little bit wonky and you look at the two year
spk_0: yeah first half twenty one or first half nineteen up forty percent and that
spk_39: yeah some prices that happen
spk_56: be primarily by and got it's a sudden maybe that's the second the fall into that is if we look at your guidance and looks like you're expecting that to year
spk_4: transit to react salary maybe not all the way back to sixteen but get back a couple hundred basis points as and stocks get better and pricing goes through was that there is he added there's that and i think if you look at it on the pro segment would even be a little bit better now is that gave share got it at great thanks good luck as
spk_0: the think those but
spk_19: next question is in line of adam baumgarten with someone says it pisses you to questions
spk_16: hey thanks to take my question i just one quick one for me just if you look at your commercial business and tag tv walk through some of the of and market verticals and more was strongest what was may be still struggling to be helpful
spk_9: yeah i'd say we're seeing strengthen quite a few areas the earth the hospitality area schools tilda warehousing is is really going well i'm gonna think of areas that are really soft nothing comes to my mind to in an area that are really soft i'd say there are growing and in
spk_58: and that lot of zelda about aware how the of expansion medical health care is expanding
spk_14: some just more than others
spk_19: adam
spk_16: the got it thanks pressure know
spk_58: and next question comes in line of garrick she might listen with capital to save the queen
spk_4: great take some tough one for me i'm just are you seeing any early signs of the impact of be a good delta very answer any change and help homeowners are are inviting and contractors appropriators no rsvp businesses the
spk_2: it's really hot and with nazi now
spk_0: but you you bet
spk_59: the next question for nine of our far side with cleveland research to see if your question
spk_23: i give up to two two things at for saw that the to your consumer growth improves in the second half
spk_4: somewhat notably relative the second quarter what what's different in the second half and that business or what was smart dragon to view the doesn't process to the second half
spk_58: yet eric at think you know
spk_9: the raw material availability impacted i said evenly my three point four percent saw a pretty evenly and a dog doesn't impact consumer little bit more so we'd we'd expect to see a little bit better progress that are a little less had when there yeah as they're chasing raw material costs pricing and in higher frightening their second half or so are are second quarter will be realized and and that you know i think what we back as we bring more capacity on and we get more raw materials will be able to the supplier or cause mirza and a better fashion
spk_60: a complaint you and then and then secondly i'm johnny talk about price leadership and stores and am
spk_9: great not surprising to see that that the question is in regards to realization
spk_1: see that's a unique period of inflation with roz
spk_28: can there be a path the upside realization on these price increases relative to the historic amount of realization or does the realization schedule
spk_9: look like it has in years past even though it's a different period of time you know i it it it might mean i'd say our approach to the pricing than very well received by our customers and
spk_61: the that was bad that i said earlier about no one hundred percent of the times i would do that exactly as we've ruled it out so they could but you know is also
spk_62: a lot of pressure on the market right now so you know what we're trying to do is put our teams in a position to be able to serve their customers to help facilitate that price effectiveness
spk_0: in them and we'll see more and work hard at it that you know i can't with when i represent certainly tell you like a project that number i could tell you that we're working very hard work with our customers that helped them to be success own in turn our shareholders are rewarded it's or mouth
spk_2: thank you
spk_4: you bet
spk_2: an expression question i enough kevin how fight with narcos research this is if your question hey good afternoon ever by am on the a l i wonder if it i think you'd mentioned that you have an application upright cost to be neutral for the full year with thailands in the back half of setting the headlines in the first half and given the inflation you're expecting and three q and kind of the timing of pricing phasing in is the third quarter still a drag on that it is expected to get to
spk_4: neutral and can you know with a busy all the benefit coming in the fourth quarter or how to expect that to kind of fade then ah and then i guess i just want to reconcile those comments with the i believe the as augmenting that gross margins in the back half of the or should be expected to be weaker than the front half i'm so why would that be given if if price cost to be in a tailwind and the front half forces at a headwind in the so nice hell and back efforts that had been in front out yeah i i think kevin you you will start getting on top of it in the third quarter
spk_0: not only the tag a price increase that was announced that across all the businesses and and segments will start getting on top of that and then

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