Heidi Petz: David, I would just add, very simply, there is no ceiling.
David Begleiter: Very good. And Heidi and John, just looking at past DIY cycle weaknesses, what does it take or what do you need to see, to think to see a reversal of the current DIY cycle weakness here?
John Morikis: Well, clearly, the consumer is feeling some pressure from an inflation perspective. And there’ll be some normalization, if it’s in wages increases — have wage increasing or the spending patterns of consumers that will take effect. But the fact is this, that I’ll remind you that paint is a relatively inexpensive, yet highly impactful opportunity for people that are interested in their home, staying in their homes to make a difference. And if people decide they’re not going to sell the home, they’re going to stay in place, it’s a very viable option. I’ll remind you the average home age now is over 40 years old. So there’s more and more investment in the structures, people aging in place is impacting as well. And additionally, I would say, not only does it help the DIY, but as the population is aging, that generally will turn into more of a res repaint opportunity, which helps our position in that space as well.
We don’t want 70-year-old people out there scraping their gutters and eaves of their homes. But inside, yes, DIY is going to be an important part. There’s a cycle, and we’re playing the long game here, whichever way the table tilts we’ll be there.
Operator: Your next question is coming from Josh Spector from UBS.
Joshua Spector: I guess two ones, more for macro around the stores group. I guess, first, when I look at U.S. completion data for New Res, it looked like that was kind of flat, you guys reported down mid-single digits. I assume you get some pricing. I don’t know if that’s a regional divergence or something else you’d call out? Maybe I’ll stop with that one first.
John Morikis: Well, I think what you’re experiencing right now is the delay between housing starts and the — whatever, 90 days or so, after maybe a little bit longer, after a start before homes are painted. So our view, and Heidi mentioned this. When you look at — and I think where your question is going is around the share — our share of New Residential. Our position here is very strong and getting stronger every day. Heidi mentioned the exclusive arrangements that continue to grow in count. Our relationship with the New Residential builder and our commitment to helping their profitability and success is helping us grow those customers. It’s delayed right now because the more agreements that we are signing right now and with the pressure on the starts, we’re not seeing that.
But I can tell you with great confidence that, as the new homes continue to rise, and they will. I mean everyone would agree there’s a higher demand than there is supply right now. Family formation continues. There’s a hole right now that exists in housing availability. When that comes back, we’re going to be there coil spring that we’ve been in the past, and it’s exciting actually to see our teams winning at the rate that they’re winning, and it will show up on the scoreboard.
Joshua Spector: Okay. I appreciate that. And just on the other side of it, when you think about the resi repaint side, not just Sherwin, but maybe the industry. So I mean we still have turnover down about 1/3 from the peak a couple of years ago. Has the industry fully digested that. So if contractor backlogs reflect that, have orders reflected that. And just — I mean, how are you thinking that plays out into next year? Is there another leg down in the industry to normalize to that, if we don’t have a step up, or have we already reflected that in the current run rate?
John Morikis: Yes. I think it’s been reflected. If you take a few quarters back here, we were talking about res repaint contractors that, in many cases, weren’t even returning phone calls. There were many people who were saying that they’d come out and give you a quote in 6 to 9 months. And then it would be about a year before they could get to the project. So there has been a more normalized reality, if you will, as it relates to the residential repaint contractor. Again, I’ll reiterate that this adversity creates opportunity for Sherwin-Williams. You should bet, right now, as we are here, in this moment, that our customers are getting visited with Sherwin-William’s representatives. You should also bet that our competitors’ customers are getting visited as well. So we’re not playing nice here. We’re going after some pretty aggressive market share gains, and we expect to win aggressively.
Heidi Petz: And I would add to that, too, Josh, I think there’s a lot of confusion in the marketplace right now. And our opportunity, John mentioned, adversity is our friend. And I couldn’t agree more with that. Our strategy is working here, and I’ll take you to — we talk about our control distribution platform. We owned the stores, we own the reps, the store manager owns that P&L. The store manager owns staffing, owns the culture of that store. And I think it’s really important because when we talk about that relationship and the consistent experience we can offer these res repaint contractors, it’s critical that they know exactly what they can get from the experience they can have at Sherwin-Williams. And so as they’re coming in, as they are traveling, as they’re trying to grow and take on more, our teams are prepared, trained and ready to get any tools that they need in front of them, to help them to become as productive and profitable as possible.
So I’m really confident in how we are prepared to differentiate as we add value to this contractor.
Operator: Your next question is coming from Mike Harrison from Seaport Research Partners.
Michael Harrison: You have opened 36 new paint store locations so far this year. Is the target still 82/100? And are you seeing any delays in either the permitting process or the construction process?
Heidi Petz: Mike, yes, we expect to build as we said it. And no, we do not expect any delays. I think this is really important. When we look at our commitment to the team, to the Street, we’re opening the new store every 3 days, and there’s puts and takes in terms of timing. You can imagine our strategy is reflecting our desire to chase the density and the volume. And some of those markets, there’s unique nuances where we’re timing getting into a certain market in a certain area. But our commitment to getting to those stores is critical because we still continue to see a return on those stores at a rapid clip, and we think there’s a lot of opportunities to chase for future density there.
Michael Harrison: All right. And then within the consumer business, one of your competitors suggested that sell-in to the big-box retailers have been weaker than sell-out. It suggests that maybe there’s been some inventory work down this year. Do you have any thoughts on how point of sale with some of your key customers as compared to your volumes into those customers? And I guess whether big box inventories at this point in the year are below where you would expect them to be.
Heidi Petz: Well. First of all, we wouldn’t comment on anything specific to our customers. So — but what I can share with you with our approach that we’re taking partners. And again, we do talk openly about making sure that success is our customer success. So when we’re looking at making sure that they are at the right inventory levels, helping them thinking through how to manage to optimize our working capital. You can rest assured that those conversations are happening on a daily basis. So we’ll let them speak to their specific strategy here.
John Morikis: Yes. And I think that’s really important. I’d like the way that Heidi frame that, that we gauge our success by how successful our customers are. And so we’re actually working with our customers, encouraging them to manage their working capital so that they can put their cash to work and be more successful. And Al, maybe you want to talk a little bit about what the impact of that might be because we’re trying to drive reasonable or acceptable working capital, not only for us but for our customers.
