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    VVV
    Earnings call· Mar 2026(Q2 FY26)

    VALVOLINE Q2 FY26 earnings call VVV

    May 7, 2026 Source

    Executive summary

    Valvoline Q2 FY26 — Strong Top-Line Growth and Raised Full-Year Guidance

    Valvoline delivered robust Q2 FY26 results, driven by strong system-wide sales and effective cost management, leading to significant EBITDA and EPS growth. The company raised its full-year guidance, reflecting confidence in its resilient business model and execution, despite anticipating increased product costs in the latter half of the year. Integration of Breeze Auto Care is progressing ahead of schedule, contributing positively to performance.

    Highlights

    6

    • Systemwide store sales increased nearly 20% in Q2 FY26.

    • Net sales grew 25% to $504 million in Q2 FY26.

    • System-wide same-store sales grew 8.2% in Q2 FY26, with ticket driving about 2/3 of the growth.

    • Adjusted EBITDA increased 28% to $134 million, with margin expanding 60 basis points to 26.5% in Q2 FY26.

    • Adjusted EPS increased 21% to $0.41 per share in Q2 FY26.

    • Year-to-date operating cash flows improved to $160 million and free cash flow was $45 million, an increase of approximately $57 million over last year.

    Concerns

    3

    • Gross margin rate decreased 20 basis points year-over-year to 37.1% in Q2 FY26, though improved 40 bps excluding depreciation.

    • Anticipated increase in product costs in Q3 FY26 due to rising crude oil prices and potential Middle East conflict impacts.

    • Breeze Auto Care acquisition is a negative impact to margin, albeit less than the initially expected 100 basis points for the full year.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year same-store sales outlook
    raised outlook
    high materiality
    High
    Full-year Adjusted EBITDA outlook
    raised outlook
    high materiality
    High
    Full-year Adjusted EPS outlook
    raised outlook
    high materiality
    High
    Full-year new store growth
    within our full year guidance
    medium materiality
    High
    Net debt to adjusted EBITDA target
    target leverage as quickly as possible
    medium materiality
    High
    Breeze Auto Care contribution to full-year EBITDA margin dilution
    less than 100 basis points
    medium materiality
    High

    Operational metrics

    16
    Systemwide store sales growth
    nearly 20%
    Q2 FY26
    Net sales
    $504 million25% increase over the prior year
    Q2 FY26

    Includes balanced contribution from core business and Breeze Auto Care.

    Gross margin rate (ex-depreciation)
    improved by 40 basis points
    Q2 FY26

    Reported gross margin rate decreased 20 bps YoY, but improved when excluding depreciation impact.

    SG&A as a percent of sales
    18%decreased 70 basis points year-over-year
    Q2 FY26

    Reflects leverage as substantial planned investments are largely behind.

    Adjusted EBITDA
    $134 millionincreased 28%
    Q2 FY26
    Adjusted EBITDA margin
    26.5%expanding 60 basis points
    Q2 FY26
    Adjusted EPS
    $0.41increased 21%
    Q2 FY26

    Includes $0.06 per share impact from interest expense.

    New stores added
    31
    Q2 FY26
    Store closures
    2
    Q2 FY26
    Transfers from franchise to company
    4
    Q2 FY26
    Total store count
    2,409
    end of Q2 FY26
    NOCR as percent of ticket
    around 25%
    Q2 FY26

    Remains very consistent across company and franchise partners.

    Capital cost reduction for new stores
    10-15%
    ongoing

    Reduction in capital required to build ground-up stores and convert acquired stores.

    IRR for new units
    mid- to high teens
    ongoing

    Consistent returns for new store investments.

    Fleet business as percent of system-wide sales
    less than 10%
    Q2 FY26

    Growing at a very rapid rate with room to run.

    New store openings in April
    14
    April 2026

    Industry KPIs

    6
    MetricValueDetails
    Sg a OPEX ratio18%%
    Comparable sales8.2%%
    Store count growth2,409stores
    Gross margin drivers37.1%%
    Net debt to adjusted EBITDA3.1xx
    Share buyback capital return—

    Deals & partnerships

    1
    Breeze Auto CareAcquisition of quick lube service centers to expand network.

    Integration is a multi-year effort, currently focused on operational stability, talent retention, and aligning support and management teams. The Breeze team managed store operating expenses well.

    Risks & headwinds

    3
    Increased product costs due to crude oil pricesQ3 FY26 onwards

    started to see costs increase in Q3 FY26, anticipate this will continue

    Mitigation: working closely with suppliers to mitigate supply constraints; company and some franchisees have taken pricing actions expected to mitigate cost increases on a dollar basis.

    Middle East conflict duration and impact on base oil supplyongoing

    severity and duration of those will be impacted by the length of the Middle East conflict

    Mitigation: working very proactively with suppliers to ensure continued supply.

    Breeze Auto Care margin dilutionongoing

    Breeze is a negative impact to margin, albeit less than we expected so far

    Mitigation: building momentum in that system to improve profitability.

    What to watch in Q3 FY26

    4

    Product cost increases and pricing actions

    Q3 FY26
    Currentstarted to see costs increase in Q3 FY26, company and some franchisees took pricing actions
    TargetFull mitigation of cost increases on a dollar basis, modest impact to gross margin rate

    Why it matters

    Determines profitability and gross margin trajectory amidst rising input costs.

    As we enter the third quarter, however, we have started to see costs increase, and we anticipate this will continue depending on the length of the Middle East conflict. We're working closely with our suppliers to ensure we mitigate any supply constraints and both company and some franchisees have taken pricing actions, which we expect will mitigate the cost increases on a dollar basis.

    Q&A highlights

    7

    Where did the same-store sales outperformance come from (company/franchise/geography)? Did you see any demand softening in Q2 or early May?

    Franchise stores outperformed company stores in same-store sales, primarily driven by transaction growth influenced by new store contributions and lapping prior-year weather. No signs of trade-down or deferrals were observed, as preventive maintenance demand remains resilient. Gas prices typically have a slow impact on miles driven.

    “Yes, we had really strong same-store sales growth at 8.2%. And as I mentioned, it did exceed our expectations. About 2/3 of that came from ticket with actually all things contributing healthy amounts on the ticket side, net pricing was good, premiumization and then OCR penetration all positive.”

    asked by David Bellinger · answered by Lori Flees

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    Valvoline reported strong Q2 FY26 results with net sales of $504 million, a 25% increase year-over-year, and system-wide same-store sales growth of 8.2%. This growth was primarily driven by ticket (two-thirds) through net price, premiumization, and NOCR penetration, with transactions also contributing across the network. Franchise stores notably outperformed company-owned stores in same-store sales, mainly due to transaction growth influenced by new store contributions and lapping prior-year weather events.

    02

    Profitability and Cash Flow

    EBITDA increased 28% to $134 million, expanding margins by 60 basis points to 26.5%. Adjusted EPS grew 21% to $0.41 per share, despite a $0.06 per share impact from interest expense. The gross margin rate was 37.1%, a 20 bps decrease YoY, but would have improved by 40 bps excluding depreciation. The company also improved year-to-date operating cash flows to $160 million and free cash flow to $45 million, a $57 million increase over the prior year.

    03

    Breeze Auto Care Integration and Contribution

    The integration of Breeze Auto Care is progressing ahead of schedule, with financial contributions better than expected due to improved execution on store-level expenses and early G&A synergies in payroll and procurement. The multi-year integration effort is focused on maintaining operational stability, retaining talent in the stores, and fully aligning support and management teams. Breeze's performance is contributing positively, with its margin dilution expected to be less than the initial 100 basis points for the full year.

    04

    Network Expansion and Unit Economics

    Valvoline added 31 new stores in Q2, bringing the total to 2,409, after accounting for 2 closures and 4 transfers. The development pipeline remains healthy for both company and franchise, with new store additions weighted towards the back half⚖️ of the year, including 14 openings in April (9 franchise). The company and its franchisees are actively reducing capital costs for new builds and conversions by 10-15%, with a line of sight for another 10-15%, while maintaining mid-to-high teens IRR for new units.

    05

    Cost Management and Pricing Actions

    While Q2 saw no material product cost increases, Q3 has started to see rising costs due to crude oil prices and the Middle East conflict. Valvoline and some franchisees have taken pricing actions to mitigate these increases on a dollar basis, expecting to fully cover cost impacts. Management noted that lubricant costs represent 20-25% of COGS, and a $1/gallon base oil increase typically requires a $0.50-$0.60 per oil change price increase to maintain dollar profit.

    06

    Customer Demand Resilience and Market Share

    Management noted continued resilience in customer demand for preventive maintenance, with no signs of trade-down or deferrals, even with potential macro headwinds🌐 like gas prices. The habitual nature of oil changes, particularly for peace of mind before long drives, contributes to consistent demand. Valvoline also reported growing market share across its business, even when excluding the impact of the Breeze acquisition, attributing this to its strong value proposition and execution.

    AI-generated summary of the company’s earnings call. Not investment advice.