VVV - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Krista, and I'll be your operator today. At this time, I would like to welcome everyone to the Valvoline's Third Quarter 2018 Earnings Conference Call. [Operator Instructions] I will now turn the call over to your host, Sean Cornett, Director of Investor Relations.

You may begin.

Sean Cornett

Krista. Thanks, welcome Quarter and Call XXXX Valvoline's Webcast. and to morning, Fiscal Third Conference Good for ended the at results released Valvoline quarter p.m. approximately June X:XX XXXX, XX, Eastern website a copy and which is this in X, our with of Time Investor on be Relations conjunction release, should investors.valvoline.com. viewed presentation earnings that available yesterday, August at remarks and results and Exchange Securities are with XX-Q the preliminary These until Form we file our Commission. a release has been to Form A X-K. of on the news copy the furnished SEC today call and the With Valvoline's Financial Chief Mitchell; on me Sam Officer, are Mary Officer. Executive Chief Meixelsperger,

shown assumes $XXX $XXX in Year-to-date, $X.XX million quarter an restructuring enhances and Valvoline be information The remarks assumptions reported to of this and will to income historical statements. We current comparable operating management Slide not of a are the Please on subject results non-GAAP release. was presentation QX used of and amounts review was used risks such or reported are unless and key differ statements million. understanding cash measures not operating unusual, results items, a nonoperational X believe or As our earnings may fact million reconciliation on of of in which nature. that is measures exclude of Slide net on any presentation In X, be based results as our non-GAAP any use management's our of to delivered Valvoline ongoing in by and from no companies. remarks, for activities reported we adjusted to actual from may share. certain otherwise noted. and by of other forward-looking our our business. approach statements income results results. adjusted that A These to discussion flow under per third forward-looking GAAP turn our provided statements. this are Adjusted today uncertainties of the are in to included obligation materially date cause basis, similar $XX of discussing statements. our forward-looking our this are of update

As in fiscal XXXX nonservice that income in as of accounting calls, guidance pension previous Valvoline mentioned quarterly first early quarter and new reclassified the adopted OPEB earnings nonoperating.

to a result, item Canadian a earnings: Valvoline state a tax with X OPEB million after-tax exclude of had had related key and adjusted EBITDA our and income, income. million is expense million acquisition third adjusted after-tax $X Great earnings the million tax; First reform. related As $X prior In to to after key pension nonservice foreign $X income $X and item netting the pension Change; year is related is primarily key a and to million associated Valvoline reported expense expenses which EPS second $X reported net of currency after-tax items the in OPEB after-tax net adjustment period, Kentucky total, now In Oil of items. was

of our Now me X, Sam? cover to details results. over to let we things as Sam Slide more to turn move

Sam Mitchell

and supported third Thanks X.X% at of remains against Premium growth key quarter. Valvoline America delivered continues in system-wide. North our Lubes. Sean. mix metrics sales Quick stores strong Oil in Valvoline the to at Change our solid Instant a number grow, gains Core Same-store by

North markets, a grew unconsolidated results share totaling year-over-year, repurchases and through in again India, goal did delivered China our These modest adjusted Adjusted for grew of JVs, such partially but came That, dividends and to soft in higher material and lower America with X% America. were X%. Furthermore, not in combined DIFM cost $XXX returning Our EPS versus volume in Quick installer million in Core volume and performance. QX. North XX% had overall the channel raw Lubes grew last volume quarter in in shareholders good our offset a cash high-growth this grew weaker-than-expected gains Core expectations. than our EBITDA Core X%. against expectations in International in North America we the quarter. as and year, as volumes, the decline only meet resulted gains our by Volumes International, DIY including

XXX to volume growth North premium total Let's the expected and driven and look we under by million volumes volumes were quarter for softer North anticipated. America increasing was the timing raw which quarter. lag, unfavorable of from increases installer DIY, lower a Core the in the DIY more to year. Overall, $X by volume in than DIFM declined EBITDA mix led due turn channel volume XX%. X year, for channel, cost branded Within Core this continued to by leading Slide the price-cost segment. material X% segment lower just versus detailed grew decline volume improve, a performance fiscal the take basis at to QX, In points we last year. for America's This to last X% offset

a gains channel, DIY a quarter promotions and as we had during expected result. number the the of Within strong volume

our QX. for through activity an category improved impacted to be the related. the DIFM expectations, timing which rest We in good rebound across channels the effectiveness the July these month through promotional a of the channels sold activity of came installer volumes Volumes also and sold tightened primarily of we in in of level our However, events. had below believe expect

call to unit material margins, last indicated expectations that quarter, raw impact our for increases we As cost expected to on came this those us we fruition. and

next of the fiscal enter fiscal maintain will in a in experienced the far, to unit roughly realized XX%, we've largest year. America up This by we is to years, same driver segment raw be the annual time, that North yet during material our team has the including pricing our Core X margins position expect decline managed last the as in in first half dramatic cost our cost. alone, year. margins increase unit this well the QX, Despite Over actions us QX we

that improvements we from packaging adjustments to I'm success investments Core current the making the we initiatives, some making While confident right and of dynamics. North the to business product digital stability for are long-term and address America are

Specifically, this for promotional use includes consumers. value and dollars to drive trade our our we how partners

to Lubes. next turn Now the let's discuss slide Quick to

industry-leading are Company-owned Our franchise X.X%. model same-store strong grew QX. X.X%, continued to up deliver and the quick-lube were results across X.X%. from were in year. system up system-wide stores VIOC Year-to-date sales up sales prior Same-store X.X% stores

strong we ticket driven also the by ad both enhanced programs, strong, a summer. new success ongoing of of We retention launched growth and last remained customer premium pricing Average mix. continue to drive marketing which with result transaction as and favorable the our campaign

sales XX transactions growth from expect average in to We moderate approximately both this network stores. forward. track We our also continue our growth the added EBITDA balanced stores the acquired and toward contribution growth QX stores, longer-term XXX anticipate beginning and In of XX benefited slightly We will the XX stores. ticket we to mid-single and are expectation Great in Sales to from moving digits. same-store new third on quarter and Canadian year-to-date. Change including add VIOC QX, stores Oil

with additions. XXXX end store close net XXX to to expect We

to slide. the next turn Let's

believe stores Canadian a that Great is look underpenetrated. history, the the Oil large Oil As Great a owner Relative working for with we Oil them help XX-year Change we is operating in represents strong recently Canada stores, acquisition and is the a has experienced well, base we that growth. Canadian Canadian With plan Change Change in third-largest established market U.S., forward brand brand XX. the them At market customer partnership grow system the and franchise completed significant the Great to while Valvoline. the strong their quick-lube system loyalty, performing Canada. We XX quick-lube recognition we the to has on to with and July maintain to quick-lube announced, This Canada business. opportunity with signage

fact, store-to-car lower. ratios XX% are In about

accelerate the organic an system and SuperPro the Canadian Great model, join the to growth to leveraging store of have Canadian by team. marketing revenue strengthening service We acquisition company programs. excellent and expect the and to in both franchisees us, Oil training support excited growth is in-store This of addition franchise for Great expansion our the I'm Valvoline Change through

which primarily driven lower only exchange. model. volumes look deliver and X came markets provide actions X%. over which in a both the these expect an X of remain JVs, Slide is in our foreign is product disruption strong including planned from facility business margins more regions, These other on and material year-over-year in approximately and We impacts raw normally. including fast-growing loss by to where warehouse America. we volume India. the remainder The ventures, EBITDA softness XX% and This currency modest combined favorable the due to currently a in grew unanticipated roughly at and to EBITDA back little JVs. volume in to industrial primarily solid of total to X are strong of to To we International, from volumes, in grew and The unconsolidated inflation, the volumes year Latin QX at two impacted SG&A. driven China to increases perspective of for volume affected softer now performance. move gains providers, by results customers. running offset the segment was JV facility our strong to A distributor elected Latin account volumes in International International growth, partially million. Europe In and performance transition joint one Including volume Europe $XX to markets the than ago, XX%. quarter. third-party by Despite licensee International's these Brazil, strong our including this America, volume performance, recently and continued in of declined X were markets half Let's strong The sequentially, in account. markets offset represented online, anticipate lower-margin ability a increase was for in transitory remaining by growth deliver pricing QX, temporary Results prior years operations The lower XX% in

volume anticipate in the However, low volume year. with soft growth single the performance full we in QX, this digits now year

look we With results. over mid- in For let our financial a me that, QX high closer still growth expectations, single-digit to our it at International. longer-term Mary anticipate to for volume turn

Mary Meixelsperger

Sam. Thanks

rate, X%. reflecting growth continued X% X% FX-adjusted, adjusted actions, More grew Our EBITDA along increases on for benefits mix, FX Slide as pricing SG&A. flat X. and tax Favorable represents of leading cost effective increases. acquisitions pass-through were and sales exchange on EPS lower lower about foreign unit margins. than million. acquisition and up offset year-over-year other to Adjusted lower higher volume a of prior the of higher with QX the in volume. sales growth from impact attributable $X.XX. grew one-third growth SG&A $XXX in and is interest planned year to fiscal offset to costs, Sales material equity EBITDA half share of XX% and in Adjusted the the increased EPS. income, as results summarized raw were by partially count to A the are well higher The in

Slide some is to fourth in XX and the the XXXX. is $XX which executed Net financing transaction fiscal quarter million the million $XX other higher largely pension attributable move The discuss increase in in of by to borrow-to-fund Let's we prior to to quarter that was expense items. primarily corporate driven compared borrowings, interest the period. year

was our free rate was XX% million, capital rate with up was due tax XX.X%, X-month rate same $XXX XX.X%. Year-to-date, XX%. cash last flow taxes. Adjusted the for period slightly tax effective to reported billion. Our our $X.X million. effective adjusted key cash from expenditures guidance debt were primarily year, cash $XXX quarter in of to Year-to-date line Year-to-date versus was operating increased $XX $XX to lower flow and year million, our million items, from full was quarter activities XX%. Net the last effective for

to We stock paid million the million and a to shareholders $XX million total $XX cash in of a million. $XXX stock $XXX returning continued dividend of repurchasing and we dividends, of in returning have Valvoline shareholders. $XX repurchased Valvoline paying quarter, in million Year-to-date,

next volume and our improvement of as the for slide we let's second is year to turn look anticipated. materializing Now The the not revised half outlook. the at

lubricant XX% down to expect XX% is a X% As now X%. to grow from anticipated growth to Revenue are result, We X% of we lowering guidance. growth to XX%, our previously. now volume

to and now This raising also Change Instant XX range our and Lubes expected our of the expect Valvoline we our result, guidance an stores. sales now within previous X% XX%. strong guidance growth. top growth as are XX system-wide in resulting to new store Oil We growth end We're add a expects of X.X% Quick of to to of comes raising sales continued on high performance end over outlook for as XXXX, additions same-store to same-store the our X.X% in franchise X-year expect fiscal high of new previous

expecting our QX range EPS EPS be are now we and $XXX still volume $XXX While guidance of EBITDA million results the our the We $X.XX. year-over-year of lowering to on anticipate and EBITDA updated to adjusted roll-forward primarily in outlook. of to both, growth, million good our $X.XX to reflect and

to from for flow As guidance to $XXX million free $XX we at expect XX% the at our flow items, an of free end XXXX. million, of our cash the in cash million. now reducing expect to come increase We're XX% guidance CapEx prior fiscal $XXX to cash $XX range and flow million in of lower

over back wrap to to turn it let Now Sam up. me

Sam Mitchell

Thanks Mary.

not quarter business. America, significant I We've the year performance did our through outlook core this in remain manage for While cost the to experienced continue primarily confident North it. and expectations, long-term we meet current impacting inflation the

We anticipate have pricing and taken stronger improved XXXX. putting unit us a in for QX, position additional fiscal for margins actions

on to Quick solid opportunities store over Q&A. are there's America. performance promotional our outside runway to for marketing the gains drive it continues I'll International, continue Sean expect Lubes that, to Core hand U.S. focus growth effectiveness expansion. We With key and to accelerate regions we the excel, confident and as we for Within improved in about growth and sales, North believe long also volume to we in very a continue

Sean Cornett

Sam. Thanks

open As for reminder, Q&A. to that With so open to ask we please the questions limit we line Q&A, for your one that get and that we a the before a follow-up you can reminder, line everyone. Krista,

Operator

first [Operator from go line Your the Please Goldman question Sachs. Instructions] comes ahead. of from Jason English

open. is line Your

Cody Tranbarger

soft? the called source why more This were And carry for in In given higher a is third-party does DIFM prepared DIY Jason. installers North less the channel branded? of Or guys out is weakness America. your actually Is issues Core you on remarks, as Cody entire than margins idiosyncratic? it

Sam Mitchell

market. that, in softer First, business the category a data believe we we larger do regarding the we And Core don't of month in issue across was had perfect off some. our on the but softness have our that channel accounts the North we We softness installer some America, as the our timing nice -- within in with distributor more month of was primarily, a issue. We our saw of June. noted, But saw biggest business during July. volumes where of recovery I saw

installer consumer-driven. The a with has relatively gross regard in So bulk of a competition business the it in business. goods business issue. the to think has of past oils. on of the higher consumer this That's a consistent In There's BXB market we was business. just to a to kind a question with margin X.X%. at With being long-term more X% yes, the been the of to been installer really DIY more packaged installer soft timing nature the profit trends business, down largely always margins, price year do we're had in DIY bit your that business, with of the model. that compared That has selling business DIY

So and helps. that's how But been new. it's of hopefully, history that structured. nothing market that the That's

Operator

of Please question Bank. Faiza Your ahead. go comes the next Alwy from line Deutsche from

is open. Your line

Faiza Alwy

you talked better. move here? volume on more share give you expect you July volumes know declines. could you the I if color wondering So do lost was are Core do think category? -- North about forward doing the you how America I you from And us mean, to in some I

about there? we us just talked forward, you about sort how more -- use forward? going going -- you should about the thinking dollars how you If what's of could And promotional expectation color around give it think

Sam Mitchell

that partners. we the growth conventional that noted, we executed is less promotional expected. that In DIY the that X%, had This retail particularly planned in of our was did the But than on quarter, than true was and expectations. number as branded key segment. we Yes. lift bullish We with promotions in our less we saw we what had but the of come were

own So feel did during of was while to amount held losses the the the there. that segment, share segment, had quarter. just primarily due promotional conventional some we synthetic our in we And we we that the activity believe

was a of So there the definitely terms time. at step-up number promoted being in the were of same brands that

brand And month. primarily on so during there we premium brand saw market, the some month, competing -- change offers focusing during given a that where were one of the instead more retailers in one

we of promotions. lift And typical that so the that would expect impacted our off

mostly it said, going tactics so affect and we're need we tended as forward. I that us as promotional to the something to develop side, to address on that's moving So conventional our

so our that that's right the team to retailers sure And the or the we're working tactics off making plans promotional need also lift we're on make make we strategies. working with of sure that closely and to their the getting something promotional is adjustments to

Faiza Alwy

in July? July -- So that? timing? Sort you think do like think did the the anything what what you impacted do And was much think different you was of what drove do you do than if behind stronger like June,

Sam Mitchell

side only of Faiza, not timing installer DIY issue factor. is the business the the regarding a channels' and

the amount shift explained, distributors, with ordering activity business, of July just a In was, as from that those to the factor to volume June larger expected and the pattern. with gains with I more of the do their side DIY we getting of the So we some installer promotional promotions. quite saw our not in

timing believe of a more was that So we issue.

Operator

of question Research. Wolfe next Bottiglieri comes the from go Please Chris from Your line ahead.

is open. line Your

Chris Bottiglieri

up to pricing seen the their acquiesce signs you be any that impact prolonging to higher could change demand? Have question environment? intervals maybe I on prices intervals. as go any customers oil had Like a to increased oil

Sam Mitchell

category, that seen results drain interval. maintaining vehicle in the longer primarily the a that a ever it's to offset That's price we it one in synthetics. respects, their -- better. consumers driven, in be a see in and of on and continues major been may focused The higher the is interval drain there's correlation, cars lubricants impact that haven't we is drain why trend, interval. -- longer we've in even more price being seen because factors shift growth higher by some miles that of more the the as long-term don't driven, Chris, a environment, But that

we be drain roughly users, data a longer know than miles to XXX our oil their interval so user. that from tends conventional synthetic And between changes

does impact I And because for seeing in so and standpoint, that increase of category of significant with in installer positive is Again, in shift channels. the the of a that we're the factors of road think interval that's profitability net Because one overall channels. the newer cars demand. the and on the higher synthetic drain synthetics, DIY requiring the synthetics, the the oils us that from carry the each our both

Chris Bottiglieri

Actually makes that sense.

do promotional gross out profit $X we think America about As we think, it's And quarters driving think at activity? a Or the that Is quick follow-up, should North what still now? couple a be level? gallon how a increased you currently you do further? table, you from in push the is should something then per do thinking that

Sam Mitchell

$X in to range. improvement margin for $X -- me as see all, expect in actions that should back I that that would Core with pricing the you in that we're what a taking significant -- baseline address North QX, towards that that America unit take the consider of First effect let

as difficult activity are the drivers, So to regard need are to one where that's motivations the getting in QX, that's that With what the we start new now higher a news, answer. year. back fiscal to to we're behind promotional the what we be good

share with our see when increases, significant our major for a tend to over accounts, the shelf analyzes key it's a product are of on share driving think with then make what then is happening for that with price promotional fair category oil ensure strategies that the term. the to the retailers management -- support of into effective that how I then traffic to also we're products the the driving fair promoted. motor those plans us to more their driver than period receiving is retailers are sure get adjust have And you the each long or have to we mostly and The our then activity. is for accordingly. our evaluate And and of you we work that the stores. key in team of that greater merchandising Valvoline category retail a important And and data business terms

is to the Valvoline has for experiment they'll gives with time from up products. time, share continued traffic key more the the long premium us trading Valvoline people in driving what's different be our in so us and strategies. And that for and run confidence retailers to and But to what effective brand

really So got There unusual that the those key plans that -- quarter. It's something close got eye moving at. an to right on we've the make feel keep we was things sure a forward. and are looking we we're it was

Operator

Your question line Morgan go from Gutman of Simeon comes Please Stanley. from the ahead. next

Your line open. is

Simeon Gutman

missed looks early some prepared in And next of but X, get we into like and should I Group of -- diagnosis a several spiked months. to is means Not big to largely to first we middle lap fair the maybe up. 'XX, customers be lag. the remarks the ask year, pricing is price-cost at January shelf of the move haven't should at really it when your -- follow-up that part Group point? or wanted we this like caught start up more to get fully about and until X, that Q&A. that it the the of a on -- some the they even maybe I feels we Are last

Sam Mitchell

Yes.

we they're -- have that a channels been offset of here during start across to oil moving QX, to about the us And we where what's good as all increases to our and fiscal get the -- biggest increases falling timing So impact QX. going that the through the definitely P&L. back are base baseline of increase our in as price will that's will increases be couple has next year. cost effective the solid that The through,

Regarding to when oil base really manage -- -- years consistent straight now the through. we increases lap we've that pretty X period of of during had we've had

timing have regarding January that I'd the a asking take you're at the question effect. So to closer look

Mary Meixelsperger

is Mary. this Simeon,

The first we we in had in and a increase was October, in the recent was in had one and most February, another January, then one. April then increase larger

the we've of So in experienced in were for the we're the components the are increases those and February passing through that QX. largest increases our April mentioned QX time and that frame, Sam that and pricing

get when I through. we and well of So think QX us fiscal pretty lapping those increases see come you'll that into seeing price next year, pushed

So our price-cost have is us. that should that we'll accomplished lag and behind be that belief

Simeon Gutman

is and really going in is I'm last going last in of to the on pricing in sort of consequence movement, up the these - know greater last of Sam. endorse just what reacts. times months shifted to the anything has during at is movement Where Because extreme in just it changed question, of the the space? shelf you don't that tricky the the would price competitor Or or And competitiveness -- a is how especially this I up. at the following some idea to the if is either X it then months price? however installer one

Sam Mitchell

something the both recover price, side, And manage tend defend each something to activity. just the true. right our business, the period to more believe has question in channel? you certainly them seen also we that cost. you've is actions That And Yes. to the pretty recover their over that a on competitor DIY know No, just have But in share you has. DIY on and that the in the with both get changed at same I with your branded don't all is price the some your Or on being to there I - for believe moving where lost be, increases side you're that it year, activity. And aggressive good make it's business are time, us, saw big discipline installer was a you the in and it's that to that and account, one There time. at that's has significant taking changed? then we would DIY sure margin promotional the right the last competitors observation,

to fundamental any there don't to on make is, So promotional sure changes strategies so that And one and again, I think I'm going right plan the really The adjustments confident that with accounts, the to there. their as our each tactical have we'll our the merchandising of with for healthy. we are develop that question relationships business XXXX? retailers we see very need teams our about plan make the that DIY remains

is for to premium side, win I it's the installer side the we On Valvoline cetera. you our as way the in -- command of value et with bring marketing the it's our on a mean, -- business installer plans, the price portfolio, usual. that It's always because price-competitive business. product And

all how strengthen installer their do we that constantly we're it's on with improve customers. So their results, improve about working profitability helping because that their value

business. initiative, a customer, geared digital real been of Obviously, helping has and drive some a Instant going too. the of strategy in of towards the those how see simplified in to to Change expertise installer also that is we in The XXXX. our company Oil to in stores advantage you installer bringing progress have traffic Valvoline as drive knowing That some manner success and So see take to and performance operating the the profitability. we're tools some in

with years share. to a market the challenging picture, big managed now as looking pleased coming are challenging it's it's get through 'XX a X ready we grow going So help the a through. for to I'm at it. really with -- us inflation Core and North matter America, doing that business really we're getting that things certainly, back been we've And of how

Operator

Your next line Hardt. of question ahead. Crespi, from comes go Monness, Please from the Chris Shaw

open. Your line is

Chris Shaw

referring I the wasn't category And to like but the did different I the but, out category you're DIY, me I out felt what figure actually You you for guess, how I is off still same. was you're DI figure specifically that if would moving be figure how are sector, do-it-for-me in I underlying and off. I trying X -- in to can't would sure those you the those is that in out? up was mentioned part - disappointed mean, think distributor we're Could you the trends help different X%, categories direction. are if

Sam Mitchell

DIFM has side. DIY always the softer than been category Historically, the

in over So X%, primarily to DIFM. and driving factors that. long-term are X% of DIY, DIY has shift behind the the that to are of that had of being roughly we've And there are do a behavior last long-term that number X% down decade, a to trend -- with

demand slowed, that's at of miles think I factor a the to interval that that's even it's been flattish the accounts it strategy is a lot a And strengthen offset it's driven, prices environment, with mix growth slightly just results of we pump. of X%, within some long-term in our certainly, over to to eye But has close where us, traffic. So DIY X%, been more of the the drain in there overall flattish. DIFM a improve just a the Certainly, you in demand so -- category flat decline softness Based the the saw been and our they a X%. The not the category our the years. market DIFM quarter, that share synthetics. more and been that like with it's shift key In obsession. to down looked keeping business. have to at very we've on for we're decline, that's longer the factor our higher didn't that But our on have business, always side of successful doing the

share Our our focus of and is on our business. side mix our customers, the on selling growing installer of our market improving the particularly portfolio and existing more product to

and this just sales have dominant in We lot execution market to we with have a keep and share growing. opportunity, our do don't has a of marketing it have healthy business tremendous So -- installer. we to and

are We're being we that our and and on So in not on it's - market successful growing focused we're share category accounts. our the focused penetrating how trend impact.

Chris Shaw

the between Or any those or just shift and X customers? one DIFM? there's the different back -- likely customers and possible it period DIY in Is the forth a are

Sam Mitchell

underneath once customer that they back It's go climb the becomes unlikely DIY DIFM that a a car. customer

grow getting do their DIY who So vehicle. you enjoy an still -- focus their within and an we've very car, away. of really within An working got would is going And our DIY getting segment, lot a the share focus Hispanic got for that -- DIY underneath maintaining have their that certain of are certainly then helping segments are close robust, of probably on DIYers think car of growing, marketing work that and that our where of will us. a I we're that equilibrium, in to not be the example area is that's lot we've which segment. There

partners, retail us So for but too. a not lot keep going of not healthy. it's DIY for Again, away. which profitable an our only we ways It's important business, in

are margins, for the So I again, unit DIY foremost, our on the feel -- and rising our health in good of share about first the business. growing is a focus environment, But and cost market job protecting us, long-term doing going we've And very share Core healthy. that. Those this premium to are that things American a mix. market our done North good keep and driving our business growing the then

Chris Shaw

ask just Quick one I Lubes, can if too. on And

thinking see I longer you That for, marketing XXXX for, just guess, expect more, the you is maybe sort the what this what that. think, though, that lot forward. guess, on sales X% X.X% same-store quarter rate in to did term? moderate more you this year, growth same-store you somewhere the on of, fourth say, going I a know like? mentioned of sales probably and something sort I based a fourth forward? the or would I could I'm But looks to full as year mean, like is be conceivably going tech I things would through going to quarter You Or do guidance. X%.

Sam Mitchell

Yes.

longer strong we're mid-single guiding towards and still term, hopefully think digit. mid-single I digits

mean, this impressive. is the think businesses outperformed we strength own about expectations. really As it, our we've I of

And initiatives place marketing in very some car have been we of driving count. the that in put effective

the pick-up in or also in -- might ticket drive transaction which we've that nice in also help improve understanding while moderate so seen and that can And performance. a bit, ways we a

-- which we to base, while got so we they're and seeing in can requirements our meeting been customers there. some And operations and we're we've in effectively pilots when more do the vehicle executing, our that how ways communicate we're they're simplify we've that our so and needs the

with with in of seeing where it quick, is this is the we that us on easy, Change. those business convenience delivering and Instant So to trusted -- services. going finding consumers opportunities promise, and on and more front, that they're that want are trust we're where more ticket But how because remain positioned the in Valvoline Oil of well also point more more confident

the that good bit It's continue pilot sales on I'm see and able business say we're to a to a so insights probably place, going in to unrealistic. same-store the with is to work we're very to single-digit high and is doing be confident So based just the improvement. we're really going it comps that continue

probably we're think consistent. really the positioned, the get us because and 'XX to just how in needs. 'XX of we Valvoline I where front and meet going But is beyond the and opportunities and and in very see well just business their to opportunity not the is to better be finding consumer of moderate that

same model adding about the the the So excited on focus while, store is more at business. time, business obviously, the keeping aggressively. healthy And units level

a said more are stores store where new who of So into the because being and we'll plan of the our build come Canada, see tremendous to up which of the they're out I also or move that having. stepping number whether success really U.S., hold in our earlier that the is partners franchise here aggressive, presents it's too, taking ground, opportunity,

So on too. we're seeing our in working of growth franchise obviously, 'XX Canada front, acquisition stores, new us and and company stores, the market for in the beyond our hard and planned growth 'XX, both

Operator

SunTrust. of question line Stephanie the Benjamin comes next from Your from

Stephanie Benjamin

kind in consumer space how from just to package of changes response in just of Kind the the during that speak also speak kind launch Could would to the you tactics? progressed or of the promotional kind second changes quickly, quarter, your response could to promotional then July? if you new be in DIY to of own activity quarter great. your any And in the

Sam Mitchell

Yes.

share - Regarding don't new July, to to there's any regard with I or effectiveness. have insights DIY promotion activity

going question So build with be have and you terms second we're I'm our I of could quarter as plans just throughout for commit on retailers those patient our to plans us QX, We'll share we fiscal to and performance if was? And with both in more the to more that. learn promotion think there, 'XX. your next sorry.

Stephanie Benjamin

on... Just

Sam Mitchell

Bottling, yes.

But good to package, new time, an the we the in large the on see promotion plan bullish saw functionality have differentiate of in hit some we've positive in we'll impact impact have late I'm as I of new we line us that's the the going of remain right we point research being sure package seeing that's really that to do But the distribution and the activity the to during that impact consumer part, forward, this package, the so think hoping new the really with with not mitigating make level does QX package. that on and from package. new the at that from the of and we the got across down loves that know now and of shelf the merchandising going we potential that begin something full model do settle help quarter. the brand, So bottle. DIY penetration the new We're the

opportunity an read us get better on too. to So QX it, to is going be for a

Operator

[Operator of the America Tong next Bank from Instructions] Your of from question comes Olivia line Merrill Lynch.

Olivia Tong

guess higher a risk, instead and that promotion. step this don't you the meaningful the your more you the -- on promotions that's believe up period follow is believe view, to start of fairly ahead? in a wanted And over this why what's I that, that if the prolonged just do that temporary, case? is I change what

Sam Mitchell

we activity it's impact early think impact going a I X-quarter could change too it's whether X-quarter see forward. be to or say in a Olivia, or to going promotion that

we that perspective, of So my is we to number sure from and I heavily is guess can It's understand, utilize most promoted. the Valvoline is a thing share. make category, always motor -- oil the think in we have to its fair tactics important levers getting DIY that which

the come consumer they is trained store. look for the so to And to value when

saw short our right have And the share, the our on points. the win us of that we the so to strong, make make term to those we I it we're business. tactics, some remains that for means sure hitting sure merchandising with brand growing we're softness side to price mentioned in that conventional

time, success giving to long-term business the right got So make make the we've brand while, with to the conventional sure up through at those drive price going is points investments consumer. share there staying we're improvements improvements, hitting the are to sure marketing strong, we're that product long-term same that making not packaging

that our the So competitors think of category seen that positive activity I things increases. I've is or competitive are with one executing price

and adjust prices place private environment, And adjust, up QX, too. And conventional the to And seeing that's moves most in too. get you label but during in now movement so prices starting were there, inflationary private-label slower see competition. of take that we're also where, we're this we're seeing to price those segment,

consumer our fiscal with healthy and take with of insight, and we're are need, we're the again, prices share we So make it cost funds one, And given that to 'XX. the our it adjustments our we'll in progress able tracking us to keep that. gives going the as to brand But front cover promotional have everyone to our closely. that more flexibility in on the in that confident we strategies place, the adjust have I'm price appropriately that,

Olivia Tong

step-up of QX? -- of fairly next that And a Because the quarters? obviously by then where hope from expectation couple your over just a large is to gross gallon, Or is follow-up. profit there's QX. say sort you per When to that's be a going you $X get just this

Sam Mitchell

right. that's there Yes, to we And be QX. for do expect

the during of taking so effect with And that part primarily are range. -- fiscal we'll that year, to we do price the the start changes quarter $X as new in the quarter. in has early be And that

we've when tracking the range -- it's going been our Core over in time unit at 'XX. this in $X all back So to you margins America, way look North

'XX, forward. pressures. a of the term, that margin made -- lag I moved that muted we've been as range with to really see of though been time improvements, despite of 'XX this we've longer unit think to drive And We've over effect improvement -- that price-cost is, moving for premium effect years. is able event battling manage -- couple we've that's and that key those our to some mix for take mix we as been seen So we've the has by through us back able the to being inflation $X

So through over hopefully see of as mix, the that to Core in too. make America We've happen. stabilizes, our better improvements line in product got premium to that installer channel, North some margin we begin also through penetration in opportunities really time nice unit that

Mary Meixelsperger

this Olivia, Mary. is

where in ago, before. price-cost North phenomena this We GP saw it dip We the a caused X back Core have seen about gallon. lag quarters per America

saw almost catch where we pricing we saw following the the up. a So in improvement quarter, XX%

have -- going have it, in we the while have our -- pricing pass-through. you're recovery and success through it's getting been demonstrated seen while a So that the challenge in

Operator

Your next the of Harrison Global. comes question from Mike Seaport line from

Jacob Schowalter

guidance. on is This question clarification Mike. Jacob A on for

this is to guys relative accounted in residual of you So prior QX was of there impacts QX? entirely reduction in are there? weaker-than-expected baking sort by volume, that expectations, some your for the that Or sort in

Sam Mitchell

impact. largely the really QX That's

And North the volume adjustment. so the Core QX and we impact in across where it's for solid really a is the QX, Lubes, resulting expect businesses, Quick our QX International, that forecast America,

Jacob Schowalter

Or thoughts within your Europe out? going now maybe that just you And then Canada, other countries that to for are growth like building have it's Quick there. through your Lubes? you looking International walk you continents strategy Australia? could maybe Just or or So be

Sam Mitchell

market, the to were close opportunities so market business Lube International for is Quick The -- all, of the Yes. U.S. Canada first dynamics.

doing And that stores Lube lot so and with business, that confidence Canadian a making Canada we're Great a Change Oil counts. Quick they're the of it's in excellent car move the with

an of and strong and there. the loyalty And established, really opportunity customer still is for strength so underdeveloped. the yet it's the Quick There's It's still growth. Lube segment

we're market. thinking market we market, U.S. it the we is a So think, to about as about American North move close very that When to Canada, think different.

be new, is too. And service. new will to undergoing may it in the -- model And to could internationally business market, modifying that other successful, intriguing think car fit terms market. somewhat. model And that specifically the market The many form without And create going where Valvoline back of have when the the the because dealership term, I more the the the a is national car long would other in growth. China typically believe is the quick-lube that are quick-lube change. for accounts I fast-growing dynamics any don't relatively China going and markets is most of market opportunity China market how quick-lube Regarding the you the see owner's of obvious in which owners. market see a We're car taking there's I the us believe be opportunities in markets for lot we're those an change for to China, so

a China in we're distribution plant growing nice of got business So base today different in business, that that to to one market to strong our us, plans is it's there. a one hope interesting build be China. piloting We've strengthening really and very approaches we studying a heavy-duty network, for business that with a

market a we're be it's going that obviously, our investing capabilities. and in to building So out

Quick about we of going closer tremendous us, in to growth the opportunity acquisitions builds, Lube first front and foremost, think where home, franchise it's through store the we be in opportunity have add development to and and So to Canada. U.S. the many in stores when

Operator

turn this the the no at queue have in further will questions presenters. We over the time. I to back call

Sean Cornett

today. Thanks, everyone, time Krista. Appreciate for Thanks, joining. your

Sam Mitchell

you. Thank right. All

Operator

call. you now this And your you And participation. conference today's may disconnect. for concludes Thank

Valvoline (VVV) 4 Aug 182018 Q3 Earnings call transcript