VVV - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Valvoline's First Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Sean Cornett, Head of Investor Relations. Mr. Cornett, please go ahead.

Sean Cornett

Carol. Thanks, welcome Quarter and Call XXXX Valvoline's Webcast. and to morning, Fiscal First Conference Good for ended the at results released Valvoline quarter p.m. approximately December X:XX XXXX, XX, Eastern X. Time yesterday, February with should And and on our at of be that website available earnings Relations viewed which this is release, remarks in investors.valvoline.com. presentation Investor copy a conjunction

X-K. and has are copy Form of A preliminary our been These on Commission. to we results SEC Form XX-Q news release Exchange file until with furnished the the Securities the a

me today Meixelsperger, Officer, Financial With call Sam Mitchell; Officer. Executive the Valvoline's Chief on are and Chief Mary

our As differ historical today certain risks shown and materially on These on Slide to X, that forward-looking the uncertainties are and as are any forward-looking of presentation cause of date statements assumptions subject are actual this results based remarks from current are not to statements. may statements. statements that such fact of of

forward-looking this items we nature. understanding ongoing required discussing unless this assumes unusual, update believe unless an adjusted key Adjusted by no otherwise remarks, restructuring or nonoperational the our are statements We approach in basis, business. noted. In of any results law. will results enhances and on exclude to obligation which our our Valvoline in be presentation

non-GAAP be may A other by provided under of and discussion The similar of our is to non-GAAP in management reconciliation management's used to our not measures amounts our information results GAAP measures of release. companies. earnings use adjusted by reported and a comparable was used included

for review reported results quarter. Slide the let's X, we to our turn As financial

operations negative million EBITDA quarter. lease-related from and EPS and cash activities $XX a new fiscal Valvoline income million, of accounting operating resulted flow reported impact flow and roughly million. the Beginning on income sheet from of the standard assets the operating Valvoline had in $XXX million was the For incremental quarter, balance impact $X Cash fiscal adopted $XX and million $X.XX. liabilities first net of this lease $XXX year, in the standard. The to of delivered of

and offsetting $X was $X current of pension one of restructuring. primary and OPEB income and of income after-tax key separation key pension after-tax item. impacts in the million OPEB non-service the million was Non-service In QX quarter, XXXX, fiscal the with legacy item

Now X, as to move can results. Slide our we review adjusted we

million, Our adjusted was EBITDA in QX XX%. $XXX growing

profitable EPS International. strong start the in year Adjusted and to growth robust The driven in strength from sales and line same-store grew was ongoing by quarter growth for the North Core top $X.XX. volume XX% contribution America, a in Lubes Quick to

me let segment over to Sam it our to Now turn discuss results.

Samuel Mitchell

Thanks, Sean. unit Quick overall new stores Lubes additions solid XX%. of sales good growth start X.X% added of year strong to had same-store sales helped quarter. The with XXX the and growth last a in drive net since XXXX system-wide

of these impact premium reduction year-over-year, operating the volume the to along and favorable our sales EBITDA QX grew Core America short-term limited the in products, growth growth very of This mix weak stores, in was due channel. year. volume had but expense channel weaker a was increased cost with contributed higher SG&A. by the labor ramping new significant strong North to building of increases retail benefits EBITDA. installer off quarter, Branded offset last a and program

and JVs our X% Eastern improved growth acquisition margins European solid saw our from contributions drove growth We XX% in growth International, from volume, to last a volume in return primarily The completed EBITDA. in year.

slide. a Lubes on look the at in next Let's take performance Quick closer

QX, grew in grew sales X.X% and quarter in same-store System-wide company X.X% franchise X.X%. growth the stores was

increases and QX in in penetration growth to services of drive EBITDA in average top of premium changes experience XX%. with in-store resonate superior in growth growth oil ticket. line are continues X% to Increases Our non-oil-change and of customers transactions. lagged contributing year-over-year

some We quarter temporary the labor traffic. versus labor deleveraging an increase in saw with hours in

taken address expect to the and grow subside QX. allocated temporary will year services increasing company minutes. they our Continuing to retail focus a segment, are in talk to We impacts actions of business the in and SG&A labor of versus a about is these key have service Mary of share indirect planned. our corporate as more so this more resources last will few -- its

stores on Lubes year steady be to Quick the track to pace since expect next years. continued The of stores with to year QX, continue the over XXX for in unit roughly add added XXX primarily franchise to mid-teens. last the per stores as we markets. low- XX We remain EBITDA added in in additions We've growth year few

to points or company of stores Let's opened a built drove are built year of to fiscal these Lubes two of at new newly the in Quick the deleveraging first margin these slide next We over when or look margins. newly XX their stores level. turn completing drag QX, Most creating negative, impacts. the past marginally overall operations basis still new years. just stores is profitability gross segment the breakeven In at XXX on store

would this year-over-year only Excluding rates modestly margin have decreased gross impact, quarter. in the

million impressive our of demonstrates This we an store expect to and stores, newly estimates EBITDA for see earnings of $X benefits million $XX our fiscal this and the contribution million $X contribution year on to 'XX. Based growth. between million and in between built compounding $XX

are drive significant three on Lubes' that Quick profitability. levers We executing

excellence same-store First is continue sales and to growth. to drive operational

And acquisitions. is incremental to constructed units. Second aggressively high add pursue to return third, newly

Lubes that double-digit this Quick will segment strong years the believe growth to We EBITDA deliver for allow come. to approach

than EBITDA Core year, on in look branded quarter QX the year by There favorable channel outlook. margin versus growth the of a and last America's slide. X things XX%. this unit North full take understand in margins, retail volume resulting in in growth the Let's look more driven at our and to to North million Core America's year-over-year performance improved $XX are results key next at

a of results of favorable customers at resulted level to unit fiscal better Actions volume partial lower year a margins. schedule a channel in position our XXXX. this promotional and branded stronger last recovery higher taken certain since quarter benefited softness volume. growth in in inventory mix The retail drove volume brand, this from including substantially First, first the our DIY quarter in

from year along the expense in improvement program margins therefore, operating benefits and a with true-ups and estimates profitability. broad-based announced ago the our of trade favorable to significant Second, we reduction that cost contributed promotion unit segment

but we offerings. expanded balance DIY for private due the be year, volume retail to our Finally, the QX, price year-over-year with gaps consistent label of versus to down expect

also increases. expect from price announced oil base We minimal impacts recently

full our $X.XX previous $X.XX improvement results to but on guidance an for now QX, Our the to $X.XX. than our outlook of unit year is margin $X.XX, in lower

quarter the our segment. to modest full this growth EBITDA improved Performance has the outlook for for year

DIY offerings. fiscal increasing the points Private in Retailers to across promotions. to last the higher retailers which next synthetic make category XXXX, with premium all declines label off role Demand brands shift brands, up of Let's DIY DIY price take playing value look a the are XXXX. aggressive premium in slide. category higher the category. this supporting continues important products, the in Near demand are label now promoted was inroads most towards end evolution. growth macro of in closer price versus continues initiated on ongoing Coming half private year, The almost more at an the gaps make stable volume. this and

partial results reflected below to volumes, pricing results a While we trends, largely rebound prior remain actions. in these which our branded our retail attribute QX

remain volume For volumes anticipate to changes. these the our year, year-over-year a be of of DIY We to we the our until retail balance sequentially, improving sign impacted relatively expect continue to we stability. lap flat

our messaging consumer with and their working focus for our the We and optimal product and our plans continue for merchandising portfolio, partners to on retail on while promotion business brand.

next International the International year by EMEA. had a at results volume on in look a good of with to slide. X%, take growth driven the Let's the growth primarily start

majority the Our Eastern recent increase. in acquisition of this Europe drove

and to in also temporary of shift by car from Asia, solid parts the in distributors our growth current a volume timing America, China Latin of weakness two closure offset in growth including a We growth business. to strengthening to of passenger promotion the from return This saw our impacted aftermarket quarter. QX recent key

in EBITDA led grew stability margins. volumes. Year-over-year higher raw XX% materials improved on to

contributions ventures also to solid Our profitability. provided joint

our ongoing drive increased and We're in throughout in to Asia building volume the most more to successful year development contributions be channel efforts We regions. from brand global. our expect with along program also acquisition, expanding a

Barring Our including volume the of roughly monitoring year-over-year these month to International in China. campaign our we coronavirus risks, EBITDA. situation launch X% fiscal guidance have growth an carefully new to could for mechanics flat March. X% and expect will our our XXXX, meet markets in operations We're it impact on as in

results. Mary Now review let to financial it me to pass over our

Mary Meixelsperger

Sam. Thanks,

of reduction growth the helped drive of favorable increases. benefits our margin X%. for on Slide Mix rate. results XX. and on adjusted X% sales QX program mix Our primary grew in volume Sales our summarized growth gross from volume are drivers operating expense the and to were Overall

We by deferred $X our comp roughly North million. incentive the due standard increase. expense. the the in was of up segment. America made Investments Roughly approximately accounting estimates, increase Quick quarter, and the lease favorable in in also totaling of in The transition true-ups increased to Lubes promotion-related of $X businesses to rent remainder International half Core million to and SG&A cost had primarily in the higher the expense the SG&A new

the are segments. operating expenses to Our shared corporate fully allocated

percentage a expense our earlier, year-over-year this $X As which a Lubes SG&A, North higher million of million a $X to is growing a to by offset of as was business, segment. was Quick significantly Lubes allocation which roughly to Sam Quick America. Core partially the allocation lower driving In QX, mentioned is increase

discuss Slide move Let's items. to corporate to XX

from an XX.X%. XX%. $XX items, for million versus quarter the primarily operating was effective reported $XX flow was rate the Capital leading rate capital. debt cash Cash in flow flat last key million of tax down free to were last $X.X million, billion. $XX was Net increase our due quarter. to year, for at to effective tax Adjusted activities million, quarter $XX was Our expenditures working for

earnings by to consistent at Day last line our with cash our our We the Investor share we dividend roughly discussed increased grow X%, year. in dividend approach per with as

turn the let's slide look and Now at next guidance. closer a to take

and our EBITDA EBITDA in QX. We the based of $X.XX. expect million million of better-than-anticipated in We $XXX to $X.XX year full adjusted to are raising now guidance results and on for $XXX EPS range EPS

improved and to America quarter, EBITDA performance the North low- now Core to this mid-single-digit have for be expectations we year in based expect Our full on range.

impact negotiations mitigate and to the of working costs rising pricing through material are raw with suppliers. our actions We

more Lubes We beginning year, growth to of will and with EBITDA pace same-store to X% Quick growth that line expect QX. continue guidance improve in sales our X% of growth top within strong in for its the line

in risks we macro anticipate growth continue. volume evolving to the International Excluding China, in

as well as maintaining guidance our Capex. overall volume are and growth We our for revenue

raising are free We to $XXX million. million outlook flow to our cash $XXX

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

Samuel Mitchell

pleased We're Mary. the still to at Thanks, team while high on a The same-store focusing with year. Quick stores. our rate, delivering new also sales Lubes start growth driving is

Our stability margins North operating expense hold, and strengthening is our program reduction America. in helping Core to drive taking

quarter. on International initiatives, services executing this our business, healthy our returned our cash We're in growing generation America retail Core developing to strategic and maintaining profitable North growth aggressively opportunities International. in

to a on enabled fueled This technology. by service-driven track become by keeps products and business, more us

And I'll over it for to with Sean Q&A. that, hand

Sean Cornett

Sam. Thanks,

open so please your can questions X every. open everyone a to get line to limit Carol, like the the Before for I'd follow-up and line. to we Q&A, we remind that to

Operator

Instructions]. [Operator

Our Gutman Stanley. today Morgan from first question comes Simeon from

Joshua Kamboj

between as talk year you could Lubes the Can narrow the the pricing to and Simeon. about quarter? the the your expect some for in Kamboj owned other Should that have that throughout increases gap your we and the comps pipeline you gap wider Quick the do sooner? just persist price or actions Joshua in stores is you that franchise lap might have maybe This

Samuel Mitchell

last Yes, year quarter had here a first fiscal in year, we of call, ago see this expect that separation we 'XX. we our took to about that early good a talked little the pricing a in fiscal because our question. at of And bit of that too, actions

in company year, the also having is the question, not our between in that we narrowing your the what as and franchise in that QX, of stores, performing second because the to quarter so part the balance we're services To help company the the on terms there more closely throughout each of taking will that were same than during of And actions prices being we are a they adjusting to stores year first other. in stores but look expect and be franchise gap, we less number do stores difference delivered GAAP last and pricing increases QX. those resulted of

Joshua Kamboj

All missed reduction quantify and of it, for America might between maybe gross right. follow-up, North Mary, SG&A in have quarter? might apologize. the just You I And then as program it, a cost benefit Core margin could quick said you the I have the

Mary Meixelsperger

the we tracking still Yes, an well the million we of have range. target. And of annualized talked basis to the overall be $XX on million about program to believe terms in in benefits that that we're $XX

are but We America haven't disclosed Core the break -- specifically benefits of it's the out primarily Lubes Core Quick how North they and America North by those business, certainly segment, benefit is the business. within benefiting the majority and

Operator

from from Lynch. Merrill America Tong Olivia of Our next Bank question comes

Olivia Tong

that. the the to in Can you you change long talk bit Lubes, corporate I the about of get little cost pressures expect to allocation the a -- aside putting how last Quick expense,

will it as steady state? get the expectations exactly pressure there? staffed Or labor higher is If of And some on Did what was increasing, issues, -- be there then businesses you your a store those continued sort get that sort? there disruption fair of to and margins assume have a on just to base happened is accordingly?

Samuel Mitchell

Yes.

So Lubes Quick the business. down the cost in in breaking our increase

the increase of allocation the some of was First expenses. corporate indirect in

this but labor, significant our labor made Lubes we're that in some -- that our was factor, costs that So resulted that, we out costing out dug had it helps us stores in on a we their into Quick was, managing called QX. was at our in what late it plan needs we're was a our model we in in which in the turned model, our and that's had made and stores those about it that -- importantly, trends a as change labor a and deleveraging within overestimating per as change $X,XXX in stores looking labor And that we our per-store business, store. over-scheduling, so basis,

a adjustment company small store across a system the significant even So had impact. fairly

month. As the by adjustment make we December the discovered able to this, we were

we addressed QX we as issue possible working our the to so regard And sure as making feel with as is like labor model we've accurately enter here.

aspect. advertising as So in our we the to do store base feel some grow. about have expense that continues good increases We

said, adding, does very that drag company in about excellent that. new the we stores we our to our profitability. that ultimately, still performance good continue same-store overall So to and feel That grow continue segment as leverage leverage stores exists on sales in create That a the performance. does we're create

growth. you to that calling And out sure we're sharing the so we anything that make that, to overall the -- some both the performance. and just in just deleveraging stores analysts in trying understand new Do and investors difference have impact is to we're more there with that And the on of become then company have transparent the add -- Mary? margin will to store stores

Mary Meixelsperger

They which from constructed ramp, there Olivia. stores. about have to No. store thing newly with add, is The like we X-year -- only other deleveraging actually, expect, new that well, one the I'd is other a

are once margins into year, building it'll deleverage get stores. level years run that that that of stores we a are XX-plus and our to should new rate consistent consistently, out, and doing of fully baked operating that before more be we have see couple we So but a we new kind

of expect deleverage So years. new over we'll couple the newly some next some those built leverage that -- continue stores from see I to

Olivia Tong

little Got of America. so helped lighter potentially any QX, you being bit talked QX, about far little were that QX. it. Core wondering you as If QX just talk milder North Comps bit in relative in has I if about way. to I could fairly winter a Also, we think Can improvement? ask volume the to sustainability to favorable one look you on so a the

Samuel Mitchell

to volume First, with up trends, retail large volume we at issues a due very the some weak regard versus to was we both issues inventory had DIY and accounts. year, where that certain promotional the significantly had retail last quarter

nonetheless, not promotion look improvement back you to in we QX better seen weak trends, but retail drive year, performance previous of gap years, has private the comparing levels scheduling last to with we've in growing to price see the do the for in and that QX prior So if label. a versus this we're but helped certainly did fiscal that us,

take of retail before into these our And us this we forecast as versus through expanded we QX -- what private this so sharing look brands strategy business, year -- going at gap really built that having the private the that's and the label out label to negative major kind QX. the is a in lap changes versus the accounts. today pricing It's we're premium price for fiscal is our on impact for

Mary Meixelsperger

relates mix to mentioned then QX And announced of balance of reduction that year. terms of in as to in the from negative balance our retail got not solid, channels year, -- are of We impact operating And promotional the it mix a the balance we've that DIY continue those we into those repeat of of -- the oil of between the see as through itself. pressure base installer year. more factored in as normalized costs the the expect some benefits that some true-up and cost recently increases cost well program some that channel we Olivia, the cost, expense will and incurred happened

Sam mentioned the $X.XX year to core the full So year looking business. in unit we're within expecting Core America see America, in North for gallon $X.XX the in full margin his North a as to a range remarks,

Olivia Tong

last could helpful. That's one I one If just add Got it. on International.

game plan very bit How know, a sort very, on fluid. still in areas is color it? obviously, China. affected I manufacturing have there. you of And the could give little if more you big Whether is Just and what us

Samuel Mitchell

Yes.

Valvoline is on when the a potential in overall region for while total low-single-digit impact still us terms China in And of very with to look profitability, you our business. to its contribution profitable First, at Valvoline it's how regard range.

measurable it we're will business. said, That to normal return to overall have impact the concerned results. economy, take how and about Valvoline So slowdown in the it a on long shouldn't the potential slowdown,

on So close eye we're going be a it. keeping to

course, has facility, Of originally up fall. process of we're open which packaging our this in to constructing been scheduled the blending and

a that in delay little So there. chance see there's of we'll the a bit construction

keep everyone develops. the as situation we'll up-to-date So

Operator

Our next Sachs. question from from English Goldman comes Jason

Cody Ross

profit that Core Cody actually North the is that appreciate you very on in Jason. was did us surprise helpful. This the thing was gave premium gross I sales One on detail gallon. for the America That North guys America. per Core

a And that? What had is? You that And significant after drove jump. I have one think that. sustainable how you do follow-up

Samuel Mitchell

Yes, a source the they as been on America, too. North the installer Core on continue premium sales both DIY strength to grow side, the of and have in side

And so new is are the synthetics requiring big behind the that. continued vehicles, which penetration driver of

And of require think new so this expect we're cars car in to synthetic. XX% -- new I XXXX, -- year, production roughly the we to full

on is retailers ahead but might So continue that's that's of a side. is do be, because growth selling where bit too. of actually it We'll to the expect The installer this in sustainable. see synthetic DIY trend why profit we to see the side synthetics, benefit particularly more the

had mileage label, segment. very synthetic strategies, private it to and category. we it's when really when on how losses thinking to at that we our look share, been our we're in in about how for that to conventional more much at the do definitely, the share DIY we've our defend high And So innovation focused comes

painful progress the focus. continue to side. still any it's share that, loss, more our on synthetic be again, the we're will some -- of And we've with have made that's to pleased that while So

Cody Ross

Great. That's helpful.

expect XXs in you in like high correct? if of to that rest I'm to mid-XXs understanding year for sounds the not that segment, it be So guys the the

Samuel Mitchell

right. That's

Cody Ross

follow-up great. then Okay, last And question.

into the Just International drilling segment.

acquisition us? there. X.X% You added of the lot drove quarterly much gains gallons Serbia it volume a said How of you a much basis? actually lubricant annual for Eastern the the quantify does quarter? this Can growth Or on the that volume how or that acquisition

Mary Meixelsperger

and it just did in X.X the growth acquired so the saw year. quarter, overall. weakness Eastern from was some and growth growth the but Yes, a nice the probably We see volume European of did America, over we but somewhat business China business Latin acquired offset gallons really regions, the was is few it XX% million of last we XX% other come Asia by in we a in over of

Samuel Mitchell

really comments about by our impacted Eastern We good as we're of to contributor there. feel year going Australia, and Just good acquisition for in in again, Europe. picking parts about in maybe the Latin is to but good feeling international of do in for trends slowed and of fires, majority East, all business. this and Europe being of growth, the earlier a Middle America that's It's with Australia, which the of up help significant about exception we add to of overall one the we good business other comments, us. our business, the the progress Mary's regions, the balance and the noted are in in But being growth in sources regions, to down our too, Asia, us overall, feel and Africa,

good on progress in of terms channels also, got our but to our with business. plans developing our working international emphasis distributors, marketing we've an market, increased in So

with with progress specifications side we the as should our XXXX. Cummins, to become think there heavy-duty we for and the have we're throughout going spend also across So and plan business, early business the higher some pleased support XXXX our brand. And all level and the on we that's line co-branded with increased of opportunities regions, especially well required be our of that really that product we've the heavy-duty performing and help the enter

Operator

next from Our from comes Alexander question Jefferies. Laurence

Kevin Estok

to balance little of a the I more year? how also of much And bit do was benefit I the I the mentioned just America. the in North about issues has you Estok channel I how, talk Laurence. guess, could first you the This with installer is in Kevin that guess, that. My if shift for guys may in on wondering timing question guess, orders

Mary Meixelsperger

Sure.

higher was impact when on business of to largely of our recognize in just last Lubes -- installer to our channel timing -- the they what primarily partners -- channel That half related a our that call in business. this half the deliveries we or stores within Quick So we over little the versus of year decline related orders within distributor accounts. the volume the our having about deliver to business, channel, year national related partners

And so we volumes some inventory of for -- the those think essentially under along on rebalancing both broader and shipments we with business revenue in Quick -- was that seeing going there Lubes recognition the of national there, account some growth in just we're month-to-month. the deferral higher higher resulting that a recognition those drove

about And underlying primary do so timing the driver that differences. want talk was Sam, in? of to you business the the

Samuel Mitchell

the and mainly lower-priced and to to and tend we've And the accounts, mean side, softness some a lower-priced of on and is lines installer there's volume that I -- product be that pricing, also opportunities. by challenges On dealing due lower-margin lost we're lost. have accounts that our those yet what couple seen both with then some are we accounts

cases, we're so customers account. is good that that's those in where our thing we some take installer for where the drive online to that positive those that from on improving of not their accounts. bring performance level And to installer profitable And continues that of the real volume progress We're store going training strengthen, with in cost, at we're platform field, trends the there. that's seeing that working the pursue our away to the where are traffic. business, we're seeing fleet even team to helping marketing our which can the And programs to is of some to too ability operations us, in going focus value all

that the So end some business. consistent of challenges the seeing but work we're doing there, point it price pressure, still lower comes for we're particularly the to is, I like the the when

I forecast. So very still like and challenging business we're all-in-all, you And but about you America, on this making earnings running foundation, have solid a we see environment, Core there. in feel strengthening that when North this that focus efficiently. our think this it's progress stabilization

Kevin Estok

then Okay, great. segment. has That's my And volume really guess, what question growth? Asia, do about International specifically that I helpful. the to drove follow-up

Samuel Mitchell

combination in too, some Asia distributors, -- made was So volume of there, working a progress with in And our solid car China. side growth the we've passenger primarily improved of the we results on business.

we number the at And of I our and also was automotive education, installers results a developing really saw of we've across the programs good distributors that brand So that. where mechanics our our through And These the of developing China, some programs in the markets -- kind to training building trends. In countries channel our changing with solid pleased other the but just focused we're beyond changes where talking we've portfolio. have we're one that words, then being broader a Asia. distribution grassroots the of some improving also important marketing some more plans not mentioned of and growing put -- marketing expanding is Valvoline than technology we're and lubricant and We've the noted place, more I effectiveness Valvoline's maintenance, on with of a in like growing product get good focus think and I in leadership that made. seeing on, just got stronger awareness are progress. to that that we're directly really I with week is a marketing, to strategy brand, phase.

Operator

Morgan. from comes question JP Jeffrey from Zekauskas next Our

Jeffrey Zekauskas

a you base up, Recently, that you it's the do recent do environment? the such weak base price And What make lift? WTI, sources What prices has forward see oil or you in go brands it's how have but oil do of were? gone of down. done but nothing think oil whether going oil, it

Samuel Mitchell

the they've base it your implementing of fact, that's have been to despite market with plenty there's and of Yes, that terms question. moving crude increase prices great broad discussion announced in a has producers because down. pretty the this the And been come certainly, the increase as point, oil

the they're what spring, focused a take effect that -- this some they to spring turnarounds a tightening market. market oil on early really on due and base will the of having So that place is see base oil tightening

plays So be in the certainly it factor, how over more balance year, is but base year. the it is of the will how I determined think trading later by a that out oil

as the the the into confidence competitors even on the is guidance. with that's through. built Valvoline finished also, work Lube that we the to is we increases, forecast and our on us, some business, we something the negotiating on suppliers and with price impact there's far But for team that of think raising and good as our we feel doing issue manage and like manageable So headwinds in market, have most based this announcing modest have that's that there

Jeffrey Zekauskas

performance So the quarter, did words, the of year-over-year the result it can out That more follow-up, trying versus Or was a business to and cost reduction, if in what's business take true-ups other there branded result. as America sequentially? the you out incremental is, take positive which same? you was stay performance and depressed of out North an fourth in the figure versus you change? my a the I'm In compare difference the the the normal maybe

Samuel Mitchell

on margins, Jeff? Particularly the

Jeffrey Zekauskas

sort the branded or Yes, business. of percentage, of the example, you quality exactly right. The for difference the in branded know that

Samuel Mitchell

to way the is stable more it's look at believe I it. Yes,

put channels. yet promotion those onetime too. that in so unit margin you stable that the And unit factor level, relatively out had the we a is the channel at are different mix so in reduction QX were of and cost place on And the us the across basis do benefits to when some margins helping program with that true-ups unit

saying we and you $X.XX that guidance million that expect seeing unit it's QX, that had we're bump out look giving. through we in you that million year in of $X.XX really in $X.XX at so we're QX be And the to $X.XX when But our to that QX million margins range. that guidance full factor million the to

that reduction reflecting at where put operating million guidance that's to so due beginning in And improvement we program is largely versus range an place. in expense $X.XX the we as we of gave year and $X.XX the were million the the to that

Jeffrey Zekauskas

incrementally XXXX? you Okay. And did how you how of your reduction accomplish? in And much XXXX, program expect to then much lastly, in accomplish do cost

Mary Meixelsperger

Yes.

reduction relative cost our program we to quarter, fourth expectations the what in the on were. So outperformed

saw million So estimate mentioned. relative you $X reduction of the to fourth that $XX my year benefits if million the quarter, $XX about run saw think in to the million is to we that million full cost in quarter what of the rate I $XX we

we thought those modest would were that I less able efforts that, that of results. initially, it the accelerate million, probably of than better in more than several be implementation $X So think but resulted we to

some we'll fourth of in lapping quarter. those So the start benefits

Operator

[Operator Instructions].

Stephanie Benjamin question next from Our SunTrust. from comes

Stephanie Benjamin

year a prior the in base of guidance? little environment. the how flex is I more be does it incorporated on wanted really terms helpful. would deeper expected can the could you range if Maybe or you get the That in for you bracket a just little just If there to that's bit volatile earnings question, of if kind dig much the outlook? follow-up the oil in

Samuel Mitchell

I again, anything. see trading, oil it's base Well, the is given environment -- volatile, getting where crude necessarily more if don't

increase through. this that. have said, But stable. guidance relatively That I do our reflects going to in think we manage to need confidence that to our we do ability our it's be

few -- we'll through rest a to negotiating half to year market. actions how modest we headwinds the So our manage take cost probably move with it's the of into savings, that's pricing but of to also it's the a we efforts, dollars, expect but million and with back that, think the both with built going of have that

on plays just So a I see based dynamics. have more And know yes, as -- any short-term do issue don't but current I can the to see provide out it than don't we turnarounds. this with if that, market I major how we

Stephanie Benjamin

it. that's real to channel. appreciate No, just the it. DIY And my helpful. kind to go Got back -- of is, just question then here I

those we great if felt think work us initiatives an to we're with shelf for it pretty that on update know X continuing quarter spoke would update. strategy. I think when for get of I I on be and channel. you how Maybe you kind placements, talked the you both of about fiscal merchandising to results, the comfortable could

variability And be or have You would year in could through if tough just in remain quarterly given still so or quarter, fluctuations. you with from That any last could overlapping comfortable some promotional just that cause helpful. idea on schedules placements? a underperformance shelf then walk we outperformance

Samuel Mitchell

we issues, can understanding In really the our it's the our the we you between from of major so have we've that you promotional one is can of next, of the but and a our channel, schedule one at end feel given. -- retailers see solid forecast that and now true. fiscal year, Yes, because ability the to do timing reflected in guidance see DIY shifts promotional the quarter,

performance, versus know facing know we we DIY we expanded schedule, promotional in as XXXX. also an And we we're our placement, what think and know we gap were so price our dealing with shelf that about

expecting be So that's that's with expanded XXXX lifts and they why challenge, in we're the less gap. were our promotional than our what to

And volume through year-over-year year. of on so we a the DIY down be to balance the expect do basis

the built that's managing through. headwind we're into again, And that's guidance. So our

for operating opportunities of I America, And that for programs maintain for our cost our segment. stability of improvements marketing. us the that's overall made in as Core again, continued there's XXXX, with we some structure with some think for North the the helping prepare we've digital our improvements then in earnings And

And and we on our be XXXX, broadly part working we're claims new a around messaging, around the performance us message how major work both product place our our in in that have and benefit taking targeted Valvoline retailers. our those We've spend. of XXXX. with optimize portfolio, for of will agency around some got product We for our our overall that's good media products also our helping can

platforms going strengthen for core again, our with DIY the to and strengthen source ultimately So the business, think that strong progress, Core so and having the and what which what those includes place. continuing And it too. us, is for we're heavy-duty pleased of means brand, taking continue to strength with be defend work of then that business, in is it installers that, I'm to I a can America, a North

Operator

Bottiglieri from Our comes Wolfe Christopher Research. next question from

Siddharth Dandekar

on Dandekar Sid is for This Chris.

Can North go and gross quarter gallon the guidance core per raising at again, for conservative. this this just and midpoint given material it profitability meet least raw to the despite your you million targets are guidance? help the $X profit increase, a is understand to at back takes America the the updated what So year to other segments us track like full guidance on bit just EBITDA puts by the seems

Samuel Mitchell

conservative our adjustment was to guidance the strong there given Yes. year. and the plan, a And execute it point Yes, certainly QX against fiscal certainly, into take we'll the quarter, a we as the Core like is look it's and what -- positive America, seeing right of is the North but year, we for news QX some the outperformance feel in we're balance now, there. at the the business guidance with certainly

EBITDA the we model half As shared in back North our America, looks think of Core for like I've comments earlier fiscal for what to the year. able the we're and year growth Q&A, to full leading

So development our expenses also same-store of half right back the performance, quickly, for but the next called sales Quick the that us. reasons And we're positive business, is a but we've out, the the certainly with with to for in other the our slower very the labor to businesses, both then for regard profit that growth driving on getting quarter quarters the first in regard was bullish year Lubes in of terms modeling. three

we're to got the battery stronger And other diesel additional trucks with with out. We've program both pricing on targeting and regard taking initiative services. some that rolling that's [indiscernible] an new actions services of

the business operational have the lot stores commitment to and acquisitions. behind building there's and continued a making good So that of are Lubes both developments our in that both with we Quick confidence

continues for story to strong Lubes exceptionally Quick us. be So

so that have our part guidance. confidence of is big that we in And that a

Siddharth Dandekar

the to the That's raw increases. And for just back for that, very imply of all helpful. then from that And impact sort half the of year? cost half that across second segments? does what material to related Is the the pricing for

Samuel Mitchell

Yes.

having American a we'll the Core to mitigated that oil regards Lubes base increase that it's on America the the make. impact profitability, see on a by with we business. North But adjustments North So our modest impact and overall again, increase is Quick price

for our index. installer channels also good both and adjust business Quick off a pricing, of for Our Lubes of portion

So adjusts on basis. quarterly a it

pricing that offset that the -- cost are impacts consistent So then that. impacts with also

it's of during So -- our when don't for factor see balance the we performance up, major you year. add the just this a being it

Operator

We event, would today's you thank like disconnect. now and attending to concludes everyone today. for This may

Samuel Mitchell

right. Thank All you.

Valvoline (VVV) 4 Feb 202020 Q1 Earnings call transcript