RPM (RPM) Q1 2026: SG&A Up $10M as Growth Investments Drive 8% Performance Coatings Volume Surge
RPM’s Q1 2026 marked a decisive pivot to growth, with management deliberately expanding SG&A by $10 million to fund salesforce, marketing, and M&A initiatives, even as peers retrench. Performance Coatings and Construction Products delivered standout volume growth despite macro headwinds, while consumer remains pressured but is gaining share in new categories. Management’s willingness to absorb near-term margin drag for long-term positioning is reshaping the company’s growth algorithm and competitive stance heading into 2026.
Summary
- Growth Investments Outpace Peers: RPM expanded sales and marketing spend, fueling volume gains in key segments.
- Operational Restructuring Underway: Six plant consolidations and new product launches are reshaping the cost and innovation base.
- Margin Leverage Deferred for Strategic Positioning: Management is prioritizing share gains and pipeline build over short-term EBIT maximization.
Performance Analysis
RPM delivered record consolidated sales and adjusted EBIT in Q1 2026, with each segment—Construction Products, Performance Coatings, and Consumer—posting all-time high quarterly sales. Organic revenue growth was robust, led by systems and turnkey solutions for high-performance buildings, and further bolstered by strategic M&A. Notably, Performance Coatings Group (PCG) achieved 8% unit volume growth, while Construction Products Group (CPG) grew units by 4%, both outpacing the sluggish macro environment and reflecting deliberate hiring and market expansion efforts.
However, SG&A increased as a percentage of sales, driven by $8.8 million in higher healthcare expenses, $5.3 million in new sales hires, $3.2 million in incremental advertising (especially for consumer brands), and $2.1 million in M&A pipeline costs. Consumer Group’s organic sales declined 3%, but RPM gained share in new cleaning categories and benefited from the Pink Stuff and ReadySeal acquisitions, which provided accretive margins. Plant consolidations and inventory builds to mitigate tariffs and ensure service continuity temporarily pressured fixed cost utilization and gross margin mix.
- Volume Gains Defy Market Trends: PCG and CPG drove record sales with strong project-based and specification-driven demand.
- Margin Headwinds Absorbed: Higher SG&A and plant consolidation costs offset some MAP 2025 efficiency gains.
- Consumer Group Mixed: Acquisitions and new category entries offset ongoing DIY softness; share gains in cleaners and adjacent retail channels.
RPM’s willingness to absorb near-term cost inefficiencies and margin dilution in favor of growth investments is a notable divergence from industry peers, positioning the company for share gains as end markets recover.
Executive Commentary
"Over the last six to nine months, we have been talking about a pivot to growth in a frustratingly no growth environment. To make a pivot to growth, we recognize that we would have to do some things differently. Today, we are doing many things differently, while most of our competitors are responding to the no growth environment by cutting costs, reducing headcount, and suspending benefits. We are expanding sales associates and support staff... These growth investments are having the desired outcome with unit volume growth in our construction products group up 4%, despite negative construction market dynamics, and unit volume growth up 8% in our performance coatings group, pretty remarkable in any environment."
Frank Sullivan, Chair and CEO
"Q1 adjusted EBIT increased 2.9% to a record as volume growth allowed us to leverage MAP 2025 initiatives and overcome headwinds from higher raw material costs and temporary cost inefficiencies from plant consolidations. SG&A as a percentage of sales increased and was due to higher health care costs, which was up $8.8 million over the prior year, higher M&A expense, as well as investment and growth initiatives."
Michael LaRoche, Vice President, Controller, and Chief Accounting Officer
Strategic Positioning
1. Relentless Growth Investment in a No-Growth Market
RPM’s contrarian approach—expanding salesforce, marketing, and M&A while peers cut back—signals a long-term commitment to share gains. Management spent an incremental $10 million on growth levers in Q1 alone, including $5.3 million on new sales and support hires, $3.2 million on advertising (with a digital and social focus), and $2.1 million on M&A pipeline development. These investments are already yielding volume growth in core and adjacent categories, particularly in project-based and institutional end markets.
2. Business Model Shift: From Distribution to Project-Based Revenue
CPG’s revenue mix is shifting from traditional distribution to project-based and specification-driven sales, now 60% project-based versus 40% a decade ago. This transition is insulating RPM from weak channel demand and enabling deeper wallet share on large-scale building envelopes, including turnkey supply-and-apply models in roofing and sealants. The ability to deliver comprehensive solutions for all six sides of the building envelope is a unique competitive differentiator.
3. Operational Restructuring and Efficiency Initiatives
Six facility consolidations are underway, temporarily weighing on cost absorption and gross margin but ultimately expected to streamline operations and support scale. MAP 2025, RPM’s multi-year efficiency program, continues to deliver working capital and profitability improvements, even as new investments raise near-term SG&A. Notably, the company is reallocating G&A savings into frontline commercial resources and innovation.
4. Portfolio Expansion and Channel Diversification
RPM’s M&A activity is focused on both core and adjacent categories, with the Pink Stuff and ReadySeal acquisitions expanding the consumer group into new cleaning and exterior wood care markets. These moves are opening up non-traditional retail channels, such as grocery and dollar stores, and positioning RPM for growth in higher-margin, less cyclical categories. The creation of a dedicated cleaning group within consumer, leveraging brands like Mean Green and Pink Stuff, is a notable strategic shift.
5. Tariff Mitigation and Supply Chain Adaptation
RPM is proactively managing tariff risk, with an estimated $90–95 million unmitigated impact, half of which has been offset through production shifts, supplier negotiations, and selective price increases. Inventory builds and manufacturing footprint changes (such as relocating Tremco production from Toronto to the U.S.) are designed to ensure continuity and margin protection as trade policy evolves.
Key Considerations
RPM’s Q1 2026 was defined by a willingness to trade near-term margin for long-term positioning, with the company’s capital allocation and operational decisions diverging from much of the sector. The following considerations should be top of mind for investors tracking RPM’s evolving growth algorithm:
Key Considerations:
- Salesforce Expansion as a Growth Engine: Incremental hiring and support staff are driving project wins and deeper customer engagement, but require a multi-year payback before full margin leverage is realized.
- Consumer Group’s Channel Diversification: New product launches and entry into cleaners and adjacent retail channels are offsetting weak DIY demand, but the segment’s organic growth remains negative.
- Manufacturing Consolidation Costs: Six plant consolidations are creating temporary cost duplication and inventory builds, with $10 million in Q1 inefficiencies expected to persist through Q2 before tapering.
- Tariff and Raw Material Volatility: Trade policy uncertainty and supplier pricing dynamics are pressuring packaging and raw material costs, particularly in the consumer segment.
- SG&A Growth Outpaces Peers: Unlike many competitors, RPM is maintaining and increasing benefit programs and growth spending, betting on a first-mover advantage when end markets recover.
Risks
RPM faces elevated SG&A and cost inflation risk as it executes its growth pivot, with near-term margin leverage deferred by deliberate investments and one-off healthcare cost spikes. Tariff volatility and raw material inflation, especially in consumer packaging, remain ongoing threats to profitability. Execution risk around plant consolidations and new channel expansion adds complexity, while end-market recovery timing—especially in DIY and housing—remains uncertain.
Forward Outlook
For Q2 2026, RPM guided to:
- Record sales and adjusted EBIT, with both expected to rise mid-single digits YoY
- Consumer segment to outpace PCG and CPG growth due to recent acquisitions
For full-year 2026, management maintained guidance:
- Sales at the high end of the low to mid-single-digit growth range
- Adjusted EBIT to grow toward the low end of the high single-digit to low double-digit range
Management highlighted several factors that will shape results:
- Continued investment in sales, marketing, and M&A to accelerate the growth pivot
- Persistent macroeconomic uncertainty and tariff-driven cost inflation expected throughout the year
Takeaways
RPM’s Q1 2026 underscores a strategic inflection, with management prepared to forgo near-term margin expansion in order to build commercial capabilities and expand into new markets. Performance Coatings and Construction Products are already delivering above-market growth, while consumer is positioned for recovery and channel diversification as end markets stabilize.
- Growth Over Margins: Deliberate SG&A expansion is driving volume gains and market share, but investors should monitor for eventual operating leverage as investments mature.
- Operational Complexity: Plant consolidations and tariff mitigation strategies will continue to pressure costs and working capital near term, with expected payoff in scale and efficiency.
- Watch for Consumer Rebound: The timing and magnitude of a DIY and housing recovery will be critical to unlocking full earnings power, especially as new products and channels ramp.
Conclusion
RPM’s willingness to invest through the cycle—despite margin headwinds and macro uncertainty—sets it apart from peers and positions the company for outperformance when demand normalizes. The next several quarters will test whether this growth-first strategy delivers the operating leverage and market share gains that management is targeting.
Industry Read-Through
RPM’s aggressive salesforce and marketing expansion in a flat market signals a broader shift in specialty chemicals and building products toward gaining share through proactive investment, rather than cost-cutting. Peers retrenching on SG&A risk ceding ground in project-based and institutional channels, especially as specification-driven sales become a larger share of the market. Tariff management, plant consolidation, and channel diversification are emerging as key battlegrounds for margin and growth across the sector. Investors should watch for similar strategies—and their payback periods—across coatings, adhesives, and construction materials peers.