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    VVV
    Earnings call· Jun 2026(Q3 FY26)

    VALVOLINE Q3 FY26 earnings call VVV

    Aug 5, 2026 Source

    Executive summary

    Valvoline Q3 FY26 — Strong Sales and Profit Growth Amidst Supply Constraints

    Valvoline delivered strong Q3 FY26 results, exceeding $1 billion in system-wide sales and expanding EBITDA margins, driven by effective management of pricing and costs. The company is navigating significant supply chain disruptions and elevated lubricant costs, proactively implementing pricing actions while maintaining reliable product access. Management remains confident in the business model's resilience and its ability to deliver profitable growth despite a dynamic macro environment.

    Highlights

    5

    • System-wide store sales increased 19%, crossing the $1 billion mark for the first time in a quarter.

    • System-wide same-store sales grew 8%, with ticket contributing more than 75% of the comp.

    • EBITDA increased 25% to $162 million, with margin expanding 30 basis points to 29.8%.

    • Adjusted EPS increased 21% to $0.57 per share.

    • Net debt to adjusted EBITDA leverage ratio declined sequentially by approximately 10% to 2.8x.

    Concerns

    4

    • Finished lubricant costs are expected to be approximately 60% above March levels, translating to an additional $5-$7 per oil change.

    • Gross margin rate decreased 50 basis points year-over-year to 40% due to higher other service delivery costs.

    • Pockets of pressure were observed in June with more moderate growth among lower-income households and some softness in NOCR penetration.

    • Q4 EBITDA margins are expected to compress by 300-400 basis points due to product cost impacts.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full year system-wide same-store sales
    7.5% to 8%
    high materiality
    High
    Full year adjusted EBITDA
    $550 million to $560 million
    high materiality
    High
    Full year adjusted EPS
    $1.70 to $1.75 per share
    high materiality
    High
    Full year EBITDA margin compression
    closer to half of 100 basis points
    medium materiality
    High
    Full year sales guide midpoint
    $2.05 billion to $2.1 billion
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    System-wide
    Achieved $1 billion in system-wide store sales for the first time in a quarter. Growth seen in both transactions and ticket, with net pricing, premiumization, and NOCR service penetration contributing to ticket growth. Franchise performance was above the system average.
    Same-store sales growth: 8%Ticket contribution to comp: >75%Transaction growth: positiveTicket growth: positive
    		$1 billion19%——
    Company-operated stores
    Company stores contributed to the overall network growth.
    Net new store openings (Q3 FY26): 22 (20 new, 2 transfers from Express Care)
    		————
    Franchise stores
    Franchise performance was above the system average for same-store sales.
    Net new store openings (Q3 FY26): 25 (26 openings, 1 closure)
    		————

    Operational metrics

    13
    Net sales
    $545 million24% increase YoY
    Q3 FY26

    Reflects continued momentum in core business and contribution from Breeze.

    Gross margin rate
    40%decreased 50 bps YoY
    Q3 FY26

    Focus remains on protecting gross profit dollars while maintaining reliable supply.

    Gross margin rate (ex-depreciation)
    improved 10 bpsYoY
    Q3 FY26

    Excluding the impact of new store depreciation.

    Finished lubricant cost increase
    approximately 60%above March levels
    Q4 FY26 forecast

    Expected to persist over the medium term; industry-wide issue.

    SG&A as percent of net sales
    17%decreased 90 bps YoY
    Q3 FY26

    Focused on improving operating leverage.

    Adjusted EBITDA
    $162 millionincreased 25% YoY
    Q3 FY26

    EBITDA grew faster than sales.

    EBITDA margin
    29.8%expanded 30 bps YoY
    Q3 FY26

    Margin expansion reflects strong execution.

    Adjusted EPS
    $0.57increased 21% YoY
    Q3 FY26

    Strong earnings performance.

    Annual cash interest expense improvement
    $1.8 million
    Annual

    Based on current balance.

    Breeze store conversions
    12
    As of Q3 FY26

    Converted to Valvoline Instant Oil Change brand, performance slightly ahead of expectations.

    Total network stores
    2,456
    Q3 FY26 end

    Strong pipeline for both company and franchise additions.

    Net new stores
    47
    Q3 FY26

    Total net additions in the quarter.

    Average ticket
    $115
    Q3 FY26

    Average base ticket for an oil change.

    Industry KPIs

    6
    MetricValueDetails
    Sg a OPEX ratio17%%
    Comparable sales8%%
    Store count growth2,456stores
    Gross margin drivers40%%
    Net debt to adjusted EBITDA2.8xx
    Share buyback capital return—

    Risks & headwinds

    3
    Constrained supply of Group III base oilExpected to persist for 4-6 months at a minimum once the Strait of Hormuz reopens.

    Finished lubricant costs could be approximately 60% above March levels, translating to an additional $5-$7 per oil change.

    Mitigation: Strategic relationship with supplier ensures reliable access to product; proactive pricing actions are being taken to offset costs.

    Pockets of pressure in consumer spendingQ3 FY26 (June)

    More moderate growth among lower-income households and some softness in NOCR penetration observed in June.

    Mitigation: Watching consumer behavior closely; investing in strengthening brand and attracting new customers; services are nondiscretionary.

    Competitive pricing environmentNear-term

    Potential for competitors to use pricing to gain market share if Valvoline's price increases are too aggressive.

    Mitigation: Constantly monitoring competitor pricing; balancing pricing actions to protect gross profit dollars while maintaining transaction volume.

    What to watch in Q4 FY26

    5

    Finished lubricant cost trend

    Next quarter (Q4 FY26 results, and into FY27)
    CurrentApproximately 60% above March levels, adding $5-$7 per oil change
    TargetModeration or stabilization of costs

    Why it matters

    Directly impacts gross margins and pricing strategy, influencing profitability.

    Based on the current forecast, we expect finished lubricant costs could be approximately 60% above where they were in March. While that sounds significant let me clarify that means we expect a total increase of approximately $5 to $7 per oil change depending on the lubricant type relative to the March period.

    Q&A highlights

    5

    What are the primary drivers behind the expected sequential softening of EBITDA margins in Q4, implying a 25% range?

    Kevin Willis explained that the anticipated 300-400 basis points of margin compression in Q4 is primarily due to product cost increases (estimated 60% above March levels, $5-$7 per oil change) which the company is covering with pricing actions. SG&A leverage is expected to continue, so the impact is almost entirely product cost related.

    “As we look at Q4, really the math is all around what we have baked into the full year guide around product cost increases, us covering those with price that we started taking in the June quarter and continued into this quarter as well. And it's really about our focus on protecting gross profit dollars and the impact of that is, as you correctly calculated at the midpoint of the range, that would imply 300 to 400 basis points of margin compression in the September quarter, and that would be really all product cost related impacts.”

    asked by Mark Jordan (Goldman Sachs) · answered by John Willis

    2 min read5 chapters

    Detailed Narrative

    01

    Supply Chain & Cost Dynamics

    The closure of the Strait of Hormuz has created an industry-wide constraint on Group III base oil, a key component of full synthetic lubricants. This has led to elevated finished lubricant costs, which are expected to be approximately 60% above March levels, translating to an additional $5-$7 per oil change. Management anticipates these elevated costs will persist for 4-6 months after the Strait fully reopens due to the time required for product flow and inventory replenishment. Valvoline believes its scale and strategic supplier relationship provide a differentiated and reliable access to product, mitigating immediate supply concerns.

    02

    Pricing Strategy & Consumer Behavior

    Valvoline and its franchisees have implemented pricing actions to offset the rising lubricant costs, with net pricing being the largest contributor to comp growth in Q3. The company actively monitors consumer sentiment, return rates, and discount usage to manage pricing elasticity. Despite these increases, management has not observed significant trade-down or deferral of services, though some moderate growth among lower-income households and softness in non-oil change revenue (NOCR) penetration were noted in June, consistent with typical summer drive season trends. The average ticket is around $115, making the $5-$7 increase a small percentage.

    03

    Breeze Integration Progress

    The integration of the Breeze business continues to perform at or above initial expectations, with the overall deal thesis and return expectations remaining intact. As of Q3, 12 stores have been successfully converted to the Valvoline Instant Oil Change brand, and their performance is slightly ahead of expectations. This success is partly attributed to strong employee retention during the conversion process, a result of focused efforts to connect with the teams. The company is also realizing early G&A synergy capture, contributing positively to performance.

    04

    Network Growth & Milestones

    Valvoline achieved significant network expansion in Q3, adding 47 net new stores and bringing the total network to 2,456 locations. This growth included 26 franchise openings (with one closure) and 22 company-operated openings (20 new, 2 transfers). The company maintains a strong pipeline for future company and franchise additions. Valvoline is also celebrating its 40th anniversary in the retail services business and its 10th anniversary as a stand-alone publicly traded company, having nearly doubled its network from just over 1,000 stores to almost 2,500 in the past decade.

    05

    SG&A Leverage & Cost Discipline

    SG&A as a percentage of net sales decreased 90 basis points year-over-year to 17% in Q3. This improvement was driven by increased transactions during the peak summer drive season and continued cost discipline across the business. Management emphasized its focus on improving operating leverage while simultaneously supporting business growth and navigating the dynamic macro environment. The company expects to continue achieving year-over-year SG&A leverage in Q4.

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