[Management View]
Sherwin-Williams management highlighted key metrics such as consolidated sales within the guided range, gross margin expansion for the twelfth consecutive quarter, and increased SG&A expenses driven by Paint Stores Group. Strategic priorities include aggressive restructuring initiatives, doubling the full-year target to $105 million, and maintaining growth investments in Paint Stores Group.

[Outlook]
Performance guidance for 2025 has been revised downward due to softer architectural sales volumes and supply chain inefficiencies. Future plans include continued investment in Paint Stores Group, disciplined G&A spending, and opportunistic share repurchases and acquisitions.

[Financial Performance]
Year-over-year trends show mixed results across segments. Paint Stores Group reported low single-digit sales growth, Consumer Brands Group experienced declines in volume, price mix, and FX, and Performance Coatings Group met expectations but faced margin reductions due to increased costs and lack of prior-year asset sale gains.

[Q&A Highlights]
Question 1: Heidi, you mentioned potential deterioration in the back half of the year in demand. What gives you that caution and if it does occur, where do we expect to see that deterioration?
Answer: There are three key areas of concern: new residential, coil, and DIY markets. Volatility in these areas, along with ongoing tariffs and uncertainty, contribute to the cautious outlook. Strategic partnerships with Lowe's and Menards are strong, but these segments remain challenging.

Question 2: Heidi, thank you for the proactive comments on the incremental competitive dynamics. Can you help us understand which subsegments in PSG will see the most share gains over the next twelve months?
Answer: Opportunities exist in all segments, but commercial, new residential, and property maintenance are expected to see significant gains due to competitor actions. Residential repaint continues to outperform, driven by market share gains. Investments in stores and reps are expected to yield returns across pro architectural segments.

Question 3: Can you provide more detail on the SG&A spend and how we should think about it in the back half of the year?
Answer: SG&A expenses include costs related to new building transitions, targeted rep ads, and store openings. Paint Stores Group saw incremental increases, while other segments experienced disciplined cost control. Second half SG&A is expected to be up only low single digits, reflecting restructuring benefits.

Question 4: What makes the current moment a once-in-a-career opportunity for Sherwin-Williams?
Answer: The differentiated strategy and stability of Sherwin-Williams, combined with macroeconomic uncertainties and competitive turbulence, create a unique opportunity for market share gains and new business wins. The company is focused on maintaining predictability and reliability for customers.

Question 5: How should we think about future growth algorithms given the current investments and market conditions?
Answer: Sherwin-Williams expects to grow at a higher rate than the industry, with potential for 2.5-3% growth in Paint Stores Group sales. Investments in growth initiatives are aimed at achieving above-market growth when demand improves.

Question 6: Can you elaborate on the impact of lower production volumes on gross margins and supply chain inefficiencies?
Answer: Lower production volumes due to reduced architectural sales have impacted gross margins. Supply chain inefficiencies are managed by adjusting production schedules and maintaining staffing levels at factories and distribution centers.

Question 7: What role does product pricing play in Sherwin-Williams' strategy for market share and volume growth?
Answer: Product pricing is not the primary driver for new account activity. The focus is on consistent quality, service, and differentiated solutions that help customers be more productive and profitable.

Question 8: Can you elaborate on the magnitude and flow-through of the restructuring program savings?
Answer: The restructuring program is expected to yield $80 million in annual savings, with benefits starting in the second half of 2025 and continuing into 2026. Savings are realized through plant consolidations and SG&A reductions.

Question 9: How will the transfer accounting impact the distribution of costs between segments?
Answer: In the short term, the impact of lower production gallons will stay in Consumer Brands Group, with adjustments made in January to reflect costs across Paint Stores Group and Performance Coatings Group.

Question 10: Can you provide more detail on the deflation expected in raw materials and the potential pricing dynamics in the second half?
Answer: Modest deflation is expected in petrochemical parts of the basket, such as solvents and resins. Pressure continues in applicators, packaging, and certain pigments due to tariffs. Competitors are implementing price increases, but Sherwin-Williams maintains discipline in pricing for value.

[Sentiment Analysis]
Analysts expressed concern about potential demand deterioration and supply chain inefficiencies. Management maintained a confident and proactive tone, emphasizing strategic investments and market share gains.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | YoY Change |
|-------------------------------|---------|---------|------------|
| Consolidated Sales | Within guided range | - | - |
| Gross Margin | Expanded | - | - |
| SG&A Expense | Increased 3.8% | - | - |
| Paint Stores Group Sales | Low single-digit growth | - | - |
| Consumer Brands Group Sales | Declined | - | - |
| Performance Coatings Group Sales | Met expectations | - | - |

[Risks and Concerns]
Risks include ongoing supply chain inefficiencies, softer architectural sales volumes, and potential demand deterioration in key segments such as new residential, coil, and DIY markets. Tariffs and competitive actions also pose challenges.

[Final Takeaway]
Sherwin-Williams is navigating a volatile demand environment with strategic restructuring and disciplined investments. Despite challenges, the company is focused on market share gains and long-term growth. Management's proactive approach and commitment to delivering value to customers position Sherwin-Williams for continued success in the competitive landscape.