Valvoline Inc., which is now a pure-play automotive services company, has reported that its net revenue grew 16.4% to $344.50 million in the fiscal second quarter ended March 31, 2023, driven by 13.5% system-wide same-store sales (SSS) growth as well as the addition of 120 net new shops to the system over the last 12 months.
“With the sale of the Global Products business complete, Valvoline is wholly focused on driving long-term value to shareholders through our best-in-class retail platform by growing system-wide store sales, increasing units through both company-operated and franchised additions, and evolving the service portfolio over time,” said CEO Sam Mitchell. “Valvoline continues to see resiliency and strength in the demand for the quick, easy and trusted preventive maintenance service we provide to our customers, demonstrated by 26% adjusted EBITDA growth on 19% adjusted sales growth* year over year for the quarter.”
The company’s SSS results break down as …
• Company-operated SSS up 14.2% on top of 10.0% growth a year ago for a two-year stack of +24.2%.
• Franchised SSS up 12.9% on top of 15.5% growth a year ago for a two-year stack of +28.4%.
• System-wide SSS up 13.5% on top of 13.1% growth a year ago for a two-year stack of +26.6%.
Management attributed Valvoline’s strong top-line growth to increased transactions as well as higher average ticket price from pricing actions and non-oil change service penetration.
Gross profit rose 18.1% to $126.70 million, and its gross margin increased from 36.2% to 36.8% on a year-over-year basis.
Net income from continuing operations grew 43.0% to $32.90 million.
Adjusted EBITDA from continuing operations increased 25.5% to $87.10 million, attributable to Valvoline’s strong top-line growth.
The company reported 35 net shop additions for the quarter (19 company-operated locations and 16 franchised shops), giving Valvoline a total of 1,781 shops system-wide. Management’s long-term goal is to have more than 3,500 shops.
“The second quarter results were in line with our expectations and we remain on track to meet our [fiscal year 2023] targets,” Mitchell said. “We also expect the margin improvement we saw during Q2 to continue in the back half of the year.”
Management’s outlook for fiscal 2023 is unchanged. This includes …
• 130 to 160 system-wide shop additions, which breaks down as 80 to 90 company-operated locations and 50 to 70 franchised shops.
• System-wide SSS growth of 8% to 12%.
• System-wide store sales growth of 16% to 20%.
• Net revenue of $1.40 billion to $1.50 billion.
• Net revenue growth of 14% to 18%.
• Adjusted EBITDA of $370 million to $390 million.
• Adjusted net income of $160 million to $180 million.
* Editor’s Note: It’s worth noting that Valvoline’s sales were up 19% excluding suspended operations of a former Global Products business that was not included in the March 1 sale of the company’s Global Products business to Aramco.
