Sherwin-Williams sales jump 7.9% but gross margin slips (NYSE: SHW)

What happened

The Sherwin-Williams Company (NYSE: SHW) grew third-quarter sales 7.9% to $6.86 billion, but gross profit rose more slowly than sales. That gap matters because the company's pitch rests on turning scale and pricing into steady margins.

Net income fell 1.5% to $821.0 million, or 12.0% of net sales. Diluted earnings per share edged up 0.9% to $3.38 from $3.35 a year earlier. Adjusted diluted EPS rose 1.1% to $3.63 from $3.59. It excludes Valspar acquisition-related amortization and severance and other restructuring expenses.

EBITDA rose 3.4% to $1.39 billion, or 20.3% of net sales. Adjusted EBITDA also excludes severance and other restructuring expenses. It rose 3.3% to $1.40 billion, a 20.5% margin.

Sales grew in all three reportable segments. The October 2025 acquisition of Suvinil contributed. Selling price increases added a mid-single digit percentage to net sales.

Key numbers

Metric	Latest	Change	Source
Net sales	$6.86 billion	from $6.36 billion, +7.9%	SEC 8-K, Exhibit 99.1
Gross profit	$3.28 billion	from $3.13 billion, +4.9%	Calculated from SEC 8-K
Gross margin	47.8%	from 49.2%, -1.4 percentage points	Calculated from SEC 8-K
Net income	$821.0 million	from $833.1 million, -1.5%	SEC 8-K, Exhibit 99.1
Adjusted diluted EPS	$3.63	from $3.59, +1.1%	SEC 8-K, Exhibit 99.1
Adjusted EBITDA	$1.40 billion	from $1.36 billion, +3.3%	SEC 8-K, Exhibit 99.1

Read more: The Sherwin-Williams (SHW) company research

Where gross margin gave way

Gross profit rose $151.7 million, or 4.9%, to $3.28 billion from $3.13 billion in the third quarter of 2025. Sales grew faster, so gross margin slid to 47.8% from 49.2%.

Chair, President and CEO Heidi G. Petz pointed to higher raw material and supply chain costs and to mix. The mix effect included dilution from Suvinil and faster growth in lower margin segments. Petz said that without the Suvinil dilution, year-to-date gross margin is flat from the prior year.

Lower overhead softened the blow. Selling, general and administrative expenses fell to 30.2% of sales from 30.7%. Interest expense rose to $139.3 million from $117.2 million. The company tied that to more debt.

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How the three segments fared

Paint Stores Group, the largest segment by sales, grew 4.7% to $4.02 billion. Same-store sales rose 3.9%. The company credited price increases and low-single digit volume growth. Segment margin slipped to 24.3% from 24.9%.

Consumer Brands Group sales jumped 21.7% to $937.4 million on Suvinil, favorable currency translation and mix. Soft North American demand offset part of that. Segment profit fell 7.1% to $146.2 million on higher raw material and supply chain costs and added Suvinil expenses.

Performance Coatings Group sales rose 8.8% to $1.90 billion. Segment profit rose 6.2% to $255.2 million. General Industrial, Packaging and Coil led the growth.

Why it matters

OptimistFi has argued that Sherwin-Williams turns brand scale, a dense store network and pricing power into durable gross margins and strong cash conversion. This quarter backs the pricing half of that view but not the durability of margin. The reading is mixed.

Cash returns held up. Net operating cash flow was $2.59 billion in the first nine months. The company returned $2.98 billion through dividends and repurchases of 7.1 million shares, including $749.0 million in the third quarter. It can still buy up to 22.5 million more shares on the open market.

Borrowing is the caveat. Short-term borrowings stood at $2.35 billion on Sept. 30, up from $1.85 billion a year earlier. The current portion of long-term debt rose to $1.50 billion from $350.5 million.

What's next

Management hosts a conference call at 10 a.m. EDT on Oct. 27 to discuss the quarter and the fourth-quarter and full-year outlook.

The company narrowed full-year adjusted EPS guidance to $11.85 to $12.15, against $11.43 in 2025. Diluted EPS guidance is $10.92 to $11.22, against $10.26 in 2025. That includes $0.82 per share of Valspar amortization and $0.11 of restructuring costs. The company expects fourth-quarter sales up a mid-single digit percentage and full-year sales up a mid to high-single digit percentage.

Petz said customer sentiment and leading indicators point to muted demand over the rest of the year and into 2027. The fourth-quarter report is the next test. Sales in line with guidance but gross margin still below the year-earlier level would weaken the margin-durability claim. A move back toward last year's level would support it.

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