Vice President & Chief Financial Officer at Masco
Thank you, Keith, and good morning, everyone. Before I begin my comments, I want to take a moment to thank Keith, our Board and the entire Masco organization for the opportunity to serve as CFO for more than 15 years. I've had an amazing and fulfilling 27-year career with company. As I look forward to my retirement, I wish everyone the best. With that, as Dave mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization and other one-time items.
Turning to Slide 8. Sales in the quarter decreased 5% and, excluding currency, decreased 2%. Lower volumes decreased sales by 11%, partially offset by net selling prices, which increased sales by 9%. In local currency, North American sales decreased 5%. Lower volume decreased sales by 14%, partially offset by higher net selling prices, which increased sales by 10%. In local currency, International sales increased 7%, driven by increased selling prices.
As it relates to inventory, we believe channel inventories have stabilized as we saw sell-through approximately equal to sell-in and destocking had minimal impact in the quarter.
Our gross margin of 29.5% was impacted by lower volumes, and higher year-over-year operational costs in the quarter. Our SG&A as a percentage of sales improved 20 basis points to 17.4% through continued cost discipline. Our operating profit in the fourth quarter was $234 million and operating margin was 12.2%. Operating profit was impacted by lower volumes, higher operational costs and currency, partially offset by higher net selling prices.
Lastly, our EPS in the quarter was $0.65. I would like to note that this performance was based on a tax rate of 24% versus the previously guided 25% tax rate due to the implementation of our tax planning strategies. Because of this assumption, we have provided restated adjusted EPS numbers for the first three quarters of 2022 in the appendix on Slide 28.
Turning to the full-year 2022. Sales increased 4% over prior year against a healthy comp of 17% for full year 2021. Excluding currency, sales increased 6%. Higher net selling prices increased sales by 9%, partially offset by lower volumes, which decreased sales by 3%. In local currency, North American sales increased 6% and the International sales increased 8%. Our SG&A as a percent of sales decreased 90 basis points to 16%. Operating profit for the full year was $1.4 billion and operating margin was 15.6%.
Lastly, our EPS increased 2% to $3.77. This amount also assumes a tax rate of 24% versus a previously guided 25%, which favorably impacted full year EPS by $0.05. Our adjusted EPS calculation for 2023 will continue to assume a 24% tax rate.
I want to thank our employees across the globe for their hard work and dedication to achieve these solid results during a challenging year.
Turning to Slide 9. Plumbing sales in the quarter decreased 3%. Excluding the impact of currency, sales grew 2%. Pricing contributed 9% to growth and volume decreased sales by 7%. North American Plumbing sales decreased 1% in local currency. This was driven by lower demand we started to experience in the third quarter. Lower demand was fairly broad based across product categories and channels. International Plumbing sales increased 7% in local currency. Hansgrohe grew sales in many of their key markets, most notably China, Germany and France.
Segment operating profit in the fourth quarter was $148 million and operating margin was 12.4%. Operating profit was impacted by lower volumes, higher operational costs and currency, partially offset by higher net selling prices.
Turning to the full year 2022, Plumbing sales increased 2%. Excluding currency, sales increased 6% with net selling prices contributing 7% to growth, partially offset by lower volume mix, which decreased sales by 1%. In local currency, North American Plumbing sales grew 5% and International Plumbing sales increased 8%. Full year operating profit was $834 million, with an operating margin of 15.9%.
Turning to Slide 10. Decorative Architectural sales decreased 8% for the fourth quarter against a 15% comp. Our PRO paint sales increased mid-single digits against a robust comp of over 50% in the fourth quarter 2021, as we continue to see solid demand for our PRO paint offering, strong brands and high-quality products. Our DIY paint sales declined low double digits versus prior year. Additionally, our lighting and builders' hardware businesses, in aggregate, declined mid-teens in the quarter against a solid mid-single digit comp.
Operating profit was $101 million in the quarter and operating margin was 13.9%. Operating profit was impacted by lower volumes and higher material costs, partially offset by higher net selling prices.
Turning to the full year 2022, sales increased 6%, driven by low single digit growth in our DIY paint business and outstanding PRO paint growth of over 25%. Full year operating income was $608 million and operating margin was 17.7%.
Turning to Slide 11. Our year-end balance sheet is strong with net debt to EBITDA at 1.8 times. We ended the quarter with approximately $1.5 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver. Working capital as a percent of sales was 17.4% at year-end. In 2023, with expected lower volumes and less supply chain disruptions, we anticipate working capital as a percent of sales to improve and be approximately 16.5% at year-end.
In 2022, we also paid down $300 million of the $500 million term loan that we borrowed in the second quarter of the year. Finally, during 2022, we repurchased 16.6 million shares for $914 million and returned $258 million to shareholders through dividends.
Now, let's turn to Slide 12 and review our outlook for 2023. I'd like to preface our guidance by reminding everyone that these are uncertain times, which makes forecasting extremely challenging. For Masco overall, we are planning for volumes to be down in the low double digit range, partially offset by low single digit pricing. Based on this assumption, we expect 2023 sales to decline approximately 10%, with operating margins of approximately 15%. Currency is projected to have minimal impact on our 2023 results.
Our SG&A as a percentage of sales trended below our normal levels during the pandemic. However, as we continue to invest in our businesses for future growth while maintaining cost discipline, we expect this percentage to increase back to a more normalized pre-pandemic level to be around 17.5% for 2023. As always, we will take appropriate actions to address our costs as the year develops based on market conditions.
Operating margins will be impacted more in the first half of the year due to lower volumes and strong year-over-year sales comps, particularly in the Decorative Architectural segment. As we previously discussed, operating profit in the first quarter will also be impacted by the higher operational costs we experienced starting in Q2 last year, particularly in the Plumbing segment. As we think about the cadence for the year, we expect our Q1 sales and margin profile to look similar Q4 2022 with our year-over-year operating margins expanding -- expected to improve each quarter thereafter.
In our Plumbing segment, we expect 2023 sales to decline in the range of 10% to 14%. We anticipate the full year Plumbing margins will be roughly flat with 2022 segment margins at approximately 16%. Lower volumes and, in the first quarter, higher operational costs will impact margins, with favorable selling price increases partially offsetting these headwinds.
In our Decorative Architectural segment, we expect 2023 sales to decline in the range of 5% to 10%. Looking specifically at paint for 2023, we currently anticipate our DIY business to decrease high-single digits and our PRO business to decrease mid-single digits, as we cycle over 25% PRO paint growth in 2022.
We anticipate the full year Decorative Architectural margin to be approximately 16%. This margin is largely due to our significant pricing actions in this segment that typically only recover the dollar amount of the inflation. As a result, all else equal, operating profit dollars remain neutral from cost recovery pricing actions, but results in margin compression. We are also playing an increased investment in people and capabilities in 2023 to drive future growth in our PRO paint business.
As it relates to share repurchases, we have begun modest share repurchases and expect to spend approximately $500 million on share repurchases, with this activity being weighted more towards the second half of the year.
Finally, as Keith mentioned earlier, our 2023 EPS estimate is $3.10 to $3.40. This assumes a 226 million average diluted share count for the year and a 24% effective tax rate. Additional modeling assumptions for 2023 can be found on Slide 15 in our earnings deck.
With that, I'd like to open up the call for Q&A. Operator?