For the fiscal fourth quarter ending Sept. 30, 2019, Valvoline Inc. reported approximately $222 million in sales from its Quick Lubes segment — an increase of 22.7% compared to the same period a year ago. Same-store sales rose 10.0% system-wide, with company-owned shops up 9.5% and franchised shops up 10.4%.
Management attributed the same-store sales growth to an increase in transactions tied to customer acquisition and retention programs, as well as an increase in average ticket, attributable to premium mix, pricing and a rise in revenue from non-oil-change services.
It’s worth noting that about 3 points of the same-store sales growth came from price increases implemented near the beginning of the fiscal year. Management is not planning any major pricing moves at the store level in fiscal 2020, according to comments made by CEO Sam Mitchell during Valvoline’s Nov. 7 earnings conference call.
It’s also worth pointing out that the Quick Lubes business posted record full-year same-store sales growth of 10.1%, which exceeded management’s expectations and represented the 13th consecutive year of same-store sales increases for the Quick Lubes segment.
For the fiscal fourth quarter, segment operating income increased 14.3% to $48 million and adjusted EBITDA grew 13.7% to $58 million.
NETWORK GROWTH … The Quick Lubes business ended the quarter with 1,385 total company-owned and franchised shops — a net increase of 33 shops for the quarter and 143 shops on a year-over-year basis. The year-over-year increase in shops includes 57 company-owned locations (29 acquired and 28 newly opened shops) and 86 franchised locations (31 of which came from the Oil Changers acquisition in Canada).
The 33 new shops added during the fiscal fourth quarter included the first four company-owned locations in Canada as part of a previously announced acquisition of an independent system in Alberta.
“For fiscal 2020, we expect the strong growth in Quick Lubes to continue,” Mitchell told analysts on the call. “We expect to add about 100 stores to the system next year. Of those, we have plans for nearly 35 new ground-up stores as we leverage the development talent we’ve added to our team. With the team and pipeline we have in place, we are well on our way to moving our target up to nearly 50 newly built stores per year over the next few years.
“Our franchisees should add between 30 and 40 stores,” he said. “New acquisitions are also expected to contribute to meaningful store growth.”
LOOKING AHEAD … Management is calling for fiscal 2020 Quick Lubes same-store sales to increase between 6% and 8%.
“Our focus on operations — along with the new stores we’re adding and the ones we’ve added over the past two years — will combine to fuel an anticipated low- to mid-teens growth in segment EBITDA,” Mitchell said on the call. “We continue to invest in our model, including new technology to further build transparency and trust with our customers.
“In 2020, we will be focused on rolling out and further penetrating our company-store markets with our breakthrough new app … . We’re also investing in new capabilities to service more vehicles and expanding our marketing programs to target owners of luxury cars and SUVs and light-duty trucks. We expect these new offerings to help grow our customer base.”
On the call, Mitchell also noted that Valvoline’s “Recall Awareness Program” is helping the company win new customers, as well as bolster business with car dealership groups by referring Valvoline Instant Oil Change customers to dealership partners for needed safety recall services. — Marc Vincent