Quick Lubes Continue To Be Key Growth Driver For Valvoline

For the fiscal third quarter ended June 30, 2018, Lexington, KY-based Valvoline Inc. came through with $577 million in sales — an increase of $43 million, or 8.1 percent, compared to a year ago. Key drivers of the improvement in sales were increased product pricing, favorable mix, acquisitions of quick-lube shops and overall increased volumes. Lubricant gallons sold were flatas volume increases in the Quick Lubes segment were offset by decreases in the Core North America and International segments.

Gross profit was up 2 percent; however, gross margin declined from 36.9 percent to 34.8 percent on a year-over-year basis. According to management, the decrease came primarily from higher raw material costs — some of which were passed through via pricing yet had a dilutive effect to Valvoline’s margin rate.

The company’s net income increased 14.3 percent to $64 million.

QUICK LUBES … Sales from Valvoline’s Quick Lubes segment increased by $28 million, or 20.1 percent, to $167 million in the fiscal third quarter. According to management, volume growth increased segment sales by $12 million, as lubricant gallons and transactions were up. Price and mix improvements increased average ticket and improved sales by $7 million, and acquisitions increased sales by $9 million.

Valvoline Instant Oil Change (VIOC) came through with 7.9-percent system-wide same-store sales growth, topping 7.9-percent growth from a year ago. Same-store sales growth for company-owned VIOC locations was 8.7 percent (on top of +6.9 percent a year ago), while same-store sales growth for franchisee shops was 7.4 percent (on top of +8.3 percent a year ago).

The increase in same-store sales was the result of both increased transactions and average ticket. According to Valvoline, investments made in customer acquisition and retention programs drove higher transactions, and previously implemented pricing actions and premium mix led to higher average ticket.

Quick Lubes operating income increased 11.8 percent to $38 million for the quarter.

EXPECTATIONS … “For the fiscal fourth quarter, we anticipate continued strong same-store sales growth from VIOC,” CEO Sam Mitchell said. “We’re also excited to bring the Great Canadian Oil Change stores into our system and, at the same time, expect to add nearly 30 new stores across the VIOC network.”

He added that management expects a “solid” quarter from its International segment and modest improvement from the Core North America segment.

For the full fiscal year, VIOC same-store sales are expected to come in between +7 percent and +7.5 percent — an increase from management’s previous guidance of +6.5 percent to +7.5 percent.

EXPANSION … Over the nine months ended June 30, 2018, the company acquired 63 service centers for a total of $71 million. This includes 60 previous franchisee shops, of which 56 were acquired from Henley Bluewater LLC for $60 million back in October.

Over the first three quarters of its fiscal year, Valvoline also sold two service centers to a franchisee for roughly $5 million.

As of June 30, 2018, Valvoline had more than 1,200 company-owned and franchisee shops across North America.