For the fiscal 2024 first quarter ended Dec. 31, 2023, Valvoline Inc. saw its net revenue increase 12.2% to $373.40 million, attributable to same-store sales (SSS) growth from both ticket and transaction improvements as well as the addition of 144 net new shops to the system over 12 months.
SSS breaks down as …
• System-wide SSS up 7.1%
• Company-operated SSS up 6.1%
• Franchised SSS up 8.0%
According to management, ticket contributed about 75% to the system-wide SSS growth with half of this benefit driven by “premiumization” and non-oil change service penetration and the balance coming from increased pricing. Transaction growth contributed the balance to the system-wide SSS growth, driven by an increased customer base as well as modest contributions from miles driven.
It’s worth noting that the quarter was impacted by a day mix change that caused just under 100 basis points of impact on the transaction side. Excluding the day mix impact, Valvoline would have seen more like one-third of its system-wide SSS coming from transactions and two-thirds coming from ticket.
Long term, management expects to see a more balanced approach from transactions and ticket.
Gross profit rose 13.5% to $134.80 million, and gross margin grew from 35.7% to 36.1% on a year-over-year basis. Valvoline attributed the margin improvement to labor efficiency, effective management and improved retention rates.
For the quarter, there were 38 total shops additions, half of which came from franchises. Another way of looking at is that there were 21 ground-up builds and 17 acquisitions.
Valvoline’s network ended the quarter with a total of 1,890 shops.
Along these lines, earlier this month, the company celebrated its 1,000th franchise shop: a Quality Automotive Services (QAS) location in Raleigh, NC. QAS has been a Valvoline franchise partner for 20 years.
During the three months ended Dec. 31, 2023, Valvoline repurchased 5.40 million shares of its common stock for $171.10 million. As of Dec. 31, 2023, $40.40 million remained available for repurchase under its 2022 share repurchase authorization.
Management anticipates completing the current authorization in the near term.
Regarding the current quarter, CFO Mary Meixelsperger told analysts on Valvoline’s Feb. 6 earnings call that the network experienced weather-related weakness early in the month of January but has seen that bounce back nicely in recent weeks.
“There haven’t really been any surprises for us in terms of where sales are trending,” Meixelsperger said, “and we’re feeling good about the guidance that we provided for the full year.”
Management’s full-year SSS guidance calls for 6% to 9% growth. — Reporting by Marc Vincent, Editor
