Paint supplier will need two coats to cover Walmart loss

Sherwin-Williams’ loss of the paint business at Walmart didn’t affect its fourth quarter results too bad, but will represent a nearly $100 million headwind for the coming year. The company reported fourth-quarter net income of nearly $72.9 million, up 11.6% from $65.3 million on sales that advanced nearly 19% to $1.9 billion during the quarter ended Dec. 31, 2010. Sales in the consumer group, which includes such retailers as Walmart, increased 6.2% to $255 million in the quarter.

Sherwin-Williams previously provided Walmart with Dutch Boy and ColorPlace brand paints but was replaced by Glidden brand manufacturer Akzo Nobel during the fourth quarter and said the change would result in lost sales. The loss will be offset somewhat by solid sales at the company’s own network of nearly 3,400 stores and those of other retail accounts in addition to recent price increases, which prompted the company to forecast first quarter sales growth in the mid to high teens.

During a conference call, chairman and CEO Christopher Connor elaborate on the results and the effect of Walmart’s decision.

“I think the headwinds that we’re seeing going into next year are going to be around the market uncertainties. We have commented that things are looking a little better. We like to believe that next year will continue to show some recovery, but the recovery that we have experienced has been extremely choppy. And so as we sit here now, to be able to indicate that all of next year is going to be a steady, smooth recovery, we’re not quite sure we're prepared to make that comment,” Connor said. “Also as we discussed with the investment community at some length during the middle part of this year, Walmart’s decision to eliminate our architectural paint program is going to have a significant impact on the consumer segment. We commented that it would be less than $100 million, but still that’s going to be substantial gallon numbers for us to overcome.”