Sherwin-Williams (SHW)

The North American Coatings Benchmark

Sherwin-Williams shows what pricing power looks like when a paint maker owns its shop counter. Its Paint Stores Group, 4,853 company-operated stores in the US, Canada and the Caribbean at the end of 2025, took 57.7% of FY2025 net sales, and most of the paint it sells comes from the company's own plants. Group net sales rose 2.1% to $23.57B.

Only the Paint Stores segment splits its growth into price and volume. Its net sales rose 3.2% to $13.61B in FY2025: selling prices rose by a mid-single-digit percentage while volume fell by a low-single-digit percentage. Sales at stores open more than a year rose 1.7%, and most of the rest came from 80 net new stores.

Gross margin was 48.8%, up 30 bps from 48.5%. The 10-K credits the stores' higher gross profit to higher selling prices and easing raw-material costs, partly offset by lower volume. Adjusted EBITDA margin rose to 19.6% ($4,609M) from 19.4%. Prices that hold while costs ease are the mark of a business that sets its own prices; the pricing power guide compares how price and cost moved margin at Ecolab and PPG.

How the Numbers Read

Because Sherwin-Williams owns the shops, the retailer's markup counts as gross profit. Rent and staff are charged lower down. So the drop from gross margin to adjusted EBITDA margin, about 29 points, is the widest among its large specialty-chemical peers; PPG, next, loses 24 points.

Segment margins show where the money is made. In FY2025 Paint Stores earned 22.5% of sales as segment profit before tax, Consumer Brands 16.1% and the Performance Coatings Group, which sells industrial coatings, 13.9%. Of Consumer Brands' sales, 63% are paint shipped to the company's own stores, and its margin divides profit by outside sales only, so it does not compare directly with the other two. The coatings economics guide compares the segments with PPG's.

Net debt was $10,664M at 31 December 2025, 2.4 times EBITDA. Leverage uses unadjusted EBITDA of $4,480M, below the adjusted figure. The company targets 2.0 to 2.5 times, so year-end leverage sat within its own range.

Sherwin-Williams reports return on sales of 10.9%, return on assets of 9.9% and return on equity of 63.4%, but no ROIC; the last is high because years of share buybacks have shrunk the equity it is measured against. The ROIC guide shows how to build a company's own figure.

Valuation Framework

Higher prices and cheaper inputs more than covered falling volume, yet the gross margin barely moved. A business with a margin that steady is valued with a DCF on a steady margin; a multiple of normalised earnings is a check. The premium valuation guide covers which multiples to use.

The contrast is Albemarle, whose gross margin moved 1,180 bps in FY2025 as lithium prices swung. A margin that moves like that needs a price assumption before any DCF can run.

What to Watch in the Financials

Which growth figure you use. Same-store sales are the nearest thing to an organic growth rate; Paint Stores' segment growth includes new stores. The group grew more slowly because Performance Coatings, 29% of sales, was flat, and Consumer Brands rose just 1.9%. Without Suvinil, a Latin American paint business bought in October 2025 that added 5.3%, Consumer Brands sales would have fallen.

Gross margin trend. FY2025's move sits well inside the 100 bps a year that marks a stable coatings margin. A move of more than 200 bps would call for a check on raw-material costs or inventory effects.

Key Risks

Housing and repaint demand. Demand for house and building paint rises and falls with housing, whatever the pricing power. Volume already fell in FY2025.

Industrial coatings mix. Performance Coatings earns a much lower segment margin than Paint Stores. A shift toward industrial customers lowers the group margin even if the stores hold price.

Pass-through lag. Coatings companies pass raw-material costs on with a lag, and the filings give no lag length. Model a margin that dips and recovers over a few quarters.