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The Sherwin-Williams (NYSE:SHW)

Q4 2012 Earnings Call

January 31, 2013 11:00 am ET

Executives

Robert J. Wells - Senior Vice President of Corporate Communications and Public Affairs

Christopher M. Connor - Chairman and Chief Executive Officer

Sean P. Hennessy - Chief Financial Officer and Senior Vice President of Finance

Analysts

Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division

P.J. Juvekar - Citigroup Inc, Research Division

Christopher J. Nocella - RBC Capital Markets, LLC, Research Division

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Nils-Bertil Wallin - CLSA Asia-Pacific Markets, Research Division

Dmitry Silversteyn - Longbow Research LLC

Dennis McGill - Zelman & Associates, LLC

Matthew McGinley - ISI Group Inc., Research Division

Charles Edward Cerankosky - Northcoast Research

Brian Maguire - Goldman Sachs Group Inc., Research Division

Aram Rubinson - Nomura Securities Co. Ltd., Research Division

Charles A. Dan - Morgan Stanley, Research Division

Duffy Fischer - Barclays Capital, Research Division

Eric Bosshard - Cleveland Research Company

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

John P. McNulty - Crédit Suisse AG, Research Division

Operator

Good morning. Thank you for joining the Sherwin-Williams Company's Review of Fourth Quarter and Full Year 2012 Results and Expectations for 2013. With us on today's call are Chris Connor, Chairman and CEO; Sean Hennessy, Senior Vice President Finance and CFO; Al Mistysyn, Vice President, Corporate Controller; and Bob Wells, Senior Vice President, Corporate Communications.

This conference call is being webcast simultaneously in listen-only mode by Vcall via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com beginning approximately 2 hours after this conference call ends and will be available until Thursday, February 21, 2013, at 5 p.m. Eastern time.

This conference call will include certain forward-looking statements as defined under U.S. federal securities laws with respect to sales, earnings and other matters. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company's prepared remarks, we will open the session to questions.

I will now turn the call over to Bob Wells.

Robert J. Wells

Thanks, Jesse. Good morning, everyone. In order to allow more time for questions, we provided balance sheet items and other statistical data on our website, sherwin.com, under Investor Relations 2012 Year-end Press Release.

Summarizing overall company performance for the fourth quarter and full year 2012, consolidated sales for the fourth quarter increased 7.3% to $2.22 billion, due primarily to higher paint sales volume to our Paint Stores Group and selling price increases.

For the full year, sales increased 8.8%, to $9.53 billion. Sales from acquisitions increased consolidated net sales approximately 0.9% in the quarter and year.

Currency translation rate changes decreased consolidated net sales 1% in the quarter and 1.8% for the year. Consolidated gross margin in the fourth quarter increased to 45.5% of sales from 42.8% of sales in the fourth quarter 2011.

For the year, gross margin increased to 44.3% of sales from 42.7% last year. The increase in gross margin for the quarter and year was due primarily to higher selling prices and the positive effect of higher production volumes, partially offset by higher year-over-year raw material costs. Selling, general and administrative expense in dollars increased $74 million in the fourth quarter compared to fourth quarter last year, an increase as a percent of sales to 37.3% from 36.4% in the same quarter last dollars but decreased as a percent of sales to 33.5% from 33.8% in 2011. Incremental SG&A from acquisitions, new stores and customer service investments accounted for the majority of the SG&A increase in the year.

Impairment charges for the planned conversion of various trademarks totaled $4.1 million in the fourth quarter and full year 2012, compared to $5.5 million in 2011.

Interest expense for the quarter increased $2.2 million, to $11.9 million. For the year, interest expense was $42.8 million, compared with $42.5 million in 2011.

Our effective income tax rate for the fourth quarter 2012 decreased to 32.7% from 88.8% in the fourth quarter of 2011.

As a reminder, fourth quarter last year income tax expense included a onetime after-tax charge of approximately $75 million to satisfy our settlement with the IRS.

For the year, our effective tax rate was 31.1% in 2012, compared to 40.4% in 2011. Excluding the IRS settlement, our full year 2011 effective tax rate would have been 30.3%.

Consolidated net income for the quarter increased $102.7 million, to $117.2 million. For the year, net income increased $238.3 million, to $680.2 million. Net income, as a percent of sales in the quarter, increased to 5.3% from 0.7% last year. For the year, net income, as a percent of sales, increased to 7.1% from 5% in 2011.

Diluted net income per common share for the fourth quarter 2012 increased to $1.12 from $0.14 per share in the fourth quarter 2011. For the year, diluted net income per common share increased 56.8%, to $6.49 per share from $4.14 per share in 2011.

Now I'd like to review our performance by segment. Sales for our Paint Stores Group in the fourth quarter 2012 increased 9.8%, to $1.25 billion. For the year, net sales increased 13.2%, to $5.41 billion. Sales increases in the quarter and year resulted primarily from higher paint sales volumes across all customer segments and slightly higher year-over-year selling prices.

Comparable store sales increased 9.2% in the quarter and 12.5% in the year. Regionally, in the fourth quarter, our Southwest division led all divisions, followed by Southeast division, Midwest division and Eastern Division. All 4 Paint Stores divisions recorded positive sales in the fourth quarter.

Segment operating profit for the Paint Stores Group increased 36.1%, to $181.5 million from $133.4 million in the fourth quarter last year. For the full year, Paint Stores Group operating profit increased 33.5%, to $861.8 million from $645.7 million in 2011. The increase in segment profit for the quarter and year resulted from higher paint sales volumes and selling price increases that were partially offset by higher raw material costs and SG&A expense.

Segment operating profit for the fourth quarter -- operating profit margin for the fourth quarter increased to 14.6% from 11.8% last year. Profit margin for the full year 2012 increased to 15.9% from 13.5% in 2011.

Turning now to Consumer Group. Fourth quarter external net sales increased 1.4% to $255.8 million, due primarily to acquisitions, partially offset by lower sales volumes to most of the group's larger retail customers.

For the year, Consumer Group sales increased 3.7%, to $1.32 billion from $1.27 billion in 2011, as a result of higher selling prices and acquisitions.

Acquisitions increased net sales by 6.5% in the quarter and 3.2% in the year. Segment operating profit for the fourth quarter decreased to $23.3 million from $30.2 million last year, due primarily to a more normal seasonal reduction in our internal finished goods inventory compared to fourth quarter last year and to higher raw material costs that were partially offset by selling price increases.

For the year, segment operating profit increased 24.6%, to $216.4 million from $173.7 million in 2011, due primarily to selling price increases and improved operating efficiencies, partially offset by higher raw material cost.

As a percent of net sales, Consumer Group's operating profit in the fourth quarter decreased to 9.1% from 12% last year. For the year, operating margin increased to 16.4% from 13.6% in 2011.

For our Global Finishes Group, net sales in the fourth quarter increased 5.1%, to $487.1 million, due primarily to higher sales volumes and selling price increases, partially offset by unfavorable currency translation.

For the year, Global Finishes Group sales increased 4.4%, to $1.96 billion, due primarily to selling price increases, higher sales volumes and acquisitions partially offset by unfavorable currency.

Acquisitions increased the group sales in the U.S. -- in U.S. dollars by 1.8% in the year. Currency translations decreased sales in U.S. dollars by 1.4% in the quarter and decreased sales by 3.5% in the year.

Global Finishes Group segment operating profit for the fourth quarter increased to $34.1 million from $13 million last year. For the year, segment operating profit increased to $147.2 million from $90.3 million last year.

In the quarter and year, higher selling prices, volume growth and good expense control more than offset raw material cost inflation. Unfavorable currency translation and acquisitions reduced segment profit $3.4 million in the quarter and $11.9 million in the year.

As a percent of net sales, Global Finishes Group operating profit was 7% in the fourth quarter, compared to 2.8% last year, and 7.5% for the year compared to 4.8% in 2011.

For our Latin American Coatings Group, net sales increased 5.2%, to $231.5 million in the quarter, and increased 0.9%, to $836.1 million for the full year, due primarily to higher year-over-year selling prices and increased sales volume, partially offset by unfavorable currency translation.

Currency translation decreased sales in U.S. dollars by 6.7% in the quarter and 10.2% in the year. Stated in U.S. dollars, Latin American Coatings Group segment profit in the quarter increased 14.3%, to $30.1 million. For the year, segment profit increased 7.6%, to $81.2 million.

In both the quarter and year, segment profit improvement resulted primarily from price increases and higher sales volume, partially offset by higher raw material costs and unfavorable currency translation.

Currency translation decreased segment profit $2 million in the quarter and decreased profit $9.7 million in the year.

As a percent of net sales, segment operating profit was 13% in the fourth quarter, compared to 12% last year, and 9.7% for the year, compared to 9.1% in 2011.

I'll conclude this review with a brief update on the status of our lead litigation. The Santa Clara case, involving claims of public nuisance brought by 10 cities and counties in California against 5 defendant companies, continues to move forward. At a recent pretrial hearing, the judge presiding over the case set a trial date of June 29, 2013, to allow the parties more time to complete the discovery process and file this positive pretrial motion.

That concludes my review of our results for fourth quarter and full year 2012. So I'll turn the call over to Chris Connor, who will make some general comments and highlight our expectations for 2013. Chris?

Christopher M. Connor

Thanks, Bob, good morning, everybody thanks for joining us today. 2012 was a year of many milestones for Sherwin-Williams. For the year, we set all-time high watermarks for consolidated sales, net income, earnings per share and net operating cash. We also reported record sales and earnings per share in each of the 4 quarters during the year. And 3 of our 4 reportable segments established all-time peaks in sales and segment profit this past year.

Additionally, our Paint Stores Group eclipsed the 3,500 store mark, and we recruited more than 1,000 college graduates into our management-training program, both all-time highs.

Finally, late in the year, we announced a definitive agreement to acquire Comex. Once this since transaction is completed, it will be the largest acquisition in our company's history.

These milestones and others we celebrated in 2012 were the direct result of our decision to stay the course, to stick with our strategy when market conditions collapsed back in 2008 and 2009. Since that time, we have continued to invest in new distribution and new product technology. We continue to invest in quality and productivity initiatives across our supply chain. We continue to recruit right motivated men and women into our management-training programs and prepare them for leadership assignments.

We believe the effects of these investments are cumulative and the outcomes we achieved this past year are repeatable. It's pretty obvious, based on our SG&A spending in 2012 and particularly in the fourth quarter, that the pace of these investments actually increased throughout the year.

While the higher SG&A did dampen earnings, we believe the timing of these investments couldn't be better. Most of the $235 million increase in SG&A for the year fell into 1 of 3 of buckets. The largest was our investment in new stores, including new sales and customer service employees, which accounted for more than half of the overall SG&A increase.

The second bucket was incentive compensation, which was higher this year, as our selling organization and field management shared in the benefits of their record results.

The smallest bucket was acquisitions and infrastructure investment, including IT. If you believed that 2012 marked the beginning of a sustainable recovery in many of our end markets, now is the ideal time to build sales and customer service capacity, which is precisely what we did.

In 2012, our Paint Stores Group added 70 net new stores, bringing our store count in the U.S., Canada and the Caribbean to 3,520, compared to 3,450 locations 1 year ago. Our plan for 2013 calls for new store openings in the range of 70 to 80 locations.

We also hired a 1,140 new sales and customer service employees to bolster our store staffing and improve our territory coverage. Our Latin American Coatings Group added 11 net new stores during the year, for a total now of 276 locations throughout the region.

These investments in new stores, store staff and rep coverage pay for themselves in a very short period of time. Consistent investment relies on strong, dependable cash generation. Again, in 2012, our net operating cash increased $152 million, to $888 million, or about 9.3% of sales.

If you add back the cash settlement paid to the IRS that Bob mentioned earlier in the first quarter of this year, cash from operations for the year approached 10% of net sales, our long-term objective.

A portion of this increase came from our continued progress in working capital management. Our working capital ratio declined to 10.8% of sales at year-end from 10.9% of sales at the end of 2011.

In anticipation of closing the Comex acquisition in the first half of 2013, in December, we placed $1 billion of new debt in 5- and 30-year maturities at a blended average rate of 2.1%.

As a result, we finished the year with an uncharacteristically high cash balance of $863 million. During the fourth quarter, we acquired 800,000 shares of the company's stock for treasury, bringing our full year total to 4.6 million shares at an average cost of $121.25 per share and a total investment of $558 million for the year.

At year-end, we had remaining authorization to acquire another 16.5 million shares. Over the past year, we returned $161 million in cash to shareholders through quarterly dividends. 2012 marked our 34th consecutive year of increased dividends per share, a string we intend to continue.

This year, at our February meeting of the Board of Directors, I will recommend approval of a payout rate for 2013 consistent with our policy of 30% at prior year's earnings per share.

I'll close my comments this morning by highlighting yet one more all-time record of guidance for 2013. Our full year guidance calls for diluted earnings per share in the range of $7.35 to $7.55 per share, a 15.6% increase at the midpoint on mid-single-digit sales growth.

For the first quarter, we're earnings per share in a range of $1.03 to $1.13, a 13.7% increase at midrange on top of a strong first quarter in 2012, and we'll accomplish that on low-single-digit sales growth. Neither of these ranges include any earnings contributions from the Comex acquisition, but do include the approximately $21 million of additional interest expense on the incremental debt.

While some members on The Street are above these ranges, this constitutes the largest increase in full year earnings guidance in both dollars and percentage terms in our company's history.

While our expectation for top line growth may appear modest, it will come almost entirely from volume. Nearly all of the impact from our previous price increases have annualized and our guidance this year anticipates very little incremental pricing.

We begin each year with some level of uncertainty, and 2013 is no exception. Despite the steadily improving health of many of our end markets and the positive trends, we've seen in the cost of certain commodities, we remain cautious. Market demand and volume recovery has been erratic across geographies and end markets, and we expect that will continue. Currency translation is also likely to remain a headwind to sales and earnings throughout the year, particularly in our Latin American markets. Our raw material basket has many moving parts as well. But in total, it remains biased towards inflation.

While we have seen some easing in titanium pricing over the back half of 2012, propylene, the key raw material feedstock, has increased 30%, from $0.55 per pound last quarter to $0.72 per pound today. This will keep some upward pressure on the price of monomers and latex in the first half of 2013.

Based upon our assumptions and improving price stability in titanium and increased volatility in propylene, we would expect average year-over-year raw material cost inflation to be in the low single-digit range in 2013. Our visibility in each of these areas improved significantly as we go through the year. And as always, we'll adjust our expectations accordingly.

Again, I'd like to thank you for joining us this morning. And now the team would be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Ghansham Panjabi of Robert W. Baird.

Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division

Can you give us a sense as to what your full year '13 guidance assumes for U.S. paint gallons for the industry? And if you could, of course, take it one step further in terms of expectations for existing and new home sales?

Robert J. Wells

Well, clearly, we're most optimistic about U.S. architectural market. And we do believe that residential will probably be the strongest driver in that market again. But just as a reminder to everyone on the call, U.S. architectural gallons typically grow at a rate in the range of GDP. And even in a recovery year, if you consider 1.5x to 2x that rate, you're still in the, probably, 3% to 4% range for U.S. architectural volume.

Sean P. Hennessy

And this is Sean Hennessy. And on top of that, when you talk about this gallonage, when you start looking at this guidance, again, last year, when you look -- and we will just talk about stores. Stores for the year, the selling price was up single -- mid-single digits. This year, we really have very slight pricing in our guidance this year. So we're going up against that pricing that we had last year. And so the sales are really more indicative of higher percentage of unit growth.

Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then switching to global finishes. Were volumes for the quarter in line with the expectations? It seemed to be a little bit stronger than 4Q '11. And if you can parse out the various verticals, how they performed during the quarter.

Sean P. Hennessy

Actually, global finishes, when we take a look at the quarter, performed very close to what we had expected. And I will tell you that the sales were in the high end of the range. It really was because of stores being a little bit stronger than what we've thought. As far as the 3 segments, I'm not prepared -- I don't have -- when you look at the automotive and so forth, we're not prepared to go through that.

Operator

The next question comes from the line of P.J. Juvekar of Citi.

P.J. Juvekar - Citigroup Inc, Research Division

There has been significant M&A in Paints. With your Comex deal, PPG acquiring Akzo's U.S. business. Do you expect that pace to continue? And what does it mean for margins in the industry if you remove some of these underperforming businesses?

Christopher M. Connor

Well, obviously, we don't expect that Paints like that to continue. Those were 2 extremely large deals in our industry and the universe of property of that size and scale are diminishing. So as we have commented for many years, P.J., from our M&A strategy, there's an awful lot of small bolt-on, both technologies and controlled distribution plays. So I think that's more will likely what you'll see going forward. I don't know that these 2 deals will have a significant impact on margin. The bigger issue on margins, in our industry, as we've shared with the investment communities, has been the impact of raw material cost pressures and the ability to pass those along over a period of time. And I think those dynamics will continue to play out pretty much unchanged, regardless of these potential acquisitions that may or may not close.

Sean P. Hennessy

And the other thing, P.J. This is, again, Sean Hennessy. When you speak of operating margins, I would say that a lot of this, the infrastructure, the admin costs, the percent of sales, those are the things that you're going to see up -- are going to see operating margin from us expand from these, but more from infrastructure and those type of SG&A efficiencies.

P.J. Juvekar - Citigroup Inc, Research Division

And secondly, you mentioned there was normal inventory decline in the consumer group. Was there a destocking by your channel partner that's now behind us? And do you see a rebound in 2013?

Sean P. Hennessy

Yes, I think this is actually, we try to use the word internal. And if you -- and I'm just going to go back a year. If remember in the third quarter of 2011, we did bring the inventory in line. And the reason we did that is in the first half of the year in 2011, we are coming -- we're anniversarying the shortages in some of, some products that we needed and we overspent in 2010. So we allowed the inventory to build in 2011. In third quarter, we allowed that inventory to drop, which depressed Consumer Group's operating margin. And what we said at that time is this was a little abnormal for us in the fourth quarter when you look at the year. So if you look at the third quarter 2011 in Consumer, the operating margin was depressed. The fourth quarter was a little higher than normal. And now we're anniversarying those situations. So it's internal inventory. Our inventory remains fairly flat in the third quarter in Consumer, and then it dropped in the fourth quarter, which is more normal for our sales curve and in our history of our company. So this year, the third quarter operating margins for Consumer was very strong. This year, the fourth quarter was depressed. And for the full year, the consumer group had really nice operating margins. Next year, I don't expect that third and fourth quarter adjustment to occur again. So it will be more normalized next year.

Operator

The next question comes from line of Chris Nocella of RBC.

Christopher J. Nocella - RBC Capital Markets, LLC, Research Division

Maybe can you break your sales growth guidance directionally, at least, between the segments for 2013?

Sean P. Hennessy

I think that if you take a look at it, we prefer not to do that. I mean, we really don't do that. But I think what you can probably tell is we're -- Store Group, with the unit volume, will probably be the strongest.

Christopher J. Nocella - RBC Capital Markets, LLC, Research Division

Okay. And then just for 2012, what's your best guess in how that volume through the stores was split between new build and repaint?

Robert J. Wells

I'd say it was probably very consistent, Chris, with the kind of the overall market environment. We have said that, for a long period of time, that the new construction market would account for somewhere in the 20% to 25% demand for architectural coatings. That was probably a little depressed from that number because we still have not seen the kind of rebound, both in housing, as well as commercial start. So -- let's assume in the high teens was the amount of the gallons that were used for new construction. The remainder would have been for maintenance and redecorating.

Operator

The next question comes from the line of Don Carson with Susquehanna.

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Just a couple of questions, one just a clarification on volumes. Of the 12.5% same-store sales growth in Paint Store Sales Group this year, were you saying that half was price, half was volume?

Sean P. Hennessy

No, more than half, but very close, because of that mid-single-digit.

Robert J. Wells

More than half of volume, Don.

Sean P. Hennessy

Right.

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

So are you forecasting volumes to be relatively flat. Is that what's implied in your -- or that the growth will be equivalent in 2013 to 2012 in terms of your volume level for Paint Stores Group?

Robert J. Wells

When you say volume flat, flat for 2012?

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

No, I meant growth rate the same, flat growth rate, yes.

Robert J. Wells

Right.

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

And then one additional question, Chris, did I hear you say you expect TiO2 to stabilize this year?

Christopher M. Connor

Yes, Don, we would expect TiO2 pricing to be more stable in 2013 that we've seen over the past few years.

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Okay. And then just final question. I know you have some tough comps in first quarter. So I was a little surprised that you're still expecting some low-single-digit growth. Is that maybe you can just give us some more background on why you think you're going to get growth over such tough comp?

Christopher M. Connor

Yes, I think Bob commented that we really have confidence in particularly the North American residential repaint market. And we have been accelerating in that space. We've been seeing the return of the painting contractor do a higher percentage of the purchase of architectural coatings throughout the year, and those trend lines are continuing. So despite the fact that we got a pretty high hurdle on the jump, we're giving the kind of guidance from the clarity that we can see in the quarter and we expect to be able to hit these numbers.

Operator

The next question comes from line of Kevin McCarthy with Bank of America Merrill Lynch.

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Chris, I appreciate the disaggregation of SG&A that you've provided. If we put the Comex deal on the side for a moment, do you think that the uplift in 2013 on the SG&A line will be similar to what you experienced in 2012? Perhaps you could comment on a forward-looking basis on some of the 3 buckets that you mentioned there and what that looks like for this year?

Christopher M. Connor

Yes. So if you look at SG&A for the year, it actually was down as a percent of sales. So the fourth quarter had a little bit of acceleration. Overall, it was a kind of discipline that we could bring to managing that part that I think was at play throughout the year. We did comment about the decision to continue to heavy-up. I think we began the year with a little lower store count expectation and kind of accelerated to get to that 70 store in the fourth quarter. 40 of our 70 stores actually came in the fourth quarter this year in terms of their openings. So we were a little late-in-the-year heavy-handed in that particular area. And that's been pretty typical for the way that the stores flow in for us in past years, as well. In our expectations for next year, that SG&A will continue to improve as a percent of sales. We're going to continue to make these investments. We'll put in more stores next year than this year as we guided. So I think that it's been a pretty consistent track record here and it should continue again into 2013.

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

And second question, I think in the past you've commented a bit on your efforts to minimize the amount of TIO2 required as a company to the extent that, that makes sense through reformulation efforts in certain cases. Can you provide an update on that? Is it ongoing? Is there -- where do you stand now? Is there more to take out in 2013?

Christopher M. Connor

Yes, I think we have commented, Kevin, along with a number of other of our global coatings competitors, who are also purchasers of this material, that there are a lot of activities under way to try to eliminate the amount of titanium load neither in a typical gallon of paint. We have talked about the ability to make those conversions to lower grades. We have titanium, particularly outside the North America, and those activities are at play as well. And I think the numbers that you hear, that perhaps 5% to -- as much as 10% of this titanium eventually can perhaps be displaced is not an inappropriate target. We've also commented that given our focus on the professional painting contractor and unwillingness to really change a lot of the raw material content in these products, who are likely to be lagger on that path, because this will be more of future products as opposed to our current product line. And I can tell you that all those activities continue to be under way with our R&D team.

Operator

The next question comes from the line of Nils Wallin of CLSA.

Nils-Bertil Wallin - CLSA Asia-Pacific Markets, Research Division

Just curious about the store growth that you had this year and your expectations for next year. Are you focused on particular regions? And how would those regions compare with where you'll bulk up once the Comex deal gets approved?

Christopher M. Connor

Yes, Nils. As we have commented throughout our time here, that the Store growth will come literally across the entire geographic footprint that we've identified -- stores that we've managed is Canada, U.S. and the Caribbean. We have around 160 district managers, each of whom built a real estate plan. We don't have a single one of these districts that considers themself fully penetrated. So we have opportunities, literally, in every market across the United States. And typically, what we do is try to do about 70% of our store openings annually would be typical fill-ins, where we're giving one store to each of these districts. And then about 30% of that count will be more of a heavy-up concentration in markets where we're underpenetrated. We shared with the investment community that throughout all of Canada and the Western markets of the United States are where those underpenetrated markets are for us. And so we'll continue to heavy-up in those spaces. If we're successful in concluding the Comex transaction, their 300-plus store count beautifully lays over that density map and really strengthens our Canadian and Western Market store count. Even with those stores, however, we'll still be far from what we would consider to be full penetration. So this notion of continuing to add these stores at about this pace for years and years to come would remain part of our strategy. We've been talking about the ability to get to 5,000 stores throughout this North American geography. And with the addition of the Comex stores, plus the 80 stores we're planning to open this year, 70 to 80 stores that we have in the guidance, we would still be below 4,000 stores. So a long way to go.

Nils-Bertil Wallin - CLSA Asia-Pacific Markets, Research Division

Yes. And then just on your incremental margin in the Paint Stores Group was quite strong this year, around 30%. With new products bulking up on your SG&A, can you -- do you think you'll be able to continue that same sort of incremental margin or operating leverage in 2013 and beyond? Or is it -- will it decelerate some?

Sean P. Hennessy

Just as you mentioned, the ROS that we -- margin that we did run the Stores Group this year was an all-time high, clips in the prior by 15 -- it was 15.5 the prior high. This year, 15.9. So when we used to talk about the 15.5 years ago, we'd say that's -- we don't think that's the top. We think if we continue to -- can get admin as a percent of sales down and other types of admin costs we think that we can beat it. We feel the same way of the 15.9. I don't think that next year, our management -- we still believe that we're going to have incremental flow-through that's very strong, as long as the market continues to recover.

Operator

Our next question comes from the line of Dmitry Silverstein with Longbow Research.

Dmitry Silversteyn - Longbow Research LLC

A couple of questions, if I may. I'm trying to understand your revenue guidance in light of what you're talking about improving markets. You're starting out the year with double -- with mid-single-digit growth in Paints, and you're going to end the year, overall, with low single-digit growth. So there's a deceleration coming in after the first quarter. And to follow up on earlier question, the first quarter seems to be the most difficult comps on year-over-year basis. I just want to understand with the contractors coming back, with commercial construction accelerating, with the housing market continuing to do better, why would you expect a slowdown in your growth rate as the year unfolds?

Sean P. Hennessy

I'm just trying to pull out the press release. But I think in the first quarter, we gave you guidance of low-single-digit and mid-single-digit for the year. That would tell you that the second, third and fourth quarter is going to be stronger than the first quarter as far as year-over-year comparisons. And so, secondly, if you sit there and say, well, if start adding the 2 years together. Again, first quarter last year was the quarter, if you remember, stores grew kind of 20 -- approximately 20% comp store gain, and nearly half of that was price, whereas for the full year, we ended up with the mid-single digits for price. So as we go along, we're going to go have that hurdle of the price not helping us as we go along. So when you go from the first quarter at mid -- at low-single digits to mid, we see it exactly -- probably a little differently than you do.

Dmitry Silversteyn - Longbow Research LLC

Your press release is correct. But I think what you've said on this conference call, and you may have misspoken, that's what I picked up on, was the opposite. But okay, with the press release, it makes sense. You start out slow and you accelerate as the year unfolds. My second question is on the guidance range that you provided. It's $0.10 for the first quarter and $0.10 for the year. I guess I'm surprised by either too tight of a guidance for the year or too loose of a guidance first quarter. How do you feel about that? I mean, it looks like that there's -- it just seems that there should have been a wider guidance for the year. But perhaps, you'll feel better as the year unfolds in the total developments in the market?

Sean P. Hennessy

I think, it goes back to, Dmitry, I don't know how long you've been -- I lost track of when you started covering us, but prior to 2008, we used to give $0.10 guidance...

Robert J. Wells

Range.

Sean P. Hennessy

Range. For the range. And when you take a look at what's happened, we actually at one year, we came out with $1 range. We said our EPS would come in between $3 and $4.

Robert J. Wells

I remember that.

Sean P. Hennessy

And we actually came in at $3.78 that year. And when you take a look at it, it was because of the variability that was going on in raws and the markets. And there was a lot of different names that was going on in 2009, 2010. And as we said back then we got a lot of pressure: "Why did you widen it too far?" We said as we get more and more clarity, you'll see us reduce the size of this, the range.

Dmitry Silversteyn - Longbow Research LLC

So the way to, I guess, really, the key, at least, way to interpret this is that the market seems to have subsided into a more normalized behavior that's more predictable from historical basis?

Sean P. Hennessy

Correct.

Operator

The next question comes from the line of Dennis McGill with Zelman & Associates.

Dennis McGill - Zelman & Associates, LLC

My questions will be easier. My first one was just trying to piece apart the guidance. It's a little tricky right now, because you're not factoring in any benefit from Comex but, obviously, you're taking a hit on the interest line. And just wanted to think through some of the moving parts. So on the share repurchase, you would think you are going to probably pull back with the deal ahead of you. Are you factoring anything related to share repurchase into the guidance?

Sean P. Hennessy

Dennis, that was the hardest part to do this guidance. Because whether we complete the Comex deal or not, we're going to pay that interest. But we do have a factor -- we have a couple different scenarios when Comex occurs and so forth, I will tell you our guidance right now does show stock repurchase.

Dennis McGill - Zelman & Associates, LLC

Okay. And then just on the tax rate, what should we assume there?

Sean P. Hennessy

We're a little higher than what we experienced the last 2 years, last year with the adjustments in the IRS and this year, when we came in at 31.1%. We think that we're going to be a little higher than that 31.1%, but no higher than 33%.

Dennis McGill - Zelman & Associates, LLC

Okay. So I think if you run that through and the top line assumptions. So might think you've talked about maybe it's modest margin expansion for the full year. And it sounds like you expect SG&A to be down on a year-over-year basis percentage of sales. So can you maybe just help us bridge that on a gross margin line, sort of what you're assuming and kind of that guidance on the low-single-digit raw material inflation, how that sorts out with some of the other action that you have?

Sean P. Hennessy

Well, we don't want to go through line by line and tell you our guidance. But I think, mathematically, I think it's pretty easy to do if you use a tax rate a little higher than have today. Interest $20-some million higher than today. And you back in and if you use a slightly smaller share count, it's going to tell you what our operating margin is there. There is going to be improvement there. And so if you show the SG&A as a percent of sales improving, and I think that you can back into the gross margin if there's going to be gross margin improvement this year.

Dennis McGill - Zelman & Associates, LLC

Okay. I guess just on some of the top line. I think, Chris, you may have commented that maybe you're a little bit more conservative or conservative on the end channels just given some of volatility that you've seen lately. Is that true to across the domestic markets? Is there any one area where you guys are seeing maybe more volatility or more hesitancy among customers that makes, maybe, a little less confident in the recovery?

Christopher M. Connor

I think the government actually came out this morning with the GDP estimates for the fourth quarter, which were retracted. And so when we look at our core more commercial, our protective and marine segments, commercial starts, those are things that we have a little less clarity at, Dennis. I think our guidance and our confidence really stems from this residential repaint domestic North American housing market, and that can carry us through a lot of rougher spots. And as we said, as we get into the year and we start to see a little better market dynamics unfolding, we'll be able to comment on that. But for right now, I think we're probably relying on this residential repaint market to be the driver.

Operator

Our next question comes from the line of Matt McGinley of ISI Group.

Matthew McGinley - ISI Group Inc., Research Division

On the consumer segment last quarter, you had stated that some of the weakness that you had there was across most product types and channels. Is that still the case? And what do you think is still driving that unit weakness in that segment?

Sean P. Hennessy

Yes, I think we did exactly say that, Matt, that our sales, both to our customers and their out-the-doors lagged the same sales performance that we're seeing through our own stores. Time will tell as we get into the selling season and come through the winter weather and that the spring paint season picks up for these folks. But our share position there has been maintained with the exception of the Walmart business, which we've commented on in the past. We did take some additional private label business there, that we're shifting from our manufacturer to a competitors' sourcing. And that was somewhat of an impact. But even factoring that out, this was a fairly flat performing segment for us.

Matthew McGinley - ISI Group Inc., Research Division

What do you think the long-run organic growth rate should be within that segment?

Robert J. Wells

Well, we've commented for a long period of time that our expectations are flat, low single-digit sales growth for this group. And this comes from the dynamics of the competitive landscape that we've created for ourselves in the United States. So the particular retail partners that we enjoy the business with will -- we benefit when they grow and improve. And time will tell how that all shakes out.

Matthew McGinley - ISI Group Inc., Research Division

Okay. And then a quick one on the inventory. Your inventory is basically down a little bit year-over-year. Was that primarily driven by this plan in raw material cost or your unit inventory's still down year-over-year?

Sean P. Hennessy

No, our unit inventory is down. We're in pretty good shape with inventory. But there was improvement with terms and so forth.

Operator

Our next question comes from the line of Chuck Cerankosky of Northcoast Research.

Charles Edward Cerankosky - Northcoast Research

When we talk about this environment you're seeing, Chris, for 2013, with the flatter price outlook, do you expect competition for volume to be a little more aggressive because price is not making up the difference for some paint manufacturers?

Christopher M. Connor

We've been blessed with great competition for 147 years, Chuck. We absolutely expect that there'll be competition for these gallons. And we face that the dynamic every single year, and we would expect to be in that same environment again this year.

Charles Edward Cerankosky - Northcoast Research

But do you think with less price inflation in there, it gets a little tougher, Chris?

Christopher M. Connor

I'm not sure that I do. I mean, I think it's tough when you have price and then it's tough when there isn't price. We've been in this environment before. Even within the last several years, we've had periods of time when there was -- I think we went 22 months without a price increase back before this titanium run. And so we got through that segment. We had gallon gains in there against these same competitors that you're talking about. It really comes down to the quality of the product, the distribution support, the caliber of the field selling organization. These are all areas where we've been muscle-building, and we would expect to be able to actually be in a little stronger position this cycle that we were the last time, given the expansion in store counts and the widening of the gap of our service capabilities.

Charles Edward Cerankosky - Northcoast Research

All right. And one for Sean. When you're talking about the guidance for 2013, do you have any expenses in there for the Comex transaction simply for what you have to spend on ahead of getting the deal done, similar to the debt financing?

Sean P. Hennessy

Very little, Chuck. I think that -- you can imagine, we have some advisers that we are working with, but I would say it's going to be really immaterial to our first quarter.

Robert J. Wells

So we would see those immaterial in the first quarter, and you're still expecting a close by the end of the quarter.

Christopher M. Connor

That's in the hands of the government. And we are not really able to comment on that. We would -- we'd love to be able to make that date work, but time will tell.

Charles Edward Cerankosky - Northcoast Research

So we'll see that bulk of the transaction costs apart -- and separating from those from any integration costs, we'll see the bulk of those when you close?

Sean P. Hennessy

Yes. The quarter that the close, you're going to have the inventory step-up. You' going to have some other expenses, onetime only expenses that quarter will definitely be -- will be dilutive from the Comex acquisition because of those first quarter expenses, then it'll start to be accretive.

Operator

Our next question comes from the line of Bob Koort of Goldman Sachs.

Brian Maguire - Goldman Sachs Group Inc., Research Division

It's actually Brian Maguire on for Bob today. Chris, I just want to clarify your comment on pricing for '13. I heard you say that there wasn't going to be any real benefit from pricing at '13. I just wanted to see if you're talking about no incremental price increases from here on out or does that mean that you wouldn't see the benefit from just anniversarying the price increases you've already done? In other words, is there truly no benefit year-over-year or is it just no benefit from here on out?

Christopher M. Connor

Yes. I think when we made the comment, we didn't anticipate any pricing activity in the year, given where we see the raw material basket at this point in time, that guidance is as good as the word of raw material suppliers. And as we've commented frequently, we really are a raw material input cost pricer to our customers. So if we're able to maintain these kinds of raw material costs as we're entering the year or what we're forecasting the year, then we would anticipate very little pricing activity. Our last price increase was actually in February of last year. So there is a little bit of pricing still. We're at the very tail end of integrating that. So for the most part of this year, there won't be any lift from pricing activity.

Brian Maguire - Goldman Sachs Group Inc., Research Division

Okay, great. And then just a follow-up as it relates to the gross margin outlook and if pricing is going to be kind of flat to modestly and if your raw outlook is for low-single-digit inflation, I don't think about there being much fixed cost in your model. I think more of a variable cost model. So does that imply your thinking and currently is sort of roughly flat to just modestly up gross margins?

Sean P. Hennessy

No, I think, when you start taking -- look, this is when you start asking sequentially. It's probably your answer there, sequentially, you can see that. But I think that if you go quarter-over-quarter, that first quarter, that gross margin was really depressed because the raws we're anniversarying and so forth and we were putting the price increase in. But we do expect to have gross margin improvement in the first quarter. And -- or else, we would it be able to get over that great quarter we had. But sequentially, I can understand your answer there.

Christopher M. Connor

Brian, and our margins have always been helped too as volumes increase, your point about the fixed costs of the company. So these incremental gallons start going through this entire supply chain, that has an impact on us as well, too. So for Sean's earlier answer to Dennis, if you do the math on that, I think you'll get to -- what we would expect to be another good year of margin, gross margin improvement for the company.

Brian Maguire - Goldman Sachs Group Inc., Research Division

Okay. And then in North America, 2 of your larger store competitors are apparently merging later this year. Do you anticipate any change in competitive behavior? Or how will that dynamic kind of influence you going forward?

Christopher M. Connor

Yes, given the status of their acquisition as well, which has not been finalized, I think it would just be inappropriate to make any comments about that at this time.

Operator

The next question comes from the line of Aram Rubinson with Nomura Securities.

Aram Rubinson - Nomura Securities Co. Ltd., Research Division

The question is on the gross profit dollar line. Can you give us, by segment, the delta in gross profit dollars that you often do?

Sean P. Hennessy

Sure. In Paint Stores Group was $96.2 million. In Consumer Group, it was actually backwards, $1.3 million. In the Global Finishes Group, $26.9 million. In the Latin America Group, it was an increase of $4.4 million.

Aram Rubinson - Nomura Securities Co. Ltd., Research Division

It looks almost as if in your Paint Stores Group, that you've kind of gotten back everything you gave away last year in the fourth quarter.

Sean P. Hennessy

That's -- I'll tell you that definitely looks -- I will tell you right there that you're accurate.

Aram Rubinson - Nomura Securities Co. Ltd., Research Division

Okay. And then one other question, just on reinvesting. Clearly, the acquisition of Comex is a major reinvest. You've talked about raising SG&A for new stores on reinvest. Where are we in other areas of the business? You've mentioned in the past that we don't need any capacity to come on board, I assume, for manufacturing. Is that still the case? And if you weren't doing the acquisition, how many stores would you have opened organically.

Christopher M. Connor

Yes, I don't think the store opening organic has been impacted at all by this acquisition. We are steady on this pace, 80 is a great number. We've said that's probably the sustainable number, as low as 50 to 60, as high as 100 over a long period of time, 80 is kind right in the sweet spot, on this march up to 5,000 stores. So there's been no capacity constraint or corporate constraint on our Stores Group to hold them back from growing in an appropriate pace. So I don't expect that to change. Regarding other investment opportunities there around the world for us, we have commented that after a fairly robust M&A period of building out infrastructure, both in Europe and Asia-Pacific, to service our OEM product finishes businesses that we feel comfortable with the infrastructure we have. Future acquisitions would likely be more, smaller technology bolt-ons than they would be brick-and-mortar. And the same can be said of Latin America, where we also have a pretty good infrastructure. We still remain interested in building all those businesses, and we'll look for the appropriate deals to do. North America still remains the key market where we have the ability to do open stores at this pace. And so that's where you can see us really focus our efforts going forward.

Sean P. Hennessy

And if I may, the other thing that we've definitely are investing in is IT systems. If you tracked our company for quite a while back in the '90s, working capital was in the high-teens, almost 20%. We think what really help us -- what helped the operations to do that was IT. And I think we're starting to see some of that. That's going to help our cash flow, and, I think, down the road, as we continue to try to improve our cash generation for sales. So I think we're also doing that around the world as [indiscernible] bought these assets.

Aram Rubinson - Nomura Securities Co. Ltd., Research Division

Before I go, is it okay to ask for the inventory adjustment dollar amount that you usually take at the end of the year, if it's available?

Sean P. Hennessy

It's not available. We're not there yet.

Operator

The next question comes from the line of Charles Dan with Morgan Stanley.

Charles A. Dan - Morgan Stanley, Research Division

Just a follow-up on the SG&A spending. It looks like the unallocated portion, or the administrative line, was up significantly this year in dollars and as a percentage of sales. To the extent that, that's where some of the incentive comp or infrastructure spending is, is that the sort of right level to think of as a base going forward? Or was it impacted by the timing of incentive comp as the share price was rising? Just helping us understand how that -- what the new base is going forward there?

Sean P. Hennessy

Everything you said there is really accurate. Really, this segment was really -- when you talk about the infrastructure, we just talked about IT as well as the compensation, including that stock-based compensation, this is where the growth occurred. I think from that from that standpoint, I think you'll see that over time flatten out and, actually, especially on the infrastructure spending, it will begin to reduce. The other thing that's in this group is or in this segment is our interest expense. Our interest expense has been flat the last 2 years in that $42 million to $43 million range with the $1 billion debt that will go up $20 million. So I think that any efficiencies we get in some of the other areas are going to be offset by the interest.

Charles A. Dan - Morgan Stanley, Research Division

So it sounds like, so just to follow-up that, if you excluded the interest expense, you would expect the remainder to go down?

Sean P. Hennessy

Yes, over time, yes.

Operator

Our next question comes from the line of Duffy Fischer with Barclays.

Duffy Fischer - Barclays Capital, Research Division

One of the strongest pillars of the story has been your ability to get price and offset the raw mats. And surprisingly, in the last probably 45 days, the biggest raw mat basket, the petrochemicals and the propylene in particular, jumped, I think, meaningfully higher than most people would have guessed 4, 5 months ago. Was it just a bad timing? Or why wouldn't we be able to get some price on the back of that big raw material increase this year?

Christopher M. Connor

I think, as we've commented, Duffy, I mean, we look at the basket of raws as they impact the company as opposed to any one individual segment. We comment about individual segments when they drive the entire basket up. But as we've given guidance about what we expect that total raw material impact for the company to be this year, that would not be the level that would cause us to take pricing to our customers.

Duffy Fischer - Barclays Capital, Research Division

Okay, fair enough. And then, if I remember, you guys used to sell some Pratt & Lambert paint through the Ace store system. How big is your business, Pratt & Lambert and other stuff, that would go through that, that may be at risk with a deal that Ace is doing with Valspar.

Sean P. Hennessy

Yes, you have a good memory. We have had, over the years, a number of independent Ace dealers take on the Pratt & Lambert product line. In this environment that Ace operates in, they can endorse programs and make it available to their co-ops through their distribution channel. But most of these independent dealers do carry products that they buy outside of that Ace relationship. And so we do not have a big exposure at Ace at this point in time. And the number of dealers that do carry Pratt & Lambert may or may not elect to continue with it per their announcement of their new paint partner. So time will tell. But that would not be an issue that you would hear us commenting on as impacting the company.

Operator

Our next question comes from the line of Eric Bosshard with Cleveland Research Company.

Eric Bosshard - Cleveland Research Company

You talked to us about in the fourth stepping up some SG&A investments across the business. I'm curious what that the target is in terms of the payback from that, if it's market share or if it's volume growth? What are you thinking that the payback might look like relative to those investments?

Sean P. Hennessy

Yes. I think that, and that's why I also mentioned the cash flow earlier, Eric. I think some of the IT spending that we did will actually help our working capital and actually help our cash generation outside the country. And we've been working on that for many years. Again, 40 of the 70 stores came into -- were opened in the fourth quarter. And so that's -- that's a high percentage in the fourth quarter. And I think down the road, I think they'll perform just like all the other stores do. And I think that just timing has caused that. So we expect to hopefully gain market share as we continue to open stores. So I think you're going to see the same timing from the stores. And I think in the next year or 2, you're going to see some nice cash flow coming out of our nondomestic group.

Eric Bosshard - Cleveland Research Company

Great. And then, secondly, a year ago, I think the guidance for 2012, the initial guidance, you ended up exceeding by a pretty meaningful amount, perhaps $1 a share. I'm curious if you look back a year ago and think about the factors that you were considering and then where the year ended up, what did you do or what played out differently in '12 that allowed you to exceed by such a wide margin in your original expectation?

Sean P. Hennessy

I would tell you, $0.97, it was $5.52 to $6.49. And so when you take a look at it, a couple of things occurred, Eric. Number one was our sales performance at Stores. I think that Stores really had a great year. I think number two was the margin improvement in Global Finishes Group. I think that was stronger than what we had expected. I think that integration, where the fourth quarter 2011 was a little heavy in SG&A because of that integration. I think that if you look at that Global Finishes Group and what they were able to do, I think those were the 2 areas. Latin America Group did improve. And Consumer, I think, was fairly close to what we expected.

Operator

Our next question comes from the line of Silke Kueck of JPMorgan.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

I was wondering whether I could try one more raw materials question, if you're not tired of it yet.

Christopher M. Connor

Of course, you can.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

So what you said is this, is that your TiO2 prices seemed more stable in 2013. So in a way, if they stayed stable from where they were at the end of 2012, that really would mean that there's still a significant benefit on a year-over-year basis in the first half of '13, right?

Christopher M. Connor

Yes, there was a decline in TiO2 pricing in the back half of '12, which put TiO2 pricing below, certainly, below 2012 peak at year-end.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

Right. And my memory with propylene prices is set. I mean, I know they're back at $0.77. But the last thing -- but same thing happened last year. And that is if you look at propylene prices for February, March, April, I think they were like $0.77, maybe they were $0.76. So on a year-over-year basis, like the propylene costs may not been -- I see how that cost sequentially, they'll move, but a new year-over-year basis, like those comparisons may not be as difficult as you make them out at first sight?

Robert J. Wells

I think a low single-digit inflation expectation across our total raw material basket is not -- I don't think that's a dire outlook. Certainly, not relative to our expectation over the past few years at the beginning -- at this time in the year.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

So I can understand how you're like reasonably -- confident that, like, this 45% gross margin is probably sustainable for like at least another 6 months or so.

Christopher M. Connor

I think that's right.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

Okay. The second thing is I wanted to understand what really happened to volumes in the -- on the Consumer Group side. Like where -- so because this is now the second quarter in a row of volumes were negative. And what exactly is happening? Because I didn't detect these volume declines like anywhere else.

Sean P. Hennessy

Yes, it's mostly Walmart, Silke. And as we've commented, we've been losing share inside that for a while there.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

I thought you gave that up already.

Sean P. Hennessy

The brand and material was replaced by Glidden immediately. And the significant portion of Walmart's vibe has been their private level under their Color Place brand name. And so the process there was that was to be a phase-in over a period of time. We were going from some percentage of their distributions that we supplied to significantly lower. And those adjustments were taking place in the third and fourth quarter. That's really the headwind that our Consumer Group was facing.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

Okay, I understand. Sorry, I forgot that. And has anything changed in your goal to explore the Canadian Stores market now that PPG owns the Glidden stores there?

Robert J. Wells

Well, our intentions have always been to continue to organically open stores throughout Canada, following our Stores model. And one of the real bright spots in this potential Comex acquisition is a brand called General Paint that operates out of British Columbia. And that will bring a significant store count boost to our plans in Canada. So we would expect to make significant progress in Canada this year organically, and then maybe get a real shot in the arm when we get this transaction closed.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

Can you enlighten us what the Comex exposure is in Canada?

Robert J. Wells

Yes, General is the brand name. The store count in Canada was...

Christopher M. Connor

78 stores.

Robert J. Wells

78 stores. Yes.

Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division

And if I could, a last question is like TiO2 question again. I wanted to ask it with raw materials, then I forgot. Has sulfur-based TiO2 from China made a difference to the global supply demand balance at all? I understand that Sherwin uses chloride-based TiO2, but I was just wondering whether you had a view?

Robert J. Wells

Silke, clearly, the chloride producers have been talking about soft market conditions and weak demand all year long. And whether that is truly weak global demand or less than robust demand partially offset or partially satisfied by increasing sulfide capacity is hard to tell. But we suspect that it might be some of the latter.

Operator

Our next question comes from the line of John McNulty with Crédit Suisse.

John P. McNulty - Crédit Suisse AG, Research Division

Just one quick question. So when we look at the sales growth that you saw and earnings growth you saw in the Paint Store or throughout your businesses, and so the Paint Store Group, Lat Am, the Consumer side, they vary pretty significantly. If you have any information or data on it, can you let us know kind of which one Comex might have mirrored more likely through the fourth quarter and 2012? Was it closer to the Paint Store type growth or was it more similar to the Lat Am growth?

Robert J. Wells

I think it's probably a hybrid of both of those. Their model would indicate that because they have such a strong distribution network and they're selling to the professional painting contractor, they would have participated in more the Mexican market growth scenario. And we think Mexico actually is a pretty good place right now. Their GDP outperformed the U.S. this past year. Their housing markets and their commercial construction businesses were stronger than ours were. So their performance should mirror closer to that. We have not commented on this private company's results yet. And we will, obviously, when we close, give you a lot more transparency there, John. But at this point in time, I think you just have to kind of look at the Mexican GDP market and know that Comex would be a good proxy for this same kind of businesses, housing, et cetera, that we enjoyed through our Stores business year.

Operator

There are no further questions at this time. I would like to turn the floor back over to Mr. Wells for any additional closing comments.

Robert J. Wells

Thanks, Jesse. Let me wrap of this morning by asking you all to save the date of Thursday, May 23, on your calendars. That's the day we'll host our annual financial community presentation at our headquarters in Cleveland, Ohio. The program will consist of our customer in morning presentations with Q&A, followed by a reception and lunch. Again, that date is Thursday, May 23. We'll be sending out invitations and related information in the weeks ahead. Thanks for joining us today. And thank you, as always, for your continued interest in Sherwin-Williams.

Operator

Thank you. This includes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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