Aug 5, 2026 earnings call — Lubricant supply strain and pricing actions
Net sales were $545 million and system-wide store sales topped $1 billion as system-wide same-store sales grew 8%.
Revenue $0.5B (est $0.5B) · EPS $0.57 (est $0.50)
Key quotes
"Based on the current forecast, we expect finished lubricant costs could be approximately 60% above where they were in March."
"Net price was the largest contributor, given the pricing actions that were taken."
"We added 47 net new stores in the quarter, bringing our overall network to 2,456 stores."
Analyst Q&A 12
why margins are softer in Q4
Q (Mark Jordan · Goldman Sachs): Analyst asked what drives the sequentially softer EBITDA margins in Q4 and asked for a breakdown of SG&A leverage in 3Q and expectations for 4Q.
A: Management said the margin compression is driven by product cost increases and the pricing taken to cover them, implying about 300 to 400 basis points of margin compression at the midpoint. They said SG&A is expected to gain leverage year-over-year and the team is managing costs well. They noted up to 60% finished lubricant cost increases equal about $5 to $7 per oil change and that is the main driver of the margin impact.
"As we look at Q4, really the math is all around what we have baked into the full year guide around product cost increases, us covering those with price that we started taking in the June quarter and continued into this quarter as well." — John Willis (CFO)
can pricing offset costs without losing traffic
Q (Ariana Warden · Citi): Analyst asked how much pricing can offset product cost increases without hurting customer traffic, and why the top end of revenue guidance did not rise despite raising the same-store sales floor.
A: Management said they time pricing and pass-through and do elasticity work, and that the $5 to $7 increase on an average $115 ticket is a small percentage and not a big out-of-pocket cost for customers. They also said they raised the sales midpoint by $25 million but kept guidance cautious given a dynamic macro environment.
"And as you look at the $5 to $7 number that I talked about on a base ticket of $115 on average or higher for some of our franchisees." — Lori Flees (CEO)
how long higher costs will last
Q (Skylar Tennant · Morgan Stanley): Analyst asked how temporary the margin compression is and whether it will be resolved by Q1, and how much more cost pressure may flow through the P&L.
A: Management said elevated product costs will persist for some time and that their supplier expects 4 to 6 months at a minimum once the Strait is fully reopened. They also said they have projected what they know today and have factored current cost increases and pricing actions, and will continue to update as the situation unfolds.
"Our understanding in working with the supplier is 4 to 6 months at a minimum once the Strait is fully reopened." — Lori Flees (CEO)
timing of cost vs price
Q (David Bellinger · Mizuho): Analyst asked whether the product cost hit gross margin in Q3 or if it is a timing issue, and whether pricing timing can be tightened; and asked whether recent sales recovery is from transactions or pricing.
A: Management said they were proactive on pricing in the June quarter but timing between when cost flows and when price is taken can be difficult in a dynamic environment; they tried to protect gross profit dollars. They also said fundamental transaction growth and premiumization remain intact and that the Q4 guidance assumes about 8% to 10% system comps with the difference driven by price.
"We've tried to be proactive on the price side to protect those gross profit dollars." — John Willis (CFO)
base oil supply and Strait impact
Q (John Babcock · Barclays): Analyst asked what partners say about base oil supply and demand, whether the Strait loosening helped, and whether suppliers have contingency plans.
A: Management said supply-demand remains challenged, especially for Group III base oil which is most constrained, and that Valvoline feels advantaged by its supplier relationship. They said the Strait loosening in May gave little relief for Group IIIs, and suppliers are reformulating and using alternate sources to keep customers supplied.
"Group III base oil, which is the primary ingredient for full synthetic, has been the most challenged and continues to be." — John Willis (CFO)
what drove same-store sales: ticket or traffic
Q (Tom Wendler · Stephens): Analyst asked for the breakdown of ticket and traffic in 3Q and what to expect on pricing as base oil costs fall.
A: Management said ticket drove about 3/4 of the same-store sales comp in Q3 and transactions were the remainder, with ticket slightly more of a contributor versus Q2. They added that historically the industry does not roll back pricing as base oil costs move down, so they would expect margin expansion when product costs moderate.
"Ticket drove about 3/4 of the comp and transaction was the remainder." — Lori Flees (CEO)
competitors' pricing and waste oil offset
Q (Scott Stember · ROTH Capital): Analyst asked what direct competitors are doing on price as VVV rolls out the $5 to $7 increase and how waste oil sales offset the price increases.
A: Management said they constantly monitor competitor pricing but the competitor base is fragmented and price moves vary by geography and tier. They said waste oil sales were little changed in the June quarter, started moving up in the September quarter, and will be an offset but not enough to fully close the gap, which they are addressing with pricing.
"Historically, waste oil sales back to collectors have been an offset, especially as we've seen crude oil costs increase, waste oil has tended to move up some" — John Willis (CFO)
pricing approach and Breeze integration
Q (Maksim Rakhlenko · TD Cowen): Analyst asked whether Valvoline will take price to protect margins and be aggressive, whether 4Q pressure rolls into fiscal '27, and for progress on the Breeze integration and synergies.
A: Management said they typically pass cost increases to consumers to protect gross profit dollars while accepting a margin rate headwind, but they must watch competitor pricing and elasticity so they don't harm volume. They said it's early to comment on fiscal '27 as it depends on the macro, and they reported Breeze integration is ahead on early metrics with positive SG&A synergy capture and low attrition in converted stores.
"And we do expect margin rate will expand back as we get through this period of supply constraint." — Lori Flees (CEO)
tariff refunds and imports
Q (Bret Jordan · Jefferies): Analyst asked if Valvoline expects to receive any IEEPA tariff refunds and whether imported filters are in their mix, plus whether competitors are disadvantaged on price.
A: Management said the tariff impact last year was modest, finished lubricants were excluded, and to date they have not received any refunds and any refunds would be very modest if they occur. They added the supplier changed filter sourcing to mitigate tariffs, and while cost increases are industry-wide, Valvoline believes it has more surety of supply than many competitors.
"To date, we have not received any refunds, but I just want to emphasize that those would be very, very modest if and when they come." — John Willis (CFO)
will higher prices reduce add-on services
Q (Craig Kennison · Baird): Analyst asked whether higher oil-change prices will cause customers to drop or defer non-oil-change services, and asked about price and cost inflation trends for those services.
A: Management said they are not seeing trade down or deferral on non-oil change revenue and still see positive NOCR contribution, though summer busier stores can reduce penetration slightly. They said they price NOCR services relative to dealer pricing to offer value and take regular pricing in due course, and they have not done anything significantly different from normal.
"We -- as I mentioned, we're not seeing any trade down or deferral, and that includes on the non-oil change revenue." — Lori Flees (CEO)
SG&A and store opening expectations
Q (David Lantz · Wells Fargo): Analyst asked for puts and takes on SG&A for Q4 including World Cup advertising, and asked about the wide implied range of store openings and company vs franchise split.
A: Management said they expect year-over-year SG&A leverage in Q4 and that marketing is planned in advance so they do not expect anything out of the ordinary from marketing in Q4. They said Q3 added 47 net new stores (26 franchise openings with 1 closure; company opened 20 plus 2 transfers for 22) and Q4 is typically heavy for new additions driven by construction timing, and they expect to be within the guided range.
"As we have gotten into Q4, like I said, we expect to have year-over-year SG&A leverage in Q4 versus last year." — John Willis (CFO)
share opportunity from shortages and pricing goal
Q (Peter Keith · Piper Sandler): Analyst asked whether product shortages by smaller players present a market-share opportunity and whether the goal is to have price and cost be neutral by the end of fiscal Q4.
A: Management said they see some competitors on allocation and are focusing marketing to be top of mind and capture customers who cannot get service elsewhere, so they see opportunity though it's hard to size. They also said their plan and expectation is to have price and cost dynamics match from a price/cost perspective by the end of fiscal Q4, assuming costs hold steady.
"But yes, our plan, our expectation is to have those 2 dynamics match from a price/cost perspective." — John Willis (CFO)