Consolidated net sales increased 9.2% in the quarter to $5.87 billion Net sales from stores in U.S. and Canada open more than twelve calendar months increased 6.4% in the quarter Diluted net income per share decreased to $2.21 per share in the quarter compared to $2.42 per share in the second quarter 2021 Adjusted diluted net income per share was $2.41 per share in the quarter compared to $2.65 per share in the second quarter 2021, a decrease of $0.24 per share including a $0.13 per share unfavorable impact in the Administrative segment Lowering FY22 diluted net income per share guidance to a range of $7.65 to $7.95 per share, including acquisition-related amortization expense of $0.85 per share Lowering adjusted diluted net income per share guidance to a range of $8.50 to $8.80 per share
CEO REMARKS
"Demand remained strong during the second quarter in The Americas Group and the Performance Coatings Group, as both groups delivered sales within our guidance," said Chairman and Chief Executive Officer, John G. Morikis. "Speaking to trends in the business since our June 8th investor day, pro architectural demand in The Americas Group accelerated as the quarter progressed and has meaningfully strengthened further in July. Similarly, Performance Coatings Group demand remained strong through the quarter in North America, the Group's largest region, and this strong demand has also continued into July. Conversely, the slower North America DIY demand trend we previously described in Consumer Brands Group did not improve and we experienced tight supply in certain resins, in particular alkyd resins, which significantly impacted our North America non-paint sales. Internationally, demand deteriorated faster than anticipated in Europe, and no meaningful recovery occurred in China following the lifting of COVID lockdowns, both of which meaningfully impacted Consumer Brands Group and Performance Coatings Group sales.
"Consolidated gross margin improved sequentially, but at a slower pace than anticipated. Segment profit improved sequentially in The Americas Group as well as in the Performance Coatings Group, where margin also improved on a year over year basis. At the same time, we are disappointed in our weaker than expected earnings results in the quarter, which were primarily related to the lower than expected sales in the Consumer Brands Group and the Europe and Asia Pacific regions in the Performance Coatings Group, raw material costs that have not yet moderated despite sequential deflation of feedstock costs and supply chain inefficiencies incurred in serving our customers. We are taking aggressive actions throughout the second half of the year in response to these challenges."
(1) Adjusted segment profit excludes the impact of acquisition-related amortization expense. Acquisition-related amortization expense in CBG was $19.1 million and $21.3 million in the second quarter of 2022 and 2021, respectively.
Net sales in CBG increased due primarily to selling price increases in all regions, partially offset by lower sales volume outside of North America. Currency translation rate changes decreased CBG's net sales by 1.2%. CBG segment profit decreased primarily due to lower sales volume, increased raw material costs and higher supply chain costs, partially offset by selling price increases. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 260 basis points compared to 290 basis points in the second quarter of 2021.
Performance Coatings Group ("PCG")
Reported segment margin
Adjusted segment profit excludes the impact of acquisition-related amortization expense. Acquisition-related amortization expense in PCG was $50.3 million and $56.6 million in the second quarter of 2022 and 2021, respectively.
Net sales in PCG increased due to higher sales in most end markets, primarily attributable to selling price increases, and sales volume growth in our packaging and coil businesses, partially offset by lower sales volume outside of North America. Acquisitions increased sales by 2.9%, while currency translation rate changes decreased PCG's net sales by 3.7%. PCG segment profit increased due primarily to selling price increases, partially offset by increased raw material costs. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 280 basis points compared to 370 basis points in the second quarter of 2021.
The Company generated $639.7 million in net operating cash during the first six months of 2022. This cash generation, along with an increase in our short-term borrowings, allowed the Company to return cash of approximately $1.01 billion to our shareholders in the form of dividends and share repurchases, as well as repay $260.2 million in long-term debt, and close an acquisition in the second quarter. The Company closed two additional acquisitions on July 1st that will be reported in our third quarter results. The Company purchased 2.55 million shares of its common stock during the first six months. At June 30, 2022, the Company had remaining authorization to purchase 46.0 million shares of its common stock through open market purchases
"We expect third quarter 2022 consolidated net sales to increase by a low to mid-teens percentage compared to the same period a year ago," said Mr. Morikis. "We are maintaining our full year consolidated net sales guidance to be up by a high-single to low-double digit percentage based on the strong momentum we are seeing in our pro architectural business in The Americas Group and continued strength in North American industrial demand in the Performance Coatings Group. Given the shortfall in our second quarter results, demand pressures in Europe, China and North American DIY, and a continuation of the highest cost inflation seen in decades, we are lowering our full year adjusted diluted net income per share guidance to a range of $8.50 - $8.80 per share, which represents 6.1% growth from 2021 at the mid-point. This implies a second half diluted net income per share of $4.63 per share at the mid-point, an increase of 35% over the same period last year.
"We are responding aggressively to inflationary pressures by implementing a 10% price increase in The Americas Group effective September 6th, with significant additional pricing actions being taken in our other two operating segments. We will manage our expenses tightly in the second half with the slowdown in market demand in certain regions and businesses, however, we will continue to invest in growth, including stores, sales representatives and innovative products. We remain highly confident in our strategy, our people, and our ability to emerge as an even stronger Company following the current near-term pressures."
