Valvoline Tightens Full-Year Sales Guidance to 5.8%-6.4% Amid Strong Store Growth and Premium Trends

Strong Performance and Strategic Focus

Valvoline Inc. (VVV) delivered a strong third quarter in 2025, with notable improvements across key financial metrics. The company reported a 10% increase in system-wide sales to $890 million and a 12% rise in adjusted EBITDA, reflecting the positive impact of refranchising efforts. CEO Lori A. Flees highlighted the company's performance, emphasizing that "we are pleased to have delivered strong sales, profit, and store growth for the third quarter."

Flees noted that same-store sales comps grew by 4.9%, including an 80 basis point impact from Easter. Additionally, the company added 46 new stores during the quarter, bringing the year-to-date total to 116. This expansion underscores Valvoline’s continued focus on network growth.

Premiumization trends also played a significant role in the quarter’s success. Flees stated that "the percentage of customers using our premium products grew both sequentially and year-over-year across the network." This trend was accompanied by transaction growth in both same-store and mature store bases, indicating a broader acceptance of Valvoline’s premium offerings.

Labor improvements contributed to a gross margin rate expansion, with CFO John Kevin Willis noting a year-over-year increase of 80 basis points to 40.5%. This improvement was primarily driven by labor leverage of more than 100 basis points, partially offset by increased depreciation from new store additions.

Outlook and Guidance

Management has narrowed its full-year same-store sales expectations to a range of 5.8% to 6.4%. Flees expressed confidence in these figures, stating, "We remain confident in our same-store sales expectations for the full year and are narrowing our guidance range to 5.8% to 6.4%."

Willis added that the company expects year-over-year SG&A leverage to return in fiscal year 2026. Sequentially, SG&A as a percentage of sales decreased by 80 basis points. The company reaffirmed its confidence in meeting store addition targets for the year and expects adjusted EBITDA to fall within the prior outlook, raising the low end of the range based on year-to-date performance.

Financial Results

Adjusted EBITDA reached $130 million, a 12% increase over the prior year, considering the impacts of refranchising. Adjusted net income was $61 million, with adjusted EPS at $0.47, an 18% increase, again factoring in refranchising impacts. Gross margin rate improved by 80 basis points year-over-year to 40.5%.

SG&A as a percent of sales increased by 80 basis points year-over-year to 18.5%, largely due to technology investments, which accounted for about one-third of the increase. The company finished the quarter with approximately $68 million in cash and a leverage ratio of 3.3x on a rating agency adjusted basis.

Q&A Highlights

Analysts raised several questions during the earnings call. Mark David Jordan of Goldman Sachs asked about full-year same-store sales growth scenarios, to which Willis responded that the company is focused on the midpoint of the range. Steven Emanuel Zaccone of Citi inquired about June’s slow start and July’s trends, with Flees expressing confidence in the business's momentum.

Simeon Ari Gutman of Morgan Stanley probed on ticket vs. transaction mix and new store performance, while Michael Joseph Harrison of Seaport Research Partners asked about pricing contributions and acquisitions. Flees also addressed concerns about the Breeze transaction, explaining that the level of maturity of those stores varies but that the acquisition is expected to provide long-term shareholder value.

Sentiment and Market Analysis

Analysts showed cautious optimism, focusing on guidance ranges, pricing, and integration risks. Management maintained a confident tone, frequently using phrases such as "we feel really good" and "we remain confident." They acknowledged uncertainties, particularly around the Breeze transaction and SG&A leverage timing.

Compared to the previous quarter, analysts were more focused on narrowing guidance and integration risks, while management's confidence has grown, supported by tangible year-to-date performance improvements and labor leverage gains.

Quarter-over-Quarter Comparison

The current quarter saw the same-store sales guidance range narrowed from 5% to 7% to 5.8% to 6.4%. Gross margin rate improved by 80 basis points year-over-year to 40.5%, compared to a 30 basis point decline in the previous quarter. Adjusted EBITDA and EPS growth rates accelerated from 6% and 3% respectively in the prior quarter to 12% and 18% in Q3.

SG&A growth decelerated sequentially, with management expecting leverage to return in fiscal 2026. Analyst questions this quarter increasingly centered on the specifics of transaction vs. ticket growth, integration of Breeze, and realization of technology investment benefits.

Risks and Concerns

Management acknowledged ongoing FTC review of the Breeze transaction, with the possibility of having to divest certain stores and uncertainty in timing. Tariffs and global trade discussions remain an external risk, but expectations of financial impact remain minimal. SG&A investments in technology are expected to moderate, but future leverage depends on growth and integration success.

Franchisee pricing actions are creating disparities between company-owned and franchised store performance, with potential implications for market competitiveness.

Final Takeaway

Valvoline delivered robust sales, profit, and store growth in the third quarter, supported by resilient customer demand and strong premium product adoption. The company has narrowed its same-store sales guidance to 5.8% to 6.4%, signaled confidence in achieving network growth targets, and highlighted margin expansion through labor efficiencies and disciplined SG&A. The pending Breeze acquisition and ongoing technology investments present both opportunities and integration risks, while management's outlook remains positive based on tangible improvements in core business performance and a well-defined path to long-term shareholder value.